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Note: Average cost (rounded) for each additional job created within the next two years.

ACOSS: ‘Tax cuts do not benefit those most in need’

The Australian Council of Social Service (ACOSS) has a different view about the Australian Government’s taxation changes included in the 2020/21 budget.

“The Budget leaves millions of people stranded, giving the least to people who already have the least, and giving the most to those who have more,” says ACOSS CEO Dr Cassandra Goldie in ACOSS’s post budget briefing media release.

“We should have given the most to people who needed it, and who are most likely to spend it.”

The self-described “national advocate for action to reduce poverty and inequality and the peak body for the community services sector in Australia” begins its analysis of the taxation changes by observing: “Tax cuts for high income earners are permanent and worth twice as much as temporary ones for middle income earners.”

ACOSS makes the following points:

  • The extra tax cuts for middle income-earners ($40,000-$90,000), worth around $21pw, last for one year only whereas those for high income-earners (the top 10% of taxpayers on $120,000 and above) are worth twice as much (around $47pw), and they are permanent.
  • This is because ‘Stage 2’ replaces the existing $21pw Low and Middle Income Tax Offset (LMITO) with an increase in the 19% threshold from $37,000 to $45,000.
  • The tax tables in Budget documents suggest that middle income-earners gain up to $42pw, but that includes the $21pw tax cut people have been getting since July 2019.

The additional tax cut for middle income-earners in this financial year comes from: (1) The increase in the 19% tax threshold, which applies to fortnightly tax withholdings, saving up to $21pw; (2) Retention of the LMITO for this year only, so the equivalent of another $21pw can still be claimed in tax returns from July 2021 (as was the case last year).

  • High income-earners benefit from an increase in the bottom threshold from the 37% tax rate from $90,000-$120,000 (saving $26pw), and also from the increase in the 19% threshold (saving $21pw).

ACOSS also contends that “each job created by the tax cuts will cost $475,000 at a cost of $23.8 billion, whereas improving community services generates jobs at less than a quarter of the cost.

  • In contrast, The Australia Institute estimates that each job created by properly funding aged care costs $70,000, for health services $100,000 and for child care $50,000.

The Australian Institute is an “independent, non-partisan and funded mostly by donations and grants from individuals, philanthropic trusts and unions, as well as commissioned research from business and non-government organisations”, it’s website states.

“The Australia Institute does not accept donations or commissioned work from political parties.

“With no formal political or commercial ties, the Institute is in a position to maintain its independence while advancing a vision for a fair and progressive Australia.”

 

Sources: 2020 Budget papers; Grudnoff M (2020), Tax cuts or spending: What is the most effective stimulus? Australia Institute; SGC Economics (2020), Economic impacts of social housing investment; Australia Institute (2020); Deloitte Access Economics (2018), Analysis of the impact of raising benefit rates; Department of Employment (2016), The effectiveness of wage subsidies in Job Services Australia. Image: ACOSS

 

 

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