Regressing on tax

Taxation Income tax Budget Australia

The centrepiece of this budget is large income tax cut that builds on the large income tax cuts in the last budget. Together, these cuts represent over $300 billion in lost revenue over 10 years and a radical reshaping of the purpose of income tax. Income tax in Australia has been a progressive tax where those on higher incomes pay a larger proportion of their income in tax. This funded universal services like health and education.

The government’s income tax plan would fundamentally change this, making income tax flatter and less progressive. If this income tax plan comes into effect, it will mean that in the future those on higher incomes will pay less tax as a proportion of their income and the amount of income tax collected will be far less. The consequences will be less revenue for essential government services. These are the same services that are relied on by both the rich and poor.

The government’s tax plan has two parts. The first part is tax cuts for low and middle income earners that begins at the end of this financial year and expires in 2021-22. The second part is a radical flattening of the income tax scales that begins after 2022-23 and will be fully implemented by 2024-25.

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