The Coalition government's personal tax cuts for middle and high income earners will cost $30 billion a year, new independent costing of the plan shows amid warnings they may drive the budget back into deficit.
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As research by the Grattan Institute warns the tax cuts may not be affordable, figures compiled by the Parliamentary Budget Office show the third stage of the government's budget tax measures will come at a substantial cost to the budget bottom line.
Labor is opposed to stages two and three of the government's tax plan. The costing by the PBO, however, only looks at the budget impact of stage three under which a 30 per cent tax rate will cover all workers earning between $45,000 and $200,000 a year.
The plan builds upon last year's move to axe the 37 per cent tax rate, with the government estimating 70 per cent of workers will find themselves on the new tax rate that is slated to start from July 1, 2024.
According to the budget office, in the first full year of operation the third stage of cuts will cost $18.7 billion in foregone revenue. By 2029-30, the annual cost of the cuts will reach $30 billion.
Over the first six years of operation, the stage three cuts will cost the budget $147.2 billion.
When the budget was announced, the government revealed its new third stage tax cuts would cost $95 billion between 2024-25 and 28-29. The PBO costings include the cost of the tax cuts that formed part of the 2018 budget.
Shadow treasurer Chris Bowen, who will flesh out more of Labor's economic agenda at the National Press Club on Wednesday, said the costing showed the true impact of the government's plan on the nation's finances.
"Scott Morrison has famously repeated in the last week his view that income tax cuts aren't a 'cost' to the budget," he said.
"That underscores just how fiscally reckless the Liberal Party is, locking into the budget, massive tax cuts for high income earners.
"This says all Australians need to know, not just about the competing choices and priorities at this election, but how the Liberals will stop at nothing to implement their ideological, flat tax agenda."
Labor, opposed to stages two and three of the government's tax plan, is debating whether to offer its own tax cuts or use the revenue to pay down Commonwealth debt faster than promised by the government.
Mr Morrison, campaigning in Queensland on Monday, said Labor's refusal to back all of the government's personal income tax cuts was proof that it could not control spending.
"Our government has always backed the high working efforts of Australians," he said.
"That is what we believe in and backing in. I am pleased to go to an election backing in Australians who are working hard and saying to them, I want you to keep more of what you own."
But separate research from the Grattan Institute suggests the stage three tax cuts could be a risk to the budget.
It found the cuts were "affordable" largely because the government assumed a steep fall in spending growth over the next five years despite expectations the cost of health and welfare will climb as the population ages.
If spending remained at its current level of 24.9 per cent of GDP, the stage three tax cuts would push the budget back into deficit the year they are supposed to come into operation.
"The pre-election tax package finally does something about bracket creep - but solves it only for the top end of town," it found.
"The package misses the opportunity for more comprehensive reform. And most concerningly, it puts a sizeable hole in government revenues just as an ageing population is starting to bite the budget bottom line."
- SMH
