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Politics

Labor and the Coalition’s income tax proposals explained

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We compared the Labor and Coalition’s income tax proposals to see who benefits most

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John Hawkins, University of Canberra and Yogi Vidyattama, University of Canberra

We now have the competing bids for our votes by the alternative governments on income tax policy.

From Labor, future cuts to the lowest marginal tax rate and new standard deductions for work expenses. From the Coalition, a one-off return to a tax offset for low and middle income earners that was previously nicknamed the “lamington”.

Our modelling shows slightly higher benefits for low- and middle-income earners from the Coalition’s proposals compared to Labor’s.

Labor’s drip-fed tax policies

The Labor government announced its main tax proposal in the recent budget. It is a permanent cut in the lowest marginal tax rate.

Currently, the tax rate on income between A$18,201 and $45,000 is 16%. This will drop to 15% from July 2026 and then to 14% from July 2027.

This will reduce the tax paid by taxpayers in all income brackets, with most receiving $536 a year in relief. But it is proportionately larger for those on lower incomes.

At the weekend, the government announced an additional measure: allowing everyone to claim a standard tax deduction of $1,000 instead of claiming individual work-related expenses.

Those with expenses over $1,000 can continue to claim their deduction in the current way. The government estimates this measure will assist 39% of taxpayers. The average relief for those benefiting will be $205 per year.

Coalition’s revived tax offset

Also at the weekend, the Coalition released its tax policies. It is essentially proposing the reintroduction of the Low and Middle Income Tax Offset (“LMITO”, which led to the nickname the “lamington”), for one financial year only.

The Morrison government introduced a low- and middle-income tax offset in the 2018-19 tax year. It was subsequently extended, but then abolished by the Labor government.

It is now called the Cost of Living Tax Offset. Those with taxable incomes between $48,000 and $104,000 will get a one-off rebate of $1,200. Other taxpayers with incomes below $144,000 will get smaller rebates.

Although Dutton was critical of Labor’s income tax cuts for not starting until 2026, the one-off rebate would also not be paid until mid-2026.

Dutton has not explained why he said three weeks ago that the budget position would not allow for income tax cuts but now he thinks it does.

Who benefits most from the competing proposals?

We have estimated the distribution of the benefits from Labor’s proposed tax cut (but not the instant tax deduction) and the Coalition’s one-year tax offset.

Given a federal election is held every three years, the estimates are provided up to mid-2028. This resulted in a slightly higher cumulative figure of around $10 billion for the Labor proposal (over two years) and $11 billion for the Coalition proposal (over one year). This is slightly higher than the Coalition’s own estimate.

The following charts show disposable household income deciles from the poorest 10% to the 10% with the highest incomes. This is household income that has been adjusted to allow comparison of income levels between households of differing size and composition.



The chart indicates slightly higher benefits from the Coalition for households in the lowest and second-lowest income groups. This may be an overestimate as it assumes those earning less than $37,000 get a $265 benefit. The policy is rather vague on this, saying only that they would get “up to” $265.

The Coalition proposal provides a somewhat higher benefit for middle income earners, but withdraws it for those on higher incomes.

All individual taxpayers earning above $45,000 will receive the same benefit from the Labor proposal. But differences in household composition mean that the benefit calculated by household continues to rise somewhat.

The Coalition proposal gives no benefits to individuals earning over $144,000. But even the households in the highest income groups have some members earning less than this, such as adult children living at home. So the average household with a high income will still get some benefit.

In terms of family type, the Coalition proposal will give less benefit than the Labor plan to couples with children but more to other groups, especially single parents.

From these distributions of both income level and family type, it seems that neither party has a clear plan to target their own traditional constituencies with these policies. The Coalition proposal may be targeting households in outer suburban marginal seats which tend to have more low and middle income households.



How much will they cost?

According to the budget papers, Labor’s cut to the lowest marginal rate will cost $3 billion in 2026-27, $6.7 billion in 2027-28 and $7.4 billion in 2028-29.

The cost of the instant tax deduction will be $2.4 billion over four years.

The Coalition has claimed its rebate would cost $10 billion in 2026-27.

This would of course increase if a Dutton government feels under pressure to extend the new rebate, as happened with the LMITO.

Disappointing for democratic decision-making

It is very disappointing that both major parties are releasing key policies on taxation and housing literally only days before people start voting.

Previous leaders like Robert Menzies (when opposition leader from 1943 to 1949) and Gough Whitlam (1967 to 1972) would spend years developing, then explaining and advocating for policies. This gave time for them to be scrutinised, and if necessary revised, before voters were asked to pass judgement.

The proposals are also disappointing for those arguing for substantial tax reform.

John Hawkins, Senior Lecturer, Canberra School of Politics, Economics and Society, University of Canberra and Yogi Vidyattama, Associate Professor, Faculty of Business, Government and Law, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Politics

Macron’s Prime Minister resigns after just one month

Macron’s latest prime minister resigns after just a month amid growing fiscal challenges and government instability in France

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Macron’s latest prime minister resigns after just a month amid growing fiscal challenges and government instability in France

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In Short:
– Sébastien Lecornu resigned as Prime Minister after less than a month, the shortest tenure in Fifth Republic history.
– His departure reflects Macron’s ongoing challenges in securing a stable government amid economic difficulties and political division.
Sébastien Lecornu has resigned as France’s Prime Minister after less than a month, marking the briefest tenure in the country’s Fifth Republic.His departure highlights President Emmanuel Macron’s ongoing difficulties in establishing a stable government amid worsening fiscal conditions.

Lecornu, the fourth prime minister to resign under Macron, faced the challenge of addressing a significant budget deficit while managing a divided National Assembly.

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France’s rising borrowing costs reflect its economic troubles. The CAC 40 index dropped by 2%, and the yield on 10-year bonds climbed to 3.6%. Critics, including Jordan Bardella of the National Rally, are calling for the dissolution of the National Assembly, arguing that such action is necessary for stability.

Upcoming elections could further weaken Macron’s legislative power. His earlier decision to dissolve parliament led to fragmentation, with left-wing and far-right parties gaining strength at the expense of Macron’s centrist coalition.

Government Instability

Lecornu was appointed after François Bayrou’s government collapsed. Bayrou faced backlash for proposing cuts to public spending, intensifying fiscal issues. Lecornu aimed to reform the approach of previous administrations but faced opposition from both ends of the political spectrum.

Rather than seeking cooperation, he appointed familiar figures from previous governments, drawing criticism from conservatives and leftists alike. Macron has been hesitant to engage with the leftist coalition that won the most votes in recent elections, complicating efforts to establish a governing majority.


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Newspoll shows divided opinions on rising house prices

Newspoll shows divided opinions on Australian house prices as government support raises expectations for market increase

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Newspoll shows divided opinions on Australian house prices as government support raises expectations for market increase

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In Short:
– Newspoll reveals a divide among Australians on house prices, with 34% wanting increases and 30% preferring stability.
– The Albanese government plans to build 1.2 million homes by 2029 to address housing supply issues.
Newspoll indicates a split among Australians regarding house prices over the next three years. More voters support an increase in home values than those who prefer stability or a decrease.
This comes as expectations rise due to government support aimed at aiding first-home buyers.The survey, conducted for The Australian, shows that 34% of respondents want prices to rise, while 30% want them to stay the same and another 30% wish for a decrease. A notable 6% had no preference.

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Divisions among the population are evident, especially between those with mortgages and renters. The Albanese government aims to address housing by pledging to build 1.2 million homes by 2029, but opinions on property prices are divided.

Most respondents aged 18-34 are in favour of dropping house prices, contrasting with older demographics more supportive of value increases. Rental households predominantly desire lower prices, in stark contrast to homeowners. Support for rising prices is stronger among Coalition voters and those who support independents.

Government Response

Prime Minister Albanese noted the government’s expansion of the Home Guarantee Scheme aims to ease access for first-home buyers. He highlighted the scheme’s minimal impact on price increases, despite a slight projected rise.

Albanese addressed housing supply challenges mentioned by Reserve Bank governor Michele Bullock, stating that building takes time. He underscored ongoing efforts to boost housing stock through initiatives, including the Build to Rent scheme and renovation of unoccupied homes.


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Takaichi aims for Japan’s first female prime minister

Sanae Takaichi breaks barriers to lead Japan’s ruling party, poised to become the first female prime minister

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Sanae Takaichi breaks barriers to lead Japan’s ruling party, poised to become the first female prime minister

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In Short:
– Sanae Takaichi aims to become Japan’s first female prime minister, leading the ruling party amidst conservative policies.
– Her nationalistic views and opposition to same-sex marriage could alienate voters and challenge her leadership.
Sanae Takaichi emerged victorious in the male-dominated race to lead Japan’s ruling party, positioning herself to potentially become the country’s first female prime minister.
Takaichi’s conservative stance and fiscal policies have raised concerns among investors regarding her plans for an expansionist fiscal agenda.
Despite her background as a heavy metal fan, her nationalistic views may provoke tensions with China.Banner

With previous leadership attempts, Takaichi intends to gain parliamentary approval to replace Shigeru Ishiba. Although she belongs to the largest ruling party, the coalition currently lacks a clear majority following recent election losses.

Hosting a meeting with former President Donald Trump is anticipated as one of her early initiatives.

Takaichi is known for her admiration of Margaret Thatcher, discussing their meeting shortly before Thatcher’s passing in 2013. As a drummer, Takaichi’s personality may resonate with voters, though her nationalistic policies, including potential alterations to Japan’s constitution, could alienate some.

Potential Challenges

While Takaichi advocates for increased gender diversity in her cabinet, her conservative policies may alienate female voters.

She stands against same-sex marriage and the option for separate surnames for married couples, stances not widely supported by the public. Economically, Takaichi promotes ‘Abenomics’, pushing for increased spending amid rising living costs and opposing the Bank of Japan’s interest rate adjustments.


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