PM would win support for tax cut amendments

Anthony Albanese looks set to gain the support of parliament if he amends the stage-three tax cuts but faces government pressure to avoid repeating Julia Gillard’s broken carbon tax promise.

Prime Minister Anthony Albanese is set to make a call on whether the government trims the final stage of tax cuts by Tuesday. Picture: Gary Ramage

Anthony Albanese looks set to gain the support of parliament if he amends the stage-three tax cuts but faces growing pressure inside the government to avoid repeating Julia Gillard’s broken carbon tax promise.

The Prime Minister is set to make a call on whether the government trims the final stage of tax cuts for medium- to high-income earners ahead of Jim Chalmers flying to Washington on Tuesday.

The Australian can reveal that the Greens and crossbenchers David Pocock and Jacqui Lambie would likely wave through amendments to the tax cuts in the Senate, despite their preference for the entire 10-year $244bn package to be dumped.

The Treasurer and Finance Minister Katy Gallagher – in response to deteriorating global economic conditions – this week floated a rethink on tax cuts less than three weeks out from the October 25 budget.

Left faction MP Maria Vamvakinou joined Labor Right colleagues on Thursday in pushing Mr Albanese to deliver the tax cuts in full, creating a 30 per cent flat rate from mid-2024 for workers earning $45,000 to $200,000.

Ms Vamvakinou, who represents the outer-Melbourne seat of Calwell, said Ms Gillard’s carbon tax backflip continued to hurt Labor’s brand.

“I think it was a commitment … that we need to honour,” she said, referring to the tax package.

“Certainly that would be the mood out in the electorate as well. We are working hard to re-establish trust. I know we are doing that and we are well intended.

“We have to work hard to keep the faith with our constituency. That is very important and on that basis, as difficult as this may be, honouring that commitment is very important.”

She said Australians earning $150,000 were under as much pressure “as anyone else would be” amid soaring mortgage repayments and inflation.

Despite Dr Chalmers leaving the door open to amending the tax package, Skills Minister Brendan O’Connor – also from the Victorian Left – said it might be premature to make changes given the tax cuts are not due to come into effect until July 2024.

“If a week is a long time in politics, well two years is an eternity,” Mr O’Connor told Sky News, adding: “Right now our focus is on the immediate pressures.”

While the debate over tax cuts is being driven by Dr Chalmers, Mr Albanese is understood to be open to changes in response to interest rate pressure if the government fails to move fast enough on debt over the next four years.

The government, which could delay the tax fight until next year’s May budget, is not considering junking the package but rather looking at options where people earning between $45,000 and $120,000 receive tax relief and those earning more would still be better off.

With the government needing the support of the Greens and one crossbencher to push legislation through the upper house, Dr Chalmers and Senator Gallagher have come under pressure from independents and minor parties to dump or amend the tax cuts.

Senator Pocock, who is pushing for a windfall profits tax on ­resources companies to fund investment in the regions and create jobs, said: “Now is not the time to be proceeding with tax cuts for the wealthiest Australians. As I have made clear to the Treasurer privately and in public comments, the government can count on my support for revisiting the stage three tax cuts.

“There are a range of options open to the government, from ­redesigning the cuts to scrapping them altogether, and I think all options should be on the table.

“We are in the midst of one of the worst cost-of-living crises in decades. The community I have been elected to represent could not have been clearer in their feedback to me.”

Senator Lambie, who carries two votes in the Senate alongside JLN colleague Tammy Tyrrell, said: “Jim Chalmers could ditch the stage three tax cuts the day after he gives his budget speech if he wanted to. He knows we can’t afford them. He knows they aren’t fair. He’s got the numbers in parliament to do something about it. I guess we’ll see in a few weeks if he’s game enough to try.”

After voting with the Coalition to push through the original tax cuts, Senator Lambie now believes stage three is too “expensive, unfair and irresponsible”.

Speaking at The Australia Institute revenue summit in Canberra on Thursday, former Reserve Bank governor Bernie Fraser criticised the Albanese government for backing the “very dodgy … unfair and unwarranted” stage three tax cuts.

Dr Chalmers said on Thursday his job was to ensure that spending in the budget was sustainable.

“If there’s going to be one defining feature of this budget that I hand down in less than three weeks, it’s going to be responsible economic management in the context of a deteriorating global situation, high and rising inflation, and persistent structural pressures on the budget,” he said.

One Nation leader Pauline Hanson said the stage three tax cuts “have to go through”.

“Labor can’t be trusted,” she said. “People are struggling with the cost of living rising and interest rates going up. I trust the money in the hands of the people rather than governments.”

Writing in The Australian, Australian Industry Group chief executive Innes Willox said stage three would “improve work, investment and saving incentives at a time when Australia needs to sharpen our productivity performance”.

He has pushed back against claims that the final-stage tax cuts were unfair, with the first two stages benefiting lower- and middle-income earners.

“Removing the impacts of fiscal drag for taxpayers all along the income distribution is a clear positive for fairness,” he writes.