Key senator urges undecided Greens to join Labor and split bill to block costly cuts for high earners
Senate independent Tim Storer has made a last-ditch plea to the Greens, Labor and his wavering crossbench colleagues to split the Turnbull government’s income tax bill to give low paid workers some hip pocket relief while blocking expensive tax cuts for high flyers.
Before- parliament’s resumption for the final sitting fortnight before the winter recess, Storer told Guardian Australia it would be “unfair” to hold up tax relief for low income earners “at a time when wages are stagnating and they struggle to pay their bills for essentials”.
That message for the Greens – who will decide on Monday whether to join a Labor effort to split the package – was followed by one for Labor, which could end up waving the package through in the event the numbers to split the package fail to materialise, given the political difficulties associated with opposing tax cuts.
Storer urged Labor to resist the path of least resistance. “It would be rash and irresponsible to commit future parliaments to the massive spending entailed in stage two and three of the tax cuts when the state of the budget remains fragile and Treasury admits its projections beyond the forward estimates are subject to significant error bands.”
The Greens thus far have rejected the entire budget package, saying the funding of services should be the priority. Labor has supported stage one while reserving its position on stage two. The opposition rejects stage three, which would flatten the tax scales, delivering benefits to the highest income earners.
As key Senate players make up their minds a new analysis of bracket creep – which has been used by the government as a justification that its package needs to pass in an all-or-nothing deal – has found taxpayers have, in most cases, already been “overcompensated” for slipping into a higher tax bracket through existing tax cuts.
With critical byelections in play in several states, the government will use the final sitting before the winter break to attempt to pass its stalled company tax cut plan and all three phases of its income tax cut proposal.
It needs eight out of 10 crossbenchers in order to pass any legislation Labor and the Greens reject. The company tax cuts need four more votes, after Pauline Hanson reneged on her deal with the government and pulled One Nation’s support. That sparked Brian Burston’s resignation from the party, which has diminished Hanson’s influence in the Senate.
Of the three phases of income tax cuts, only one – the $540 tax rebate for low and middle-income earners – has majority support. Its passage, though, rests on Labor’s attempt to force the government to split the legislation, something Mathias Cormann said he wouldn’t do on Sunday.
“We will not be supporting any amendments to split the bill,” he said.
In new analysis published by the Australia Institute, to be released on Monday, economist Matt Grudnoff found “Australian taxpayers at all income levels have received more in tax cuts than they have lost through bracket creep” and had “already been overcompensated for bracket creep”.
“Further income tax cuts cannot be justified by arguing they will reduce the impact of bracket creep,” Grudnoff wrote. “In addition, the government’s tax plan would further overcompensate those who have already been most overcompensated for bracket creep.”
Grudnoff’s analysis found someone earning $75,000 had been overcompensated by about $730 a year, while someone on $200,000, who would benefit the most from the government’s planned flat tax rate plan, was overcompensated by $10,700.
Labor has said it has concerns about the second tranche of the Coalition’s income tax plan, which increases the lower thresholds in an effort to address “bracket creep” within the marginal tax rates, and has all but ruled out support for the third which creates a flat tax rate for earners between $41,000 and $200,0000.
Without the Greens support, Labor’s amendment plan would fail.
Derryn Hinch, who continues to oppose business tax cuts for companies with a turnover in excess of $500m, told Guardian Australia he will not vote to split the income tax legislation. “I told the government I will vote for it all in one hit, they can have it,” he said.
Hinch said he had no idea which party would come out of top. “It will either go down in a screaming heap … I can’t see either side, at the moment, getting it through,” he said.
“But if company tax does go through, it will be despite [Tim] Storer and Hinch. Neither of us are going to move on this.”
Stirling Griff of the Centre Alliance told Guardian Australia last week he was open to splitting the bill to allow the passage of stage one and possibly stage two. Griff is expected to confirm his bloc’s position on stage three on Monday.