Tax cuts will be a big feature of the Budget next month.
Tax cuts will be a big feature of the Budget next month.

Huge tax cuts to be brought forward

Scott Morrison has all but confirmed income tax cuts will be brought forward in the budget after slamming a new advertising campaign arguing against the move as "taking money out of people's pockets".

The Prime Minister's blunt response was triggered by a new national campaign to be launched by the left-wing think tank the Australia Institute today urging the Morrison Government not to fast-track income tax cuts in the October 6 budget.

The campaign, which will be rolled out on television screens from tonight, is arguing against the early introduction of legislated tax cuts worth up to $2565-a-year.

The tax cuts, worth $20 billion, were scheduled to come into force in 2022.

The campaign against the early introduction of tax cuts is being supported by 40 prominent Australians, including: Bernie Fraser, former governor of the Reserve Bank, Stephen Grenville, former deputy governor of the Reserve Bank and Professor Peter Doherty, Nobel Laureate in Medicine

"Cutting taxes for already wealthy Australians will undermine the long-term strength of our public services, like healthcare and education, while doing very little to stimulate economic growth," said Ben Oquist, executive director of The Australia Institute.

"Tax is an investment in our society. Those calling for tax cuts today will be calling for service cuts in the future."

But a government spokesman for the Prime Minister has told news.com.au that he won't be influenced by the new campaign.

"At a time of recession the Australia Institute want to take money out of people's pockets,'' he said.

"We're always focused on how we can give it back to them and lower taxes.

"The Australia Institute and the Labor Party have never met a tax increase they didn't like."

However, it's the involvement of the former Liberal leader John Hewson in the campaign against tax cuts that is set to raise eyebrows.


Dr Hewson has released a statement to back the Australia Institute's television ad where he warns tax cuts alone won't help the nation exit the recession.

"The Liberal National Party naively hope tax cuts are good politics, but they won't be as they increase inequality and fail to ensure job security and increasing wages with our economy still struggling to exit recession,'' he said.

Dr Hewson famously campaigned to introduce a GST at the 1993 election, giving rambling answers on how the tax would apply to birthday cakes before "losing the unlosable election".

In June, Mr Hewson conceded that going to an election calling for tax increases was a crazy brave decision.

"Sure, I also helped with answers about the price of birthday cakes, attempting to demonstrate the complexity of the sales tax system to be replaced by a simpler GST,'' he wrote.

"But this emphasised the need for a wide and informed public debate to overcome scare campaigns and to convince the electorate of the need for tax reform as a precondition to an effective overall reform agenda."

Former Liberal leader John Hewson has come out against the proposed tax cuts.
Former Liberal leader John Hewson has come out against the proposed tax cuts.

However, Dr Hewson has also argued for a more comprehensive overhaul of the tax and transfer system that he argued was too complex, inefficient, unfair.

One option, he argued, was to increase the GST which is 10 per cent to 15 per cent.

"Unfortunately, the Morrison government seems incapable of recognising the opportunity. Can the states, emboldened, step up?,'' he said.

"There is no doubt that increasing the rate to about 15 per cent, and extending its coverage as broadly as possible, could produce $90 billion to 100 billion a year (when the economy recovers), with about a third required to compensate the bottom 40 per cent of income earners. This is a lot of financial capacity to start to reform the rest of the tax and transfer system."

"However, perhaps it would be better to be more innovative by ditching the GST and replacing it with a business cashflow tax, in the style proposed by former Treasury secretary Ken Henry."

Treasurer Josh Frydenberg first confirmed in July that bringing forward the 2022 income tax cuts was a live option.

Scott Morrison says the tax cuts will provide money in people’s pockets when it is needed the most.
Scott Morrison says the tax cuts will provide money in people’s pockets when it is needed the most.

"There are three stages to those legislated income tax cuts and, you know, the benefit was very clear. We're creating one big tax bracket between $45,000 and $200,000 where people pay a marginal rate of no more than 30 cents in the dollar,'' Mr Frydenberg said.

"So we are looking at that issue and the timing of those tax cuts because we want to boost aggregate demand, boost consumption, put more money into people's pockets and that is one way to do it."

The Australia Institute's campaign against the fast-tracking of those tax cuts also being backed by the Australian Council of Social Services that warned more tax cuts now means cuts to hospitals and schools later.

"More tax cuts today mean service cuts tomorrow,'' Cassandra Goldie, CEO of ACROSS, said.

"The next stage of legislated tax cuts costs $12 billion a year and reduces tax for people on $130,000 or more by $47 per week. Most low and middle income earners get nothing. Yet it's only low income-earners that will spend most of any Government stimulus. Instead, it's time to #RaisetheRateforGood by permanently increasing Jobseeker payments."

Former deputy governor of the Reserve Bank Stephen Grenville, said the answer was more government spending, not tax cuts.

"We'll need substantial stimulus for an extended period. Cutting top-rate income tax would be a weak stimulus which undermines the equitable and progressive tax structure we'll need when the COVID crisis is over,'' he warned.


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