Chris Bowen (McMahon, Australian Labor Party, Shadow Treasurer) Share this | Link to this | Hansard source

I rise to speak on the Medicare Levy Amendment (National Disability Insurance Scheme Funding) Bill 2017 and related bills. Here we have a situation where a government which professes to be a low-tax government, a government which claims that it's interested in reducing the tax burden on working Australians and a government that beats its chest and reminds people how much it's done for them when it comes to reducing tax seeks to increase personal income tax paid by anybody earning more than $21,000 a year. This is a stark difference between the two sides of this House.

The Labor Party will oppose this bill. We don't believe that a tax hike on over seven million Australian workers earning less than $87,000 a year is justified. It is particularly concerning at a time of low wages growth, high cost-of-living pressures and a government which is standing by watching Australians take a wage cut for committing no crime other than working on a weekend—and this government is prioritising an income tax increase for those same workers. As I said, the government likes to talk the talk about reducing tax and the Treasurer likes to boast that he cut tax, as the Prime Minister likes to boast, but what they're doing here is increasing tax. This government believes in lower tax for some and higher tax for others. It believes in lower tax for corporations and higher tax for low- and middle-income workers, and even believes in lower tax for high-income earners but higher tax for those who can least afford it. This tax increase will mean a worker on $55,000 a year would pay $275 a year extra on tax while someone on $80,000 will pay more than $400 a year extra on tax.

You occasionally hear this government, the Prime Minister and the Treasurer asked: what have been their achievements in office? I understand why they struggle to answer that, but they search around and come up with, 'We've cut taxes on workers. We've cut personal income tax.' But the problem for them is that their tax cuts, which received bipartisan support, are outweighed by this increase. Under the government's plan to increase the Medicare levy, it turns that out a worker earning $85,000 a year will lose the full benefit of last year's tax cut, which the government likes to boast about, and will end up paying more in income tax. They will be worse off compared to if the government had done nothing—not cut tax last year and not increased the Medicare levy this year. If the government did nothing, then that worker on $85,000 a year would be better off.

It is understandable that Australians look at this Treasurer in particular and shake their head when they see that this government is increasing taxes on them. This party of lower taxes introduced over $20 billion in new taxes in this year's budget. The tax-to-GDP ratio is higher now than it ever was when Labor was in government, as high as we've seen since the Howard government. And it's clear that the government's corporate income tax cuts are, in a technical sense, unfunded. The government has no plan to pay for them.

But in a real sense they are actually funded by Australian workers, because what the government is doing is increasing personal income tax at the same time as it reduces, or seeks to reduce, corporate tax. Recently, the Parliamentary Budget Office put out a report entitled 2017-18 Budget: medium-term projections, which made some interesting points. It noted that once the tax cap is increased that personal tax receipts are projected by the PBO to continue to rise as a percentage of GDP as company tax receipts decline from 2023-24. This is as a result of the government's enterprise tax plan. Those are PBO's words, not mine. The PBO projects that the average tax rate on personal income will rise from 22.7 per cent in 2016-17 to 25.9 per cent in 2027-28. The report states that in 2023-24 personal income tax will be 12.4 per cent of GDP, while company tax will be 4.5 per cent of GDP. But by 2027 personal income tax will be 12.6 per cent while corporate tax will be 4.2 per cent. So, from 2023-24 to 2027-28, when the company tax rate is meant to decrease to 25 per cent for all companies, personal income taxes will rise by 0.2 percentage points of GDP while company taxes decrease by 0.3 per cent of GDP. That might not sound like much, but of course as a percentage of GDP it adds up to a very substantial amount.

This was further reinforced in another report put out by the Parliamentary Budget Office a few weeks ago, showing that middle-income earners are set to suffer the greatest tax burden under this government's policies. As I said, only last year the Treasurer was talking about delivering income tax relief for middle-income earners like it was the greatest challenge of our time. Despite the Liberal Party's low-tax talk, the Turnbull government is delivering tax cuts only for big business while actually increasing income taxes on lower-level income earners. In fact, as I said, somebody on $85,000 will be worse off as a result of the interaction of both of those things.

Another PBO report, entitled Changes in average personal income tax rates: distributional impacts, shows that average tax rates for individuals in every quintile are set to increase between this year and 2021. The largest increase in average tax rates is expected for people in the middle-income quintile, earning just $46,000—the largest increase in tax will be paid by those earning just $46,000! And the average tax on the middle-income quintile is expected to increase by 3.2 percentage points—much higher than the less-than-two percentage point increase expected for people in the top quintile. And average tax rates on middle-income earners are expected to rise to 20-year highs. What we're seeing here is in many respects a combination of the government's policy of increasing the Medicare levy on every Australian who earns more than $21,000 and bracket creep—people moving from one tax bracket into another.

Of course, we were told that this would be the great moral mission of the Treasurer—that he was going to introduce big, sweeping personal income tax cuts to deal with this. He said so. He said, when he became Treasurer, that he was passionate about bracket creep and that he would be dealing with it. Sometimes the tax cuts were called 'big', sometimes they were 'very big' and sometimes they were 'extremely big', but it was very clear that he was laying out his personal agenda on which he would be judged a failure or a success. What he's done is produce today's tax cuts last year, which are now more than eaten away by this personal tax increase.

It goes to the heart of the lack of a credible economic plan by this government. It goes to the heart of their lack of beliefs—to their lack of a coherent and consistent agenda. This is a government which actually doesn't believe in anything; a government which could, with a straight face, actually say to the Australian people that this Medicare levy increase is necessary when it wasn't mentioned by them at the last election. All they were saying at the last election was that they had a magical plan to grow the economy by reducing corporate tax and that they didn't need to fund it because, in effect, it would fund itself. I wonder why they, who were so keen on this plan, weren't straight with the Australian people at the last election, which was a little more than 12 months ago? The fact of the matter is that many people will be worse off as a result of the government's policy compared to the Labor Party's.

The Labor Party is prepared to be reasonable. We believe that the only increase in the Medicare levy that can be justified is for those who earn more than $87,000 a year. We don't say that with any relish or enjoyment, but, if difficult decisions are necessary, governments need to prioritise. We say it is sustainable and reasonable to exempt those earning under $87,000 from this increase.

The government will in the course of this debate try to justify their policy by claiming it is necessary to save the National Disability Insurance Scheme. This is highly irresponsible for the government to argue. It's highly irresponsible because it generates fear among those who rely on the NDIS, for themselves or for family members, who come to the view that somehow the NDIS must be under threat or at risk. Well, firstly, the reports we have seen indicate that there's been no blowout in the cost of the NDIS. In fact, the final budget outcome, which we saw a few weeks ago, showed that the NDIS was running at under projections and that the government was actually spending less on the NDIS than had been projected at budget time. So for the government to argue that the NDIS is out of control and unfunded is not only highly disingenuous but also deeply irresponsible. As I said, it creates fear among those who rely on the NDIS.

Here is a challenge for the government. We know that the NDIS is not running over cost. Minister Porter himself has confirmed that. He has said there is no evidence that there's been a cost blowout. We know that the Labor Party in government took difficult decisions to fund the NDIS. We put those decisions through—some of them with the support of the Liberal Party. That was done. But, if the government are really saying that the NDIS is under pressure or under threat, what they're saying is that they will renege on the signed agreements they have with the states to introduce and implement the NDIS. I don't believe the government will renege on their agreements. But they should be honest about that. They should confirm that they won't renege and that the NDIS is fully funded—as it is.

So the NDIS argument falls flat at every hurdle. It is completely disingenuous. The NDIS has been funded by both Labor and Liberal governments. Both Labor and Liberal governments have allocated funding to the NDIS in all budgets since 2013 and signed bilateral agreements with the states that contain the government's commitment to the full funding of the NDIS. Like other items of government expenditure, such as defence, the NDIS is funded from consolidated revenue and does not require a separate funding arrangement. Why should the NDIS be different from all the other worthy and good things that the government spends money on? This government singles out the NDIS and says to Australians earning more than $21,000: 'You've got to pay this special increase in the levy to fund it.' We do not believe that that should be the case. We believe it should be funded in the normal fashion, through consolidated revenue, as was implemented by the previous Labor government.

I will shortly move a second reading amendment. This amendment points out that this is a tax hike for over seven million Australians who are earning less than $87,000 a year and the errors in the government's approach. The package of bills that we are debating today includes a bill that would abolish the Building Australia Fund and the Education Investment Fund—

Chris Bowen (McMahon, Australian Labor Party, Shadow Treasurer) Share this | Link to this | Hansard source

a matter of some interest to my friend the member for Grayndler. Members may recall that the government tried to abolish these two nation-building funds when the former Treasurer, Joe Hockey, put forward his ill-fated Asset Recycling Fund. And now, after slowly crab-walking away from the Asset Recycling Fund idea, the government goes back to its old idea of abolishing these funds and crediting them to an NDIS special account. This is something my colleagues will say more about in their contributions, but I can say very clearly that we will oppose the government's plan. In the consideration in detail stage, I will be seeking to move amendments that will seek to implement our policy to have the Medicare levy increased for those earning over $87,000. And I will be moving amendments that set up the legislative framework for the reinstatement of the budget repair levy. While we may be constitutionally prevented from reinstating the levy itself, we can put the framework in place. I move the amendment circulated in my name:

That all the words after "That" be omitted with a view to substituting the following words:

"the House declines to give this bill a second reading as:

(1) this is a tax hike on over seven million Australian workers earning less than $87,000 a year;

(2) the Government is already supporting cuts to penalty rates for low and middle income workers;

(3) at a time of low wages growth and the high cost of living pressures, including energy costs, the Government should not be seeking to raise taxes on these low and middle income workers;

(4) the Government:

  (a) is cutting funding for vocational education, university and research infrastructure, and transport infrastructure;

  (b) has failed to abolish the Nation-Building Funds previously; and

  (c) has sidelined Infrastructure Australia when making infrastructure investment decisions;

(5) the National Disability Insurance Scheme has been fully funded in a bipartisan fashion, and funding has been allocated to the NDIS in all Budgets since 2013-14 and bilateral agreements with the states that contain the Commonwealth Government’s commitment to the full funding of the NDIS have been signed in a bipartisan manner;

(6) like all other items of Government expenditure, such as defence, the NDIS is funded from consolidated revenue and does not require a separate funding arrangement; and

(7) there is a better and fairer plan which would:

  (a) only raise the Medicare Levy for those earning above $87,000 a year;

  (b) reinstate the Budget Repair Levy for those earning above $180,000 a year; and

  (c) would ease the pressure on low and middle income workers, and be better for the budget bottom line".

I know the member for Grayndler is particularly keen to second it. I will continue my remarks at a later hour.