Tax Relief NOW! - The Australian Taxpayers' Alliance

On 18 May 2019, Australians resoundingly voted in favour of tax cuts for hardworking Australian workers, and against tax hikes on renters and retirees.

But the battle is not over yet.

Labor and the crossbench now support the first two stages of the government’s tax cuts package, but have not yet supported stage #3.

Make no mistake, the consequences of not supporting this important reform are dire:

· Nearly 4 out 5 Australians will be denied tax relief which ensures that everyone earning less than $200,000 benefits from a top rate of 30 cents for every dollar we earn.

· Hardworking taxpayers will continue to suffer from cruel income tax ‘bracket creep’, taking more hits to our hip pockets with no increase to our real wages.

· Women seeking to re-enter the workforce and support their families will be denied opportunities to pursue career advancement, move from part-time into fulltime work, or take on more hours.

· The economy will be deprived of a $10 billion boost to annual GDP, and $3 billion boost to consumer wellbeing, damaging our living standards and undermining our way of life.

· We’ll all be hurt by lost productivity and economic growth opportunities, including key incentives to save, invest, take entrepreneurial risks, seek promotions, and pursue social mobility.

The time for taxpayers to raise our voices is now.

Use our form to contact your Senator to let them know that an important, fair and timely tax reform that is crucial to our continued prosperity, should NOT be up for negotiation.

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Dear Senator,

I write to you as one of your concerned constituents, and urge you to support all three stages of the government’s income tax cuts package- including tranche #3 which will lower the 32.5 per cent marginal rate to 30 per cent while abolishing the 37 per cent bracket for those  earning between $125,000 and $200,000 by 2024-25. This will ensure that all workers earning under $200,000 benefit from a top rate of 30 cents for each dollar of their earnings.

This tax cut will allow millions of hardworking Australian workers to keep more of what they earn. It will help to remedy inequitable income tax 'bracket creep' which hikes taxes on ordinary Australians every year without improvement in our real wages, and it will significantly boost productivity whilst facilitating women’s participation in the workforce, I believe, based on the evidence, that its benefits as a shrewd and fair microeconomic reform far outweigh its cost to the budget.

While the cut should ideally be fast-tracked, rather than delayed until 2024-25, locking it in now regardless of when it takes effect is in the interest of taxpayers and the Australian economy. It will maintain the progressive nature of our income tax system by still maintaining multiple tax brackets and levying proportionally more income tax from higher income earners.

I urge you to offer this important reform your support for the following reasons.

Firstly, it will help remedy inequitable 'bracket creep' which is an income tax hike 'by stealth' that takes place every year since income tax brackets are not adjusted to inflation. As a result, Australian workers are pushed into higher tax brackets and pay more in tax despite stagnating real wages. I believe that any proposed tax hikes should be subject to adequate and open stakeholder consultation and parliamentary debate- the same as any significant policy change. Yet 'bracket creep' circumvents this due process by allowing the government to claim that it has raised revenue without raising taxes on workers every year- this is manifestly false and unfair. Although the only way to permanently fix this issue is to index tax brackets to inflation periodically, as is the practice with alcohol, tobacco, and fuel excise, no major political party has offered support for this proposition. However, the relief provided by the government’s complete income tax cut package will partially or fully offset bracket creep's effects over many years. It is noted that supporting only the first two tranches of the government’s income tax cuts will grossly undermine the package’s beneficial mitigating effects against bracket creep which continues to cruelly dip into the budgets of Australian families like mine.

Secondly, the third tranche of the income tax cuts is a productivity-boosting microeconomic reform whose impact on the budget bottom-line will be offset by gains in long-term economic growth, jobs, investment, and increased workforce participation according to independent economic analysis. Politicians should rightly concerned about the revenue impact of significant tax cuts, and those who take these concerns into account should be commended due to the potential long-term negative consequences of national debt which will have to be paid for with interest by our children and grandchildren. However, it is my firm view that the importance of long-term structural microeconomic reform, of the kind which this country has not had in well over 20 years, is significant due to the need to boost our stagnating levels of productivity, and to create incentives for saving, investment, jobs growth, entrepreneurship, innovation, and foreign investment. This is especially true given the potential for global economic headwinds to shift in a negative direction, as has already damaged the government’s recent forecasts for GST takings. Even the Australian retail sector is already feeling these effects. Michael Brennan, the chairman of the Productivity Commission, himself recently argued that Australia is in dire-need of productivity-boosting microeconomic reform. While the Parliamentary Budget Office estimates the cost of the government’s income tax cuts to be $158 million over 11 years, this modelling is static and does not take into account people’s behavioural responses, especially to the third tranche of the tax cuts. Dynamic response modelling by Dr John Humphreys of the non-partisan Centre for Independent Studies, instead finds that it will cost just $128 million over 11 years- primarily due to the third tranche of the tax cuts. In return, the third tranche of the tax cuts alone will deliver over $10 billion in additional annual GDP growth, with an annual $3 billion boost to overall wellbeing i.e. the consumer surplus. Dr Humphreys notes that at the income brackets where this reform kicks in, individuals are actually more likely to change behaviour after tax incentives. They are more likely to work more, seek promotions, save, take entrepreneurial risks that drive innovation, invest in productive assets, and declare more taxable income as they can more easily rearrange their affairs or take advantage of the complex deductions system to minimise liabilities. Unlike the LMITO tax offset increase proposed in the first tranches of the government’s package which have Labor support, this will not simply deliver a short-term economic boost through spending. Rather, it is a longer-term reform whose benefits will pay dividends over many years as aspirational Australians advance through their careers - fostering social mobility in the process. In doing so, the complete tax cuts package will not change the fact that those with the ability to pay continue to shoulder the lion’s share of the tax burden.

Thirdly, insofar as measures that promote female workforce participation and gender parity go, tax cuts would be extremely effective. I note analysis by Sydney Morning Herald Economics editor Ross Gittins, as well as studies cited by Shadow Assistant Treasurer Andrew Leigh on his own website, which confirm that women, in general, are far more sensitive to tax incentives than men are. This is because women face a greater range of choice as they are far more likely to be secondary income providers in a family. This means that tax incentives are far more effective in encouraging women to move into full-time work from part-time, to take on more hours, or to re-enter the workforce at all. Where these incentives apply at the advanced occupation or higher-education level, they will hence also allow Australia to make the most of our human resources as women who desire to pursue their career goals whilst having taken time out to focus on family life, will be encouraged to do so.

Passing the complete tax cuts package now, even if the third tranche is only set to take effect in 2024-25, will help in holding the government to account in its promise to implement shrewd economic management, by locking in tax relief ahead of time. In doing so, it will allow you to assert your own economic credentials by showing support of principled, economically beneficial structural reform. The direct winners will include young people seeking social mobility at a time of rising costs of living, workers across Australia’s middle class, and women with career aspirations.

Thank you for considering my comments and concerns. I hope that you will help pass the complete income tax cuts package in the interests of hardworking taxpayers and our families nationwide.

Yours sincerely,

Tax Relief NOW! - The Australian Taxpayers' Alliance

On 18 May 2019, Australians resoundingly voted in favour of tax cuts for hardworking Australian workers, and against tax hikes on renters and retirees.

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