Extract from The Guardian
Fall in payments to lower-income earners dwarfs higher taxes on the top earners, according to Treasury analysis
- Daniel Hurst, political correspondent
The government’s budget decisions will have a greater impact on
lower-income earners than higher-income earners, according to newly
released Treasury analysis that reinforces a key criticism the financial
blueprint disproportionately affects the poor.
The Treasury figures are the raw data underlying a graph in a glossy budget document showing average cash transfers received and income tax paid by low-, middle- and high-income, working-age families and singles in 2016-17.
Labor has seized on the figures – released after a Freedom of Information application from Fairfax Media – to further its argument the budget was unfair in its targeting of the poor.
Average cash transfers for the lower-income group would reduce from $13,446 with no policy changes to $12,604 with the budget changes implemented, a fall of $842. Average income taxes paid by the lower income group would increase by $2 from $1,836 to $1,838. It can therefore be calculated that the net impact on this group in 2016-17 is $844.
By comparison, the higher income group would have average cash transfers reduced from $381 to $310, a fall of $71, and income taxes would rise from $47,507 to $47,953, an increase of $446. The net impact on this higher-income group is therefore $517.
The analysis relates only to the effects in 2016-17 – the final year of the “budget repair levy” on people earning more than $180,000 – so critics contend the disparity will be even greater in later years. The temporary three-year increase in income tax for high-income earners was sold by the government as an attempt to ensure everyone was contributing to the task of addressing the debt and deficit.
Numerous private modelling exercises have previously concluded the budget decisions have a disproportionate impact on lower-income groups, particularly when the raw figures are considered as a proportion of disposable income. The Treasury modelling is likely to give further weight to those criticisms.
The treasurer, Joe Hockey, sought to dismiss the Fairfax Media story by highlighting the progressive nature of the tax system – whereby higher-income earners are in higher income tax brackets.
“That story is wrong because it fails to take into account a range of things, like the fact that higher-income households pay half their income in tax, low-income households pay virtually no tax, so I think there is a lot of misinformation around,” Hockey told the Nine Network’s Today program on Monday.
“It doesn’t take into account the fact that higher-income households pay half their income in tax and on average higher-income households fund the benefits that go to an average of nearly four lower-income households. Every dollar that lower-income households receive comes from higher-income households.
“It fails to take into account pensions, which is not included in that table, which are a substantial payment. It also fails to take into account the massive number of concessional payments such as discounted pharmaceuticals, discounted transport, discounted childcare that goes to lower-income households. So the information, as presented, is deliberately misleading and it does not represent the true state of affairs.”
The shadow treasurer, Chris Bowen, said Hockey could not dismiss the “strong data” about the impact of his budget and must stop “attacking the media for daring to report these figures”.
“These are Treasury figures, these aren’t the Sydney Morning Herald’s figures, these are not the Labor party’s figures – these are Treasury figures which have been released under FOI and they go to the impact of this budget, the decisions he took,” Bowen told the ABC.
“Of course there are a range of matters right across the government which impact on families but this is the direct impact of decisions in his budget.”
The acting leader of the Greens, Adam Bandt, said the figures proved the Coalition knew its budget would hit the poor the hardest and was unfair. “The Abbott government needs to go back to the drawing board, stop attacking the poor and instead ask Gina Rinehart and the big banks to pay a bit more,” Bandt said.
The new figures came as Hockey continued a round of talks with crossbench senators in an attempt to secure passage of contentious budget measures.
On Monday the treasurer met the Liberal Democratic party senator David Leyonhjelm, who suggested the government may gain better acceptance of its proposed $7 GP co-payment if the proceeds were used to secure a matching reduction to the cost of medicines under the Pharmaceutical Benefits Scheme. Leyonhjelm said Hockey had indicated “he would think about that”.
Leyonhjelm said he was inclined to agree with Hockey’s arguments downplaying the Treasury analysis published on Monday. The key crossbench senator said the issue was ensuring Australia had “a safety net for really needy people”.
Leyonhjelm further suggested Hockey should use the savings from cuts to middle-class welfare to cut tax. He said he would not support the Coalition’s paid parental leave scheme or the Direct Action climate policy.
The Treasury figures are the raw data underlying a graph in a glossy budget document showing average cash transfers received and income tax paid by low-, middle- and high-income, working-age families and singles in 2016-17.
Labor has seized on the figures – released after a Freedom of Information application from Fairfax Media – to further its argument the budget was unfair in its targeting of the poor.
Average cash transfers for the lower-income group would reduce from $13,446 with no policy changes to $12,604 with the budget changes implemented, a fall of $842. Average income taxes paid by the lower income group would increase by $2 from $1,836 to $1,838. It can therefore be calculated that the net impact on this group in 2016-17 is $844.
By comparison, the higher income group would have average cash transfers reduced from $381 to $310, a fall of $71, and income taxes would rise from $47,507 to $47,953, an increase of $446. The net impact on this higher-income group is therefore $517.
The analysis relates only to the effects in 2016-17 – the final year of the “budget repair levy” on people earning more than $180,000 – so critics contend the disparity will be even greater in later years. The temporary three-year increase in income tax for high-income earners was sold by the government as an attempt to ensure everyone was contributing to the task of addressing the debt and deficit.
Numerous private modelling exercises have previously concluded the budget decisions have a disproportionate impact on lower-income groups, particularly when the raw figures are considered as a proportion of disposable income. The Treasury modelling is likely to give further weight to those criticisms.
The treasurer, Joe Hockey, sought to dismiss the Fairfax Media story by highlighting the progressive nature of the tax system – whereby higher-income earners are in higher income tax brackets.
“That story is wrong because it fails to take into account a range of things, like the fact that higher-income households pay half their income in tax, low-income households pay virtually no tax, so I think there is a lot of misinformation around,” Hockey told the Nine Network’s Today program on Monday.
“It doesn’t take into account the fact that higher-income households pay half their income in tax and on average higher-income households fund the benefits that go to an average of nearly four lower-income households. Every dollar that lower-income households receive comes from higher-income households.
“It fails to take into account pensions, which is not included in that table, which are a substantial payment. It also fails to take into account the massive number of concessional payments such as discounted pharmaceuticals, discounted transport, discounted childcare that goes to lower-income households. So the information, as presented, is deliberately misleading and it does not represent the true state of affairs.”
The shadow treasurer, Chris Bowen, said Hockey could not dismiss the “strong data” about the impact of his budget and must stop “attacking the media for daring to report these figures”.
“These are Treasury figures, these aren’t the Sydney Morning Herald’s figures, these are not the Labor party’s figures – these are Treasury figures which have been released under FOI and they go to the impact of this budget, the decisions he took,” Bowen told the ABC.
“Of course there are a range of matters right across the government which impact on families but this is the direct impact of decisions in his budget.”
The acting leader of the Greens, Adam Bandt, said the figures proved the Coalition knew its budget would hit the poor the hardest and was unfair. “The Abbott government needs to go back to the drawing board, stop attacking the poor and instead ask Gina Rinehart and the big banks to pay a bit more,” Bandt said.
The new figures came as Hockey continued a round of talks with crossbench senators in an attempt to secure passage of contentious budget measures.
On Monday the treasurer met the Liberal Democratic party senator David Leyonhjelm, who suggested the government may gain better acceptance of its proposed $7 GP co-payment if the proceeds were used to secure a matching reduction to the cost of medicines under the Pharmaceutical Benefits Scheme. Leyonhjelm said Hockey had indicated “he would think about that”.
Leyonhjelm said he was inclined to agree with Hockey’s arguments downplaying the Treasury analysis published on Monday. The key crossbench senator said the issue was ensuring Australia had “a safety net for really needy people”.
Leyonhjelm further suggested Hockey should use the savings from cuts to middle-class welfare to cut tax. He said he would not support the Coalition’s paid parental leave scheme or the Direct Action climate policy.
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