Andrew Leigh (Fenner, Australian Labor Party, Shadow Assistant Treasurer) Share this | Hansard source

There's one thing worse than right-wing ideologues, and that's unoriginal right-wing ideologues who have to borrow their tax-cutting strategy from overseas. The story of this government's personal income tax plan originates in United States Republican law, with people like Irving Kristol and Grover Norquist. To see the origins of this, you need to look back to the Bush tax cuts implemented in 2003, which saw 53 per cent of the cuts going to the top one per cent. American taxpayers making $10 million or more pocketed an average of $1 million a year. But, in order to hide from the American people the impact of that tax cut, a short-term stimulus was put in place, and so everybody saw an immediate handout but, over the long run, it was the most affluent who received the most.

We've seen President Trump recently pass through Congress a similar tax plan. According to the non-partisan Tax Policy Center, over the course of the long term, the impact of the Trump tax plan is to give multimillionaires more than $700,000 but those in the bottom fifth absolutely nothing. The middle class, over the long term, receive a smaller dollar amount from the Trump tax cut, and they receive a smaller percentage amount. The income boost for the very top can be as high as 10 per cent. The income boost for the middle is just one per cent.

Again, the Trump tax cuts' long-term impacts are hidden through short-term payments which are due to expire for the middle class. US economist Paul Krugman likens this to going out to dinner with a wealthy acquaintance. The dinner starts with the wealthy acquaintance promising to pay everything, and so you order a hamburger each, and then, as the meal goes on, the acquaintance turns around and orders the most expensive bottle of wine and a filet mignon steak and then says, 'Put it on the poor guy's credit card.'

That's what we've seen from the early 2000s Bush tax cuts and from these most recent Trump tax cuts. It is a strategy which has its origins going right back to Irving Kristol's 'starve-the-beast strategy'—the notion that if you cut down government revenue enough then you would have a political excuse to slash the politically popular social safety net. Grover Norquist's group, Americans for Tax Reform, required American Republican candidates to sign 'no new taxes' pledges. You saw movements in the early 2000s to shutdown so-called tax harmonisation—effectively, to go soft on tax havens like the Cayman Islands—costing American taxpayers up to $70 billion a year. I commend to the House the piece in Rolling Stone a couple of years ago, 'How the GOP became the party of the rich'.

We've seen in the Australian context exactly the same playbook. In the 2014 budget we saw permanent cuts to the social safety net but a temporary increase in taxes for the most affluent. The only temporary measure was the one that applied to the most affluent Australians. That debt levy lasted only from July 2014 to June 2017, despite the fact that—as the shadow minister for finance pointed out—the net debt has doubled under the Liberals. What we see now in this tax plan is something very similar to what we saw from the 2014 budget, from the early Bush tax cuts, from the most recent Trump tax cuts. It is a set of tax cuts whose early effect is to benefit middle Australia but whose later effect is considerably more regressive.

The government has been steadfast in refusing reasonable requests from Labor to provide distributional analysis. We didn't use to have to ask for these things. The budget used to contain a family impact statement, which was omitted with the 2014 budget—not surprising, given how regressive the measures in that budget were. I'll bet, as the Shadow Treasurer said in his speech today, that analysis was done but simply not released so others have stepped into the breach. Analysis from Ben Phillips at the Australian National University uses the relatively new model, the ANU PolicyMod model of the Australian tax and transfer system. That model estimates that, of the measures due to take effect in 2018-19, the average change in disposable income per household would be fairly similar across the distribution. A middle-quintile household would benefit to the tune of $508, a top-quintile household, $650. In proportionate terms for the middle-quintile household, that would be 0.6 per cent and, for the top-quintile household, that would be 0.3 per cent.

But it is a very different story when you look at the impact by 2024-25. In that year, the average change in disposable income per household for the middle quintile would be $913 but for the top quintile would be $4,925. That means the top would get more in dollar terms but they would also do better in proportionate terms. According to the ANU analysis, middle-income households would receive a one per cent increase in disposable income by 2024-24 while the top would receive a 2.2 per cent benefit in disposable income per household. As the ANU analysis concludes:

Initially these measures are tax cuts targeted at lower and middle income individuals but by the middle of the next decade the measures are weighted towards higher income individuals.

A similar analysis carried out by the Grattan Institute shows that the later measures would be more expensive and further skewed towards the top. Its estimate is that by 2024-25:

The income tax cuts are much larger for higher income earners in absolute terms. People in the top 20 per cent will get an average tax cut of $4,600 a year compared to $700 a year for someone in the second-lowest income quintile.

The Grattan Institute concludes that 60 per cent of revenue foregone goes to the top 20 per cent of income earners. The respected economic commentator Ross Gittins sums it up by saying, 'Morrison's tax cuts miss the middle'. He has made the point that over the long term the impact is considerably skewed towards the top.

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