By David Crowe and Mike Foley
Prime Minister Anthony Albanese has rebuffed talk of an overhaul of the stage three tax cuts for workers earning more than $45,000 a year by declaring the government’s position has not changed despite a furious debate over the cost of the package.
The move confirms the government’s support for the $243 billion plan ahead of a federal cabinet meeting on Tuesday to consider the state of the budget at a time of growing unease within the ministry about breaking this year’s election promise to deliver the tax cuts.
Prime Minister Anthony Albanese says the government’s position to stage three tax cuts hasn’t changed.Credit: Peter Rae
With Treasurer Jim Chalmers due to fly to Washington DC late on Tuesday for meetings about the worsening outlook for the global economy, ministers face a deadline to settle the debate over the tax cuts in time for the October 25 budget.
Albanese promised at the May election to keep the tax cuts after Labor voted with the Coalition in favour of the package in the last parliament despite concerns about the scale of the benefits to workers on higher incomes.
“Our position hasn’t changed. I’ve said that repeatedly. And I stand by that comment,” the prime minister said in Perth on Sunday.
Asked whether that position will change, Albanese replied: “Well, our position hasn’t changed.”
Asked if he was ruling out changes, the prime minister said: “We have a budget in a couple of weeks. Our position hasn’t changed.”
Treasury officials are preparing a new cost estimate for the package ahead of the October 25 budget to sharpen the debate over the package, given the long-term cost was not included in the previous government’s last budget in May.
While the stage three cuts have been debated inside the expenditure review committee of federal cabinet, the discussion has not gone to a full meeting of federal cabinet, where major policy decisions are ultimately decided.
Labor caucus members have been reluctant to go public with calls to change the tax package, given the political danger of breaking an election promise for Albanese, but many acknowledge the problem with the package when debt is forecast to exceed $1 trillion.
While some within the government back the idea of a public debate over the tax cuts, others want the public agonising to be halted as soon as possible and the tax cuts supported because of the political danger of breaking a promise.
The prime minister’s remarks came after Resources Minister Madeleine King said the government had “no plans” to ditch the cuts, a phrase other ministers have not used over the past week.
“We have no plans to change those stage three tax cuts,” King told Sky News in an interview that aired on Sunday morning but was recorded on Thursday.
“Obviously, there is a conversation going on in the community ... but right now this government is not planning any changes.”
Chalmers has also said in recent days that the government’s position has not changed, although he has also spoken about the need for difficult decisions in the October 25 budget, seen as a signal about changing the tax plan.
The tax cuts reduce the 32.5 per cent tax rate to 30 per cent for people earning between $45,000 and $200,000, ensuring all workers earning more than $45,000 gain some benefit.
The more generous element of the package abolishes the 37 per cent marginal tax rate for those earning more than $120,000, so the greatest gains go to those on higher incomes, given this cohort pays more tax. Every dollar earned over $200,000 will continue to be taxed at the 45 per cent tax rate.
Nobody in the government has called for a decision to scrap the entire stage three plan, although parts of the media have aired conjecture in recent days about the financial impact on workers if this was done.
“When it comes to the tax cuts, I think we’ve made the obvious point that when it comes to cost-of-living relief, it should be targeted to people on low and middle incomes,” Chalmers said.
Opposition Leader Peter Dutton said the tax cuts were intended to be in three stages, with the first two stages aimed at middle-income earners and stage three for those on higher incomes. He said the debate within Labor had revealed divisions in the party.
“What we’ve seen this week is a real split between the prime minister and treasurer, and the treasurer has demonstrated his inexperience,” he told ABC’s Insiders on Sunday morning.
Shadow treasurer Angus Taylor said the government would be declaring “war on aspiration” if it changed the tax plan.
“This is about middle Australia making sure they can earn or keep more of what they earn,” he said.
“We’re seeing extraordinary inflationary pressures right now. And we know with inflation, the average Australian pays a higher rate of tax.
“These tax reforms were designed very carefully to make sure there was an incentive for Australians to get out there to have a crack.”
Cut through the noise of federal politics with news, views and expert analysis from Jacqueline Maley. Subscribers can sign up to our weekly Inside Politics newsletter here.