United Workers Union demands stage-three tax-cut review

UWU national secretary Tim Kennedy says the ALP ­national conference should act to help low- and middle-income workers through the cost-of-living crisis.

United Workers Union national secretary Tm Kennedy says governments need to ‘give hope to people that they can have a better life’.

The influential United Workers Union has urged the Albanese government to use the ALP ­national conference to commit to reviewing the stage-three tax cuts, declaring they need to be revamped to help low- and middle-income workers through the cost-of-living crisis.

UWU national secretary Tim Kennedy told The Australian that the government should use the national conference in Brisbane this week to lead a discussion on the tax cuts and publicly commit to reviewing them.

He said the tax cuts should be skewed away from high-income earners towards workers earning between $45,000 and $120,000 a year. “I think stage-three ... will go ahead in some form and we think the only way it should go forward is in a progressive way that seeks to look after people in that big tax bracket between $45,000 and $120,000,” he said.

Mr Kennedy said the biggest issue facing Australians was the cost of living and it was impacting on “younger generations like never before”.

“The biggest threat for this government is they aren’t seen to be dealing with the cost-of-living crisis for a whole young generation. Part of it is steady-as-you-go on an income tax system that is becoming increasingly regressive and is not sustainable,” he said.

“Governments who actually cannot give hope to people that they can have a better life don’t last long.”

Jim Chalmers, who will lead national conference’s first major session on the economy, where tax policy will be discussed, on Sunday said the government’s policy on stage-three tax cuts “hasn’t changed”.

Under stage-three tax cuts, legislated by the Coalition in 2019, the 37 per cent tax bracket would be abolished and shifted towards a flat rate of 30 per cent for Australians earning between $45,000 and $200,000 from July 2024. The top 45 per cent bracket would start from $200,000, meaning about 94 per cent of workers would pay no more than a marginal rate of 30c in the dollar.

The Parliamentary Budget Office in May estimated the cuts would cost $313bn over 10 years.

Since the 2022 election, Labor MPs and unions have argued publicly and internally for stage three to be overhauled. Ahead of the Treasurer’s first budget last year, the government allowed a debate over the future of stage-three tax cuts before recommitting to the package. Senior government officials said they expected some “noise” around the tax cuts but their focus was on the cost-of-­living crisis and fighting inflation.

Mr Kennedy said the union did not intend to move amendments to the party platform in support of a tax cuts review. “What we’d really like is for the government to say we’re going to do this. The conference is really the mechanism by which it gets talked about. The conference doesn’t change anything, it’s what the government decides to do that’s important.”

He said he accepted that the government had a mandate for the tax cuts and would be attacked by opponents if it moved to change them. “I think the mandate argument has political force, but when the facts change, good leaders acknowledge that the facts change and make decisions based on the new circumstances.

“I think the government has acknowledged that the world is different from when they were done and so a review is space for the government to look at both the political imperative of the promise (and) the economic and social reality of the situation. What we’re saying is look at our people, working people on about $70,000, and see that they are making a disproportionate contribution to the overall tax take. They need support and Labor governments are designed to support the many, not the few.”

Changes to stage-three tax cuts would require legislation and it is likely the government would win support from the Greens and crossbenchers to trim the tax cuts. Any overhaul of stage-three tax cuts would occur through the budget process next year, ahead of the tax changes coming into effect. Some Labor MPs have raised the prospect of a new levy on wealthier taxpayers to fund the government’s policy priorities.

Rich Insight founder Chris Richardson said “the tax cuts mostly fight bracket creep, which has been like fighting a phantom enemy for many years”.

“The case for tax cuts has been strengthening because the inflation surge at the moment is increasingly hurting families but helping government. Second thing is that the official forecast in the budget say that in a decade … there is no deficit,” he said.

The veteran economist said there was still a case that “you need to trim … I would say they are still too big, but the too big (case) is smaller than it was”.

Maintaining a rate of 37c in the dollar from $120,000 to $180,000 would save the government more than $10bn in 2025-26. Changing it to 35c in the dollar would save more than $7bn in the same year.

Mr Richardson said because inflation had delivered a tax bonanza for government, “the case for handing back some of that has ­improved”.