Treasury’s role in Stage 3 tax cuts ‘redesign’ a disgrace

Treasury was hopeless during the covid pandemic and its role in the so-called Stage 3 tax cuts redesign has been `utterly disgraceful’.

So, the prime minister went all the way through January promising to deliver the Stage 3 tax cuts when Treasury had already been asked to ‘redesign’ them.

Or are we to believe that Treasury went off on a frolic all of its own with the redesign; that was then ‘sprung’ on an unsuspecting PM and Treasurer; and the duo simply had no alternative but to do what they were told by Treasury?

The Treasury statement on the tax changes begins very curiously: “this advice paper RECOMMENDS (my emphasis) a redesign of the legislated tax cuts.

With a normally functioning relationship between Treasurer and Treasury, you would expect the statement to have kicked off with: “we have been instructed to advise on a redesign….”.

But it gets worse. Treasury says that a redesign of the Stage 3 tax cuts presented “other

opportunities”, over and above simple cost-of-living relief.

Treasury was either unilaterally frolicking or doing the bidding of a PM and Treasurer intent on quite deliberating NOT delivering the Stage 3 changes as promised. But instead delivering a different package to achieve ‘new’ purposes.

The Treasury’s – seeming willing – politicisation was further demonstrated with a constructively misleading table upfront, comparing the 2023-24 tax scales with the new ones proposed for 2024-25.

This showed, clearly deliberately, everyone’s a winner – from the lower income earners, all the way to the fat cats.

The Prime Minister, Anthony Albanese and federal Treasurer Jim Chalmers.

A more analytically rigorous, or just simply more honest, table would have compared the tax scales, as already legislated, for 2024-25 with the new scales now proposed.

This would have more graphically revealed the awkward truth that the Albanese Government is actually proposing tax INCREASES on higher income earners – anyone earning more than $135k.

And that, critically, tax increases over and above what bracket creep will rip out of them anyway – and indeed out of people with incomes LOWER than $135k, as well. Not just in 2024-25 but every year after that as well.

We are not talking about two sets of proposals; but changes – embraced and pushed by the PM and Treasurer – to an EXISTING tax scale.

Come July 1, as presently structured, the 37c bracket goes.

Very specifically, in black and white, the government is proposing to increase the marginal rate that would apply between $135k and $190k from 30c to 37c.

And to increase the rate that applies from $190k to $200k from 30c to 45c.

This analytical sleigh-of-hand thoroughly corrupts the Treasury analysis purporting to show how bracket creep is ‘returned’ to taxpayers on different income levels.

It both dramatically overstates how much is returned (to ALL taxpayer levels), and falsely indicates it is ‘fairer’ and more effective.

Treasury only throws forward, and only the Stage 3 cuts.

It should have taken as its base the situation in 2018, and what ALL three tax cut stages delivered.

This would have shown lower income payers got by far the biggest bracket creep return benefit; and just how punitive to those earning more than $135k the proposed changes will be.

Ah Treasury. Utterly hopeless through Covid. Utterly disgraceful after it.

Originally published as Treasury’s role in Stage 3 tax cuts ‘redesign’ a disgrace