No-deal tax cuts up to Albanese

Mathias Cormann rules out doing deals with crossbench senators over $158bn personal income tax cuts.

Finance Minister Mathias Cormann. Picture: AAP

Finance Minister Mathias Cormann has ruled out doing deals with crossbench senators to win their support for the Coalition’s $158 billion personal income tax cuts, intensifying pressure on Labor to back the plan.

The blanket refusal by the government’s Senate leader to negotiate special deals or buckle to demands from Pauline Hanson and Centre Alliance senators came as Anthony Albanese backed away from closing the door to supporting all three tranches of the Coalition’s package.

With the Morrison government set to make tax cuts its legislative priority for the first sitting week of the new parliament next month, Labor identities called on the party’s new leader to wave through the seven-year package or risk being labelled a wrecker.

The Australian understands that senior Labor MPs have also ­expressed concerns about opposing tax cuts at the start of a new election cycle, and being painted as blockers.

“At the end of the day, you just can’t block tax cuts,” a senior Labor MP said.

The Opposition Leader has maintained that, while he would support the first stage of the cuts, he would consult internally and externally before considering the second and third stages.

Senator Cormann, writing in The Australian today, warns that under no circumstances would the government split the legislation. He says Labor would stand accuse­d of denying all workers a tax cut by refusing to commit to passing the entire $158bn package.

“There is no way the government will agree to split our income tax relief plan for all working Australians­,” Senator Cormann writes. “It was a firm election commitme­nt and is central to our plan for a stronger economy.

“Any ­attempt by the Senate to split our plan would be rejected by the government in the House of Representatives.

“So the way for Labor to help deliver income tax relief for low-income earners quickly is by voting­ for our entire plan both in the house and in the Senate in the first week of July.”

Mr Albanese yesterday took a softer line, not ruling out supporting the second and third stage. The latter doesn’t come into effect until 2024-25. “We’ve said we’ll consider the options which are there,” Mr ­Albanese said. “We’ll consider it in a meaningful way based upon the facts and we want to get those facts.”

Hawke and Keating government minister and former NSW Labor powerbroker, Graham Richardson said Labor should support the entire tax package.

“The wise thing would be to let them pass,” he said. “(Albanese) doesn’t want to look like he is saying no to everything; it becomes a pattern for the leadership. If you start off staying no to tax cuts … what do you say yes to?”

Mr Richardson’s comments follow those of Labor campaign strategist Bruce Hawker, who said this week he believed the Coalition had a mandate for the tax package.

“I think Labor should ultimately give in to this,” Mr Hawker told Sky News.

“I really don’t think it’s worth the fight … My point about these things is essentially that governments should be allowed a mandate and to implement its mandate.”

Mr Albanese has demanded more information on the ­economic implications of the tax cuts over the medium term. The government has claimed this is merely a stalling tactic as it is all in the budget.

“We’ll have an ­internal debate about it through appropriate process­es that I will establish, just like I consulted everyone in the leadership group and others in the movement ­before I made my announce­ment about Mr Setka,’’ Mr Albanese said. “Unfortunately for the government, they said these cuts, stage one, would come in on July 1 and of course they’ve already broken that commitment.”

Senator Cormann’s refusal to horse trade with the Senate crossbench comes after Senator Hanson put a $25bn price tag on her support, claiming she was not in favour of the third plank of the plan “at this stage” and wanted the money first spent on a new coal-fired power station and an inland water-storage system in Queensland.

Senator Hanson had tried similar tactics last year with the government’s first $144bn income tax plan, which included abolishing the 37 per cent marginal tax bracket. It was eventually passed in full by the Senate after the government refused to split that bill as well.

With the new Senate shaping up with a reduced crossbench of six, and the Coalition holding 35 of the 76 Senate seats, the government will need four of the independents to pass legislation. One Nation has two senators as does Centre Alliance, which is also considering its position on the third stage. Australian Conservatives’ Cory Bernardi and Jacqui Lambie are the remaining crossbenchers.

Senator Cormann says Labor should respect the mandate for the tax cuts after Bill Shorten, Chris Bowen and Jim Chalmers all claimed during the election campaign that if elected Labor would claim a mandate for its tax agenda. “At this very recent election Australians voted in favour of our entire plan for income tax relief,” he says.

Stage one of the new tax plan is an increase in the low- and middle-income tax offset measures announced last year, and will now range from $255 to $1080 for workers on up to $90,000 a year.

Stages two and three would lift the top income threshold for the 19 per cent tax bracket to $45,000 and reduce the tax rate for incomes between $45,000 and $200,000 from 32.5 per cent to 30 per cent.

This builds on the ­2018-19 tax plan which abolishes the 37 per cent tax bracket in 2024-25, raises the ceiling for the 32.5 per cent tax rate from $120,000 to $200,000 and raises the point at which the top marginal tax rate of 45 per cent kicks in from $180,001 to $200,001.

Senator Cormann says that, from 2024-25, 94 per cent of workers would not pay more than 30 per cent income tax.