[Theme Music Starts]

RUBY:

From Schwartz Media, I’m Ruby Jones. This is 7am.

No matter which major party wins the next federal election, the top 5% of income earners in Australia will receive tax cuts worth $180 a week.

These tax cuts, which will overwhelmingly benefit high income earners, will cost the budget $300 billion over 10 years.

Today, chief executive of the Australian Council of Social Service Cassandra Goldie, on the origin of these tax cuts, and what their real cost will be.

It’s Wednesday, August 11.

[Theme Music Ends]

RUBY:

Cassandra, these tax cuts aren’t due to fully take effect until 2024. But they’ve been part of the political discussion for quite a while now. Can you tell me how they first came about - whose idea were they?

CASSANDRA:

Well, they were introduced in the May 2018 budget by the former prime minister, Malcolm Turnbull.

Archival Tape -- Malcolm Turnbull:

“By the time the plan is complete in 2024-25, 94% of Australians will never face a marginal tax rate of more than 32½ cents…”

CASSANDRA:

I mean, at that time, the Turnbull government was in serious crisis and of course, the Treasurer at the time was Scott Morrison, who is now our prime minister, and they were pretty quickly legislated through the parliament at that time.

Archival Tape -- Scott Morrison:

“Tonight, I announce a seven year personal tax plan to make personal income tax lower, fairer and simpler. The plan will result in more working Australians paying lower rates of tax. It will be enshrined in legislation.”

CASSANDRA:

But of course, the bulk of those tax cuts, which was the three stage package, weren’t due to kick in until after the federal election, which, of course, took place in May the following year.

Archival Tape -- Scott Morrison:

“You don't have to punish some people with higher taxes, who are already paying the majority of tax, to give others tax relief.”

CASSANDRA:

Our assessment was that at the point when the coalition announced this tax cut package they had kind of assessed they didn't have much to lose. If it was likely that they were going to lose the federal election, what they were doing was effectively booby trapping the federal budget at that time. So everybody was very obsessed with the notion of getting a budget back to surplus, remember that?!

Archival Tape -- Scott Morrison:

“We'll be back in the black in 2019/20. That's what the budget is.”

CASSANDRA:

And by putting in place these large tax cuts, it was so damaging to the budget bottom line. And if it was a Labor government that was needing to deal with it, of course, that would make it extremely difficult for a Labor government to pursue a surplus.

RUBY:

Mm and so, as you say, Scott Morrison won that election. What happened to those tax cuts over the past sort of three years or so?

CASSANDRA:

Well, they have been rolled out.

Archival Tape -- Scott Morrison:

“The plan that we put to the Australian people at the election, the plan that they voted for and I'm pleased that tonight in the Senate, and in the House of Representatives earlier in the week, the parliament has also voted for.”

CASSANDRA:

And in the face of the circumstance of the pandemic, of course, the government also brought stage two forward.

Archival Tape -- Josh Frydenburg:

“I bring forward Stage Two of our legislated tax cuts by two years, lifting the 19% threshold from $37,000 to $45,000, and lifting the 32.5% threshold from $90,000 to $120,000”

CASSANDRA:

And so we have delivered a lot of tax cuts already. The last budget, the one just behind us, the biggest expenditures associated with the federal budget have been on the tax cut side course.

At the same time, of course, the government slashed away again its Social Security and brought the unemployment payment down to just $44 per day. And yet this is contrary to much of the advice. I mean, we had many economists saying the most effective measures that we were seeing was on the transfer payment side, where you were targeting economic support to people on modest incomes who you knew would be spending them in the real economy, whereas people on higher incomes were typically saving more of those dollars. And as a result, we saw what we consider to be very damaging and wasteful policies where the government was announcing cash incentives to high income people to renovate their houses...

Archival Tape -- Scott Morrison:

“as part of the many, the many measures, the many supports that we're putting into our economy at the moment, supporting our home building industry and not just new homes, but significant renovations of homes...”

CASSANDRA:

...because people had accumulated so many savings on their balance sheet and higher income households.

Archival Tape -- Scott Morrison:

“$25,000 to support those families and those Australians whose dream it was to build their home or to do that big renovation, a dream that they thought might have been crushed by the coronavirus...”

CASSANDRA:

So we've got this deep inequity in the way that the tax and transfer policies have been operating over the last period, despite us all clearly seeing it would be much better for us to have larger investments, larger spending going into Social Security and, of course, those critical, essential services.

RUBY:

When these tax cuts were first announced by the Coalition they were opposed by Labor. That meant there was a question mark over whether they would actually go ahead depending on who won the next federal election. But now Labor has now changed its position. Can you tell me about that?

CASSANDRA:

Well, of course, we've had the Labor Party go through its own political process of assessing what it perceived to be the reasons why it lost a federal election and this most recent announcement to them where they've dropped both the question mark over this stage three tax cuts.

Archival Tape -- Jim Chalmers:

“This is all about providing some certainty and clarity of our positions around our positions on tax…”

CASSANDRA:

Those are the tax cuts that primarily go to people on higher incomes and also the dropping of the really important policies associated with closing of some of the negative gearing and capital gains discounts associated with property investment.

Archival Tape -- Jim Chalmers:

“For the nine million plus Australians who earn $45,000 or more, they'll get the same tax cut under the Morrison government as under us.”

CASSANDRA:

Now, the end result of that, of course, is that we have now both major parties going into the next federal election guaranteeing tax cuts for people on very high incomes in the country at the time when we've got millions of people affected by poverty and disadvantage and we've got - eye watering now - housing prices. So we have been left with a situation where the major parties are not prosecuting important reforms that we all in the social policy area see as critical to addressing some of our deepest challenges: inequality, poverty, and of course, in addition, climate change.

RUBY:

We’ll be back after this.

[Advertisement]

RUBY:

Cassandra what do you think the bipartisan embrace of these tax cuts - which will benefit the most wealthy - says about public policy in Australia? Because it seems like this idea of using tax cuts to stimulate the economy, which was once a key fault-line in our politics, is taken for granted?

CASSANDRA:

I think it's such an important time for civil society, for economists, for social policy people and for community groups to be really prosecuting the case for raising revenue. It is what enables us to have a good public health response. It is what has enabled us to respond to the crises of a pandemic.

But also, as you can see, we've paid the price for running down of these kinds of services by the glaring gaps that existed in our public responses to the pandemic, where we had to scramble to fill those gaps, to lift JobSeeker, to put money into housing services for example, and to make sure that we were getting the kind of rollout that we needed.

I'm very worried, though, that we will go too far, too quickly, get into a debate about just needing to get the budget back to balance. And we know who will pay the price of that. It will be people on the lowest incomes who are perceived as being less powerful in the electoral sense.

RUBY:

Right - but let's talk about the argument for these tax cuts - the government says we need to lower taxes to create jobs. So what do you make of that, the argument in favor?

CASSANDRA:

Well, of course, the government justifies the tax cuts as the way to grow the economy and create jobs to create a reward for workforce participation. If you look to what is most effective in creating jobs, I mean, these tax cuts on Treasury's own job numbers typically are costing over $300,000 per job in terms of tax cuts, whereas if you were investing in critical care services, it would be costing a third of that to create decent jobs in the aged care sector, for example.

And if you're trying to justify these tax cuts on work incentives, you would be much better off, if we were serious about work incentives, to look at the effective marginal tax rate issues associated with women's workforce participation, women in part time work, and the cost of childcare. That's where we could do some really important reform to support women's workforce participation. And of course, for a moment there, last year, we saw something glorious, which was that child care became free and that would really be the game changer when it came to workforce participation, particularly for parents.

RUBY:

Do you think that there is an opportunity to change the narrative here? Because for decades we've seen political parties on both sides offer up tax cuts as a way to win votes. And over that time, our services have continued to degrade and inequality has become more apparent. So how do you think that that shifts?

CASSANDRA:

Well, I think it shifts through the democratic processes; and ensuring that we are informing the community of the choices that are before them, of demonstrating to them that they actually have a role to play in standing up for what they want, and what they need, and to understand the electoral power. I mean, here we are. The reality is that a third of households get absolutely no benefit from tax cuts because their incomes are so low that they are not paying income taxes, certainly paying other taxes, for example, the GST.

I think the reality is that as we speak, we are seeing some major transfers of wealth and income, you can see what's happening to housing prices. I don't think we should underestimate just the kind of community backlash that will happen if these housing prices continue to go upwards so that we've got this really strong sense of those who have, are doing extremely well and those who have been left behind are not doing well. And I think the politics will play out very powerfully about that. And so governments and political parties have shown over and over again they have the capacity to change their mind. That's our job. I think in the analysis of how politics works these days, use that truth to the fact that communities lead and politicians follow. And that's what we certainly plan to do.

RUBY:

Cassandra, thank you so much for your time.

CASSANDRA:

You're welcome.

[Advertisement]

[Theme Music Starts]

RUBY:

Also in the news today,

A new report by the United Nations Intergovernmental Panel on Climate Change has found that the planet is on track to exceed the Paris Agreement target of 1.5 degrees of warming by 2030.

According to the report, rising temperatures 'unequivocally’ caused by human activities will increase the intensity and frequency of extreme weather events and lead to possible loss of entire countries due to sea level rise.

And in New South Wales, three more people have died after contracting Covid-19. None of them were vaccinated, and all died in hospital.

The state recorded 356 cases of Covid-19 on Tuesday, the highest number on record so far.

I’m Ruby Jones, this is 7am. See ya tomorrow.