Bracket creep still part of plan

Neither side of politics has delivered a credible plan to deal with the scourge of bracket creep and the debilitating impact it has on aspiration, productivity and the standard of living of all Australians. Peter Dutton has promised to do something about it when budget conditions permit. In the treasurers’ debate on Wednesday, Jim Chalmers confused tinkering with the lowest tax scales with reform action to protect workers who were pushed into higher tax brackets across time. His reasoning underscores Labor’s rejection of the reform intent of the stage three tax cuts that were sacrificed as a cost-of-living essential with little thought to the long term.

Economists have estimated the small tax adjustment being promised by the Albanese government will be swallowed quickly by bracket creep, if it is noticed at all. The story gets worse when consideration is given to Labor’s plans for superannuation, where it intends to introduce a penalty tax regime on superannuation balances above $3m, including a widely criticised proposal to tax unrealised capital gains on high-balance accounts. Unless the measure is indexed – where there are no plans to do so – more and more superannuation holders will be drawn into the higher rates and distortionary tax net. This will be doubly so if the Greens are successful in having the threshold lowered to $2m, something Labor is avoiding discussing until after the election. Modelling shows that lowering the threshold from $3m to $2m would result in 1,811,952 Australians being stung with higher tax before they died. The proposal has been roundly played by Labor as envy politics to soak the rich. But it speaks to the bigger divide that was on display in Wednesday’s debate.

Business leaders wanted to know what they could expect on industrial relations from each side if it won the election. The common complaint was that changes made during the first Albanese term had increased the compliance burden and made life more difficult for business.

Angus Taylor said a Coalition government would restore common sense in IR for small business, including simplifying the definition of casual workers and cut red and green tape that hampered flexible working arrangements. Above all, Mr Taylor said, it was not about bigger government but getting government out of the way. But he did not address industry bargaining that hit the big end of town.

Dr Chalmers defended Labor’s record on IR and said the next phase would be about gender, protecting penalty rates and abolishing non-compete clauses. When he was asked how Labor’s IR plans would assist small businesses, the answer was by tipping government spending into TAFE and childcare. The bottom line is Dr Chalmers says the Labor option offers stability where the Coalition will offer risk. But Mr Taylor was in tune with many of the business leaders in the room when he said voters took a risk at the 2022 election by voting Labor and the “results have been disastrous”.