Australia Institute modelling draws similar conclusions to previous studies, but shows National party seats won’t fare as well
The Turnbull government’s income tax cut package will benefit the
wealthiest electorates in Sydney and Melbourne the most, with the prime
minister’s seat of Wentworth the biggest winner, according to a new
analysis.
Echoing similar findings from the National Centre for Social and Economic Modelling, a fresh cut of the data by the progressive think tank the Australia Institute suggests households in Wentworth will receive almost double the national average benefit of the seven year tax package.
As well as blue ribbon Liberal seats like Wentworth, North Sydney, and Warringah appearing in the top 10, courtesy of their clusters of high income earners, three Labor-held electorates also make the list – Sydney, Melbourne Ports and Grayndler.
But electorates held by the Nationals don’t fare as well. “By political party, it is clear the least benefit flows to National party seats,” says Matt Grudnoff, senior economist at the Australia Institute.
“One quarter of Nationals’ seats are in the bottom 10 electorates, and all but one of their seats are ranked in the bottom half of electorates”.
The Natsem analysis, released just after the 7 May budget, found city dwellers were the biggest beneficiaries, while regions benefitting least included the far north coast of NSW, and areas in Tasmania, due to lower incomes in those areas.
The number crunching by electorate follows the release of distributional analysis from the Parliamentary Budget Office showing that men will benefit more than women from the budget measures, particularly at the higher end, given their higher-on-average earnings.
Detailed breakdowns prepared in response to a Labor request show men benefit from the proposed $143bn tax cut package at a ratio of almost two to one, which reflects the entrenched gender pay gap in Australia, and different working patterns between men and women.
In stage three – where the government proposes to flatten the income tax scales, removing the 37% marginal tax rate, so that all income from $41,001 to $200,000 will be taxed at a marginal rate of 32.5% from 1 July 2024 – men benefit at a ratio of almost three to one, with $30bn of the $41.6bn going to male taxpayers.
As the political debate about the tax package traversed the gender impacts, the budget package was the subject of a hearing by the Senate’s economics legislation committee on Wednesday.
Miranda Stewart, a tax and transfer expert from University of Melbourne Law School, criticised the government’s plan to flatten the income tax scales by abolishing the 37% marginal tax rate on 1 July, 2024.
While treasury officials told the committee the budget tax measures had no appreciable impact on the progressivity of the tax system, Stewart said knocking out the 37% bracket was an “inefficient and a retrograde step that undermines 100 years of a progressive income tax rate structure in Australia”.
“The removal of the 37% rate might appear to be a minor change ... but it does flatten the rate structure more than has ever been done before, it has a permanent fiscal cost and a permanent effect”.
She told the committee she was not criticising the government’s plan to lift income tax thresholds to deal with bracket creep; she was critical of the plan to abolish the 37% rate. “The efficiency case for that has not been made out,” she said.
“There really is no empirical evidence to show that systemically, at that upper-middle of the income distribution, between $40,000 and $200,000, there are negative work effects or investment effects,” she said.
“To the extent that we might see disincentive effects, they’re probably arising either at the very top or at the very bottom of the [income] distribution”.
Stewart said the PBO’s findings on the gender impacts of the tax plan were obvious, given men occupy more higher-paying positions. “Women comprise about 25% of the top 10% of income earners, 22% of the top 5%, 20% of the top 1%, and 17% of the top 0.1% of the income distribution,” she said.
But the treasurer Scott Morrison said the gender analysis was a “nonsense argument” because the tax system didn’t discriminate on the basis of gender. He said the rate of tax paid reflected people’s income, not people filling out “pink forms” or “blue forms”.
The revenue minister and minister for women, Kelly O’Dwyer, insisted the package was good for women, because the tax relief was focussed predominantly on people earning under $90,000.
The PBO’s distributional analysis of the tax measures shows phase one
of the package, which introduces a low and middle income tax offset of
up to $530 for individuals with taxable income up to $125,333 for the
2018-19, 2019-20, 2020-21 and 2021-22 financial years, benefits men and
women almost equally.
The Australia Institute has been campaigning to persuade cross bench senators to reject the phases of the tax package that benefit higher income earners.
The South Australian independent Tim Storer confirmed on Wednesday he would only vote for elements of the package inside the four-year budget cycle, arguing it would be economically irresponsible to support the later stages.
Representatives of the Australia Institute appeared before the Senate committee on Wednesday. The Liberal senator Jane Hume, chair of the committee, asked questions to designed to draw out the links between the think tank and the Greens.
“What proportion of staff at the Australia Institute have held paid or voluntary roles with the Greens, either in the parliamentary party or the party organisation?” she asked.
Grudnoff told the committee he didn’t know. “On notice is fine. Can you take that on notice,” she said.
Echoing similar findings from the National Centre for Social and Economic Modelling, a fresh cut of the data by the progressive think tank the Australia Institute suggests households in Wentworth will receive almost double the national average benefit of the seven year tax package.
As well as blue ribbon Liberal seats like Wentworth, North Sydney, and Warringah appearing in the top 10, courtesy of their clusters of high income earners, three Labor-held electorates also make the list – Sydney, Melbourne Ports and Grayndler.
But electorates held by the Nationals don’t fare as well. “By political party, it is clear the least benefit flows to National party seats,” says Matt Grudnoff, senior economist at the Australia Institute.
“One quarter of Nationals’ seats are in the bottom 10 electorates, and all but one of their seats are ranked in the bottom half of electorates”.
The Natsem analysis, released just after the 7 May budget, found city dwellers were the biggest beneficiaries, while regions benefitting least included the far north coast of NSW, and areas in Tasmania, due to lower incomes in those areas.
The number crunching by electorate follows the release of distributional analysis from the Parliamentary Budget Office showing that men will benefit more than women from the budget measures, particularly at the higher end, given their higher-on-average earnings.
Detailed breakdowns prepared in response to a Labor request show men benefit from the proposed $143bn tax cut package at a ratio of almost two to one, which reflects the entrenched gender pay gap in Australia, and different working patterns between men and women.
In stage three – where the government proposes to flatten the income tax scales, removing the 37% marginal tax rate, so that all income from $41,001 to $200,000 will be taxed at a marginal rate of 32.5% from 1 July 2024 – men benefit at a ratio of almost three to one, with $30bn of the $41.6bn going to male taxpayers.
As the political debate about the tax package traversed the gender impacts, the budget package was the subject of a hearing by the Senate’s economics legislation committee on Wednesday.
Miranda Stewart, a tax and transfer expert from University of Melbourne Law School, criticised the government’s plan to flatten the income tax scales by abolishing the 37% marginal tax rate on 1 July, 2024.
While treasury officials told the committee the budget tax measures had no appreciable impact on the progressivity of the tax system, Stewart said knocking out the 37% bracket was an “inefficient and a retrograde step that undermines 100 years of a progressive income tax rate structure in Australia”.
“The removal of the 37% rate might appear to be a minor change ... but it does flatten the rate structure more than has ever been done before, it has a permanent fiscal cost and a permanent effect”.
She told the committee she was not criticising the government’s plan to lift income tax thresholds to deal with bracket creep; she was critical of the plan to abolish the 37% rate. “The efficiency case for that has not been made out,” she said.
“There really is no empirical evidence to show that systemically, at that upper-middle of the income distribution, between $40,000 and $200,000, there are negative work effects or investment effects,” she said.
“To the extent that we might see disincentive effects, they’re probably arising either at the very top or at the very bottom of the [income] distribution”.
Stewart said the PBO’s findings on the gender impacts of the tax plan were obvious, given men occupy more higher-paying positions. “Women comprise about 25% of the top 10% of income earners, 22% of the top 5%, 20% of the top 1%, and 17% of the top 0.1% of the income distribution,” she said.
But the treasurer Scott Morrison said the gender analysis was a “nonsense argument” because the tax system didn’t discriminate on the basis of gender. He said the rate of tax paid reflected people’s income, not people filling out “pink forms” or “blue forms”.
The revenue minister and minister for women, Kelly O’Dwyer, insisted the package was good for women, because the tax relief was focussed predominantly on people earning under $90,000.
The Government’s tax cuts are good for women. About 86% of female taxpayers have a taxable income of $90,000 or less, and that is where the Government’s tax relief is focused.
The Australia Institute has been campaigning to persuade cross bench senators to reject the phases of the tax package that benefit higher income earners.
The South Australian independent Tim Storer confirmed on Wednesday he would only vote for elements of the package inside the four-year budget cycle, arguing it would be economically irresponsible to support the later stages.
Representatives of the Australia Institute appeared before the Senate committee on Wednesday. The Liberal senator Jane Hume, chair of the committee, asked questions to designed to draw out the links between the think tank and the Greens.
“What proportion of staff at the Australia Institute have held paid or voluntary roles with the Greens, either in the parliamentary party or the party organisation?” she asked.
Grudnoff told the committee he didn’t know. “On notice is fine. Can you take that on notice,” she said.
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