Shorten stokes class war with tax plan

Bill Shorten has launched a class war over the federal budget with plans to raise the top personal tax rate.

Bill Shorten delivering his budget reply speech. Picture: Kym Smith

Bill Shorten has launched a class war over the federal budget with plans to raise the top personal tax rate to 49.5 per cent for people earning more than $180,000 a year, doubling down on the ­Coalition’s “big-government” budget by pledging $22 billion more for schools.

The promises issued last night put Labor on course for $8bn deeper deficits over the next four years, under policies that reverse the government’s university cuts, spend more on schools and restore the indexation of Medicare rebates immediately.

In his biggest policy move, the Opposition Leader demanded changes to the government’s $8.2bn hike in the Medicare Levy that would exempt workers earning less than $87,000 a year, setting up a clash in the Senate that will force Malcolm Turnbull to negotiate with the Greens and crossbenchers.

The Labor plan widens the gulf with the government by planning to keep the “temporary” deficit levy, which adds 2 per cent to the tax rate on workers earning more than $180,000, as well as modifying the plan unveiled on Tuesday to increase the Medicare Levy from 2 to 2.5 per cent on millions of workers.

As a result, a worker earning more than $180,000 a year would pay an effective top tax rate of 47.5 per cent under the Coalition compared with 49.5 per cent under Labor — comprising the 45 per cent top marginal tax rate, the 2.5 per cent Medicare Levy and the 2 per cent deficit levy.

Under Mr Shorten’s proposal, workers earning $87,000 a year would be spared a Medicare Levy increase worth $435 a year, ­although the benefit would be limited for those on low incomes ­because the levy does not apply to workers on less than about $21,000 a year and scales up slowly to those on $50,000 a year.

“Our policies are the real deal because they spring from our values,” Mr Shorten told parliament.

“They weren’t cooked up in a panic to try and neutralise a political liability. And the great irony of this budget is that while it doesn’t measure up to our values, it doesn’t keep faith with Coalition values ­either. In fact, it’s devoid of values altogether.”

Finance Minister Mathias Cormann last night stood by the budget plan to raise the Medicare Levy from July 2019, amid signs he could gain support for this from the Senate crossbench.

With the Medicare Levy increase designed to “fully fund” the National Disability Insurance Scheme, Mr Shorten tried to support the funding increase without conceding the gap in the NDIS left from the Gillard government’s last budget.

“Labor fully funded it in government; we will fight for it in opposition — and we will never see the people who rely on it, go without the money they need,” he said.

Scott Morrison last night ­accused Mr Shorten of betraying Australians by not fully funding the NDIS.

“I’m very disappointed that Mr Shorten failed to take up our ­invitation to fully fund the NDIS on a bipartisan basis,” Mr Morrison told The Australian. “He had an opportunity to break the political cycle, put politics aside, help families and allow parliament to do its job. It is very disappointing.”

Labor’s push to lift taxes is at odds with its rhetoric in recent years. Treasury spokesman Chris Bowen said three years ago: “We believe in a globalised world in reducing marginal tax rates over time.”

Mr Bowen added that it was “lazy policy” to increase them.

Bill Shorten takes a jog around Lake Burley Griffin in Canberra yesterday before delivering his budget reply speech.

Mr Shorten said he would support the government’s $6.2bn bank levy but insisted the responsibility for the impact would lie squarely with Mr Turnbull and Mr Morrison if the banks passed the cost on to customers.

“The big banks know they can run right over the top of this weak Prime Minister,” Mr Shorten said.

“He’s giving them a levy with one hand, a tax cut with the other and a free pass for bad behaviour. I’ll give them a royal commission.

“And let me make this clear — if the banks pass on a single dollar of this tax to Australian families — then that should be the end of this Treasurer, this Prime Minister and this government.”

Mr Shorten indirectly conceded that Mr Turnbull was trying to steal Labor’s “fairness” theme and win back voters from the middle ground, while offering an echo of Julia Gillard’s “we are us” speech from 2011.

“This isn’t a Labor budget and it’s not a fair budget,” Mr Shorten said. “Because we are not you — and you will never be us.”

Mr Shorten used last night’s speech to reach out to the parents of children in Catholic schools at a time of huge disputes over the government’s school funding plan and the lower growth rate promised for Catholic schools compared with independent and government schools.

The government has pledged an additional $18.6bn for all schools over 10 years, raising questions over whether Labor would commit another $22bn.

“Tonight I can promise a Labor government will restore every ­single dollar of the $22bn the Liberals have cut from schools, down to the last cent,” Mr Shorten said.

Blasting the government’s revised higher education policy, he said Labor would oppose the ­efficiency dividend for universities and the increase in loan repayments for students — forcing the government to rely on the Senate crossbench to get its policy through parliament.

He opposed a key budget policy to allow young Australians to put more money into super to save for their home deposits, while repeating Labor’s vow to curb negative gearing on investment properties.

In a key new policy, Mr Shorten said Labor could save $5.4bn over 10 years by closing multinational tax loopholes but offered little ­detail on how this would be done.

Targeting wealthier Australians, he said Labor would impose a $3000 cap on the amount individuals could claim for accountancy and legal advice on their tax returns, raising $190m a year over a decade.

He called for the same-sex marriage plebiscite to be shelved to save $170m and said a Labor government would take a tougher approach to scaling back the visa system for skilled foreign workers.

He also shot barbs at Mr Turnbull by labelling him a friend to billionaires, attacking the use of tax havens in the ­Caribbean and vowing to stop a company tax cut worth $65.4bn over a decade.