Monique Ryan (Kooyong, Independent) Share this | Hansard source

I also rise to commend the Treasury Laws Amendment (Cost of Living Tax Cuts) Bill 2024 to the House. This bill modifies the legislated stage 3 tax cuts to give greater benefit to lower and middle-income earners. The vast majority of Australian taxpayers will be better off over the next decade under this revised legislation. In its first year, about 11.6 million people will receive a bigger tax cut. Ninety per cent of women and more than 90 per cent of people aged under 35 will receive a bigger tax cut than they would otherwise have received.

The Grattan Institute and the Treasury have both released analyses indicating that more than 80 per cent of taxpayers will be better off over the next decade. Treasury estimates that these changes will increase labour supply by as much as 930,000 hours every week in this country, an important contribution at a time of labour shortages and when many are concerned about immigration. The proposed changes will also restore the 37 per cent bracket to the tax system. The Morrison stage 3 cuts had a single tax bracket from $45,000 to $200,000. This would have flattened our income tax system radically, to the point where it would have been more aggressive than at any time since the 1950s. The restoration of the 37 per cent bracket, which I called for in 2023, improves the basic structure of our tax system.

The move to modify the stage 3 tax cuts is evidence based. Last year, more than 100 tax experts and economists publicly declared their concern about the impending tax changes. Their concern was that the Morrison stage 3 cuts would worsen inequality in this country and that they were unfair and inflationary. Those experts stated that they believed politicians should take their promises seriously, but that they also believed the country's economic circumstances had changed radically since the stage 3 tax cuts were legislated in 2018.

To date, my community has been disappointed with Labor's response on the cost-of-living crisis. This legislation will provide greater tax cuts to more Australians, and most of my constituents support this change. Indeed, 71 per cent of taxpayers, even in Kooyong, will be better off with the modified stage 3 tax cuts. However, the changes do mean that some taxpayers will not receive the full tax cut that they had planned and budgeted for. At the time of increases in the cost of living, that is extremely disappointing for some. I want to acknowledge that this evening. While many constituents have written to me to express their support for the changes to the stage 3 tax cuts, some have contacted me to express their concerns. There are two main reasons why some constituents are disappointed with the changes. Firstly, many people, especially single parents, were relying on those tax cuts. Last month I heard from a young single mother in my electorate who would have received a larger tax cut under the Morrison legislation. She had recently been offered a new job with a significantly higher salary. In her words: 'Because of an existing HECS debt and because of the high tax rate, it's amazing how quickly a striking on-paper salary can be cannibalised. I really feel that the amount being taken at the payroll office is unreasonably high. Because I don't have a partner, I am taxed at a far greater rate, in effect, than a couple earning my salary between them, due to there being one tax-free threshold, not two. The prospect of the planned tax cuts was a great relief; it was going to mean I would see a greater proportion of my income actually hit my bank account, and it would allow me to more viably save for my kids' future. I don't yet own a home.'

I have also heard from constituents who are concerned about the impact of bracket creep, with one couple noting that the $180,000 threshold introduced on 1 January 2008 would be over $265,000 now, had it been adjusted appropriately for inflation. That couple also told me that the government needs to take the lead in explaining the impact of inflation on the tax thresholds, and that it needs to be more open with the public about the resultant need to regularly adjust these. I agree that bracket creep is a vexatious problem; it can be a real disincentive to people working more. To address bracket creep, we need to review our tax brackets and we should index them. My constituents' difficulties are real; they reflect the severity of the current cost-of-living crisis. I share my constituents' concerns about the cumulative effect of income tax and of compounding HECS debts—and about systemic inequalities and the cost of child care; the financial disadvantages of being a single parent; and the increasing difficulty of saving for a home deposit, or paying the rent or a mortgage.

The other reason that some constituents are disappointed with this tax change is that they believe it was a broken promise from our Prime Minister. Most of the stressors feeding into the current cost-of-living crisis were already apparent at the time of the 2022 federal election: COVID, the war in Ukraine, rising inflation and consequent increases in interest rates. All of those manifested after the tax cuts were legislated, but before the most recent election. When asked in 2022, and when asked subsequently, repeatedly, whether they planned to change the stage 3 tax cuts, the Prime Minister and the Treasurer repeatedly said, 'No'.

We have a trust deficit in this country. A deficit driven by increasing economic inequality and fuelled by the stressors of the recent pandemic. A deficit which is, sadly, fuelling increasing populism and division. That trust deficit may well have been exacerbated by the government's change of mind on these tax cuts. We don't yet know when the government did change its mind.

In politics, words matter. When we're elected, we enter into a covenant with our community to act, as much as we can, with honesty and with integrity. But we also promise to act, as much as we can, in the best interests of our community, and that is why I am supporting this bill.

There are two important points to make here. Firstly, the sad reality of tax debate in this country is that politicians of all sides face brutal, bitter smear campaigns when they start conversations about tax. We've seen that in almost every term of parliament this century, on issues from the GST to the mining tax and stage 3. We've seen that in the media this week, in the mainstream media's concentration on rule-in rule-out questions, on wedges and on wordplay. We deserve better. In an ideal world, the government would have announced a plan for genuine tax reform before the last election, a plan to address what Ken Henry—more than 10 years ago now—called 'extraordinary intergenerational inequity'. We have not addressed that to date, and this bill does not do that.

The second point I want to make is that our circumstances in this country have significantly changed since the last election. In May 2022, Australia was doing relatively well. Consumer spending and economic growth were on the up. Mortgage rates and rents were only just starting to climb. In the last 18 months we have dealt with persistent inflation, 13 interest rate rises and a war in the Middle East which places us at risk of an energy price shock. Real household disposable income, per capita, decreased 5.3 per cent last year. That was the worst decline in 40 years. Mortgage payments and rent are taking up a larger share of our income than at any time in Australian history.

The tax cuts in their previous form were slated to cost $20 billion a year. That's about what we spend on the Pharmaceutical Benefit Scheme each year; it's almost twice what we spend on higher education, and $20 billion a year in tax cuts when the budget is in deficit and there's inflation is a problem. They didn't make sense then, especially in the face of increasing inflation, and they don't make sense now. That's why they need to be changed. The RBA's response has been, in recent years, a series of interest rate rises which have disproportionately affected those with mortgages and renters. This is a group which is already doing it tough. The Morrison stage 3 tax cuts would have worsened inflation, and they likely would have led to further interest rate rises and further stress on those renters and mortgagees.

The US jurist Oliver Wendell Holmes Jr famously said, 'Taxes are the price we pay for a civilised society.' In our country, our civilised society, we are very, very lucky to expect the standard of living that most of us have. We expect high levels of education. We expect superior health care. We expect that our country will be kept secure and that our aged and our disabled are looked after. We expect that people who cannot work are afforded financial and housing support and that people who come to our country seeking asylum are welcomed and helped to start a new life. We expect that our government will provide those things. As citizens we know that the price we have to pay for them is tax, and every three years we get to judge how legitimately our taxes have been spent.

Our government must find a sustainable way of funding societal needs and expectations. Right now, our dependence on personal income tax to provide that funding is too high, and the impact of that on future generations is too great. As was recently noted by the Parliamentary Budget Office, in the current tax mix, with its high dependence on personal income tax, there is a trade-off between providing sufficient support for the ageing population and maintaining intergenerational fairness for younger Australians whose primary income is wages. Really, what we need is a whole-of-system tax reform which looks at all of the services that we need from government—how much they will cost and how best to pay for them—and which not just looks at domestic sources of revenue but also takes full benefit from the windfall profits made by multinationals from our mineral and fossil fuel wealth.

Australians are sensible and pragmatic. They know that nothing comes for free, but they've lost trust in government processes and spending decisions—with good reason. We must future-proof our economy for the next generation, which faces increasing national debt and HECS debts, challenging housing affordability, the cost of climate remediation and the need to support an ageing population. I will continue to make the case for this government, the Labor government, to be brave and to help all Australians through the worst cost-of-living crisis in a generation. Tinkering around the edges on tax isn't good for us in the long term.

My community has been clear with me. It is supportive of these changes to the stage 3 tax cuts in order to make them less inflationary, in order to make them fairer, and I support these changes, too. But what Australia really needs is a broader discussion about intergenerational inequity and about our economy. We must ensure that we can fairly and equitably raise the revenue that we need to provide the services and the infrastructure that Australians expect and deserve. I urge both major parties to put politics aside and to be open to reasonable, expert led tax reform. I commend this bill to the House.

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