Tax cuts bypass people in need and threaten vital services

| May 9, 2018

No sooner have we seen five minutes of budget sunshine then the Government has committed itself to seven years of income tax cuts. This is not a disciplined and responsible approach to budgeting.

There is a seven year plan for tax cuts, but where’s the seven year plan for reducing poverty among adults and children, guaranteeing growth funding for health care, and closing the gaps in essential services such as mental and dental health and affordable housing?

It is shameful that the Government has chosen to ignore the overwhelming consensus to help people on the lowest incomes, by increasing the woefully inadequate Newstart and student payments, as a matter of priority.

Instead the Government has chosen to give away personal income tax cuts for people including the highest income-earners in the country. The maximum benefits of the new tax offset ($11 a week) will go to people earning $48,000 to $90,000, not low income-earners.

Higher income earners will be the beneficiaries of lifting the $87K threshold to $90K taxable income. The lowest 40% of individuals by income will receive nothing or very little, up to $4 per week. This first stage of tax cuts alone will cost the budget $13 billion.

The seven year tax plan hands out increasingly generous tax cuts that will disproportionately benefit higher income-earners. These tax cuts, on top of the corporate tax cuts, will clearly deprive future governments of the revenue we need to guarantee essential services.

There are some welcome measures to stem tax avoidance, such as refusing tax deductions for vacant land, modest measures to tackle the use of trusts for tax avoidance purposes, and action to limit profit shifting by multinational corporations. Measures on the black economy are also welcome. However, these measures go nowhere near compensating for the lost revenue from the 7 year tax plan.

The planned tax cuts and the arbitrary revenue cap of 23.9% to GDP place us in a damaging fiscal straightjacket. Australia is already one of the lowest taxing countries in the OECD, and with tax cuts for years ahead, we clearly could not guarantee essential services and a decent safety net to meet community needs. Tax cuts risk extending user pays for essential services leading to greater out of pocket costs.

The increase of 14,000 home aged care packages is welcome, and starts to deal with a backlog of 100,000 packages. The focus on quality and transparency is also welcome. However, this aged care package highlights the yawning gaps that remain in essential services, and tonight’s announcement only begins to fill those gaps.

The $1B increase in hospitals funding is also welcome, but only restores funding cuts that would have otherwise commenced in 2020. Similarly, the Medicare rebate freeze is ending. We cannot afford to keep taking one step forward and another step back in health funding. Adequate growth funds must be guaranteed and a stronger revenue base is the only way to achieve this.

Other more modest measures that we welcome include the remote housing funding for the Northern Territory ($550 million), a small boost mental health services and continuity of support services for some people not eligible for the NDIS ($92 million).

Commitments in education, including schools and early childhood funding, are also welcome but do not give the assurances we need that public schools and preschools will be adequately funded into the future.

The harshest change in this budget affects some of the most vulnerable people in the community: new migrants lacking paid work, who will be left without income support for the first four years. This is not the way to welcome people to this country and help them contribute to its future prosperity.

There are small changes to one of the harshest existing schemes, the Community Development Program for remote Indigenous communities, including a new wage subsidy scheme and slight reduction in the hours they need to work for their benefits, but the changes do not restore incomes to the thousands of people losing income support when they are penalised under this scheme, and some could make matters worse.

The proposal to deduct State Government fines from social security payments without their agreement is unnecessary, intrusive, and could leave many people homeless. The ball is in the States’ court to reform the system of court-ordered fines so that people are no longer imprisoned because they can’t afford to pay.

A responsible budget would strengthen the revenue base so that the government can do its job, especially to provide the essential services people need and protect people from poverty. Unfortunately this budget does the opposite, and the budget mistakes of the 2000s are being repeated.

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Cassandra Goldie

Cassandra Goldie has been ACOSS CEO since July 2010. With public policy expertise in economic and social issues, civil society, social justice and human rights, she has represented the interests of disadvantaged people in several national and international processes as well as in grassroots communities.