The Guardian • Issue #1973

No tax cuts for the rich!

Labor leader Anthony Albanese and Shadow Treasurer Jim Chalmers shocked many in their own ranks when they announced that Labor would support the Coalition’s tax cuts which overwhelmingly benefit the wealthy. The cuts will cost an estimated $19bil a year and do nothing to improve the living standards of workers or stimulate the economy. They will be paid for by low-income workers, pensioners, and the unemployed.

They are the third stage of three rounds of tax cuts which Chalmers had previously described as the “least affordable, least fair and least likely to be effective because higher-income earners aren’t as likely to spend in the economy as workers of more modest means.” Too true!

The economy is once again sliding into recession. Lockdowns and the forced closure of many businesses and the loss of thousands of jobs have hit workers hard. JobKeeper had retained the link between workers and their employers, and the JobSeeker supplement kept many families afloat. This time around, the Coalition has reluctantly agreed to a disaster payment of $750 per week but not with the maintenance of the link with the employer.

It still stubbornly refuses to increase JobSeeker to the level of a living wage or raise the level of other payments such as the Youth Allowance and Age Pension. It deliberately suppresses wage rates. It has failed to act on wage theft which has become an all-too-common business model, and it passed legislation cementing casual work, in particular for low-income workers.


The Australian Council of Social Service estimated that the overall three-stage tax package would cost the public purse more than $35 billion per annum if the final, third stage of cuts, were introduced in 2024. It found that:

  • Most individuals on $30,000 or less, and the lowest thirty per cent of households, do not benefit from the tax cuts because their taxable incomes are too low to pay income tax.
  • A middle income-earner on $50,000 gains $1,205.
  • A high income-earner on $200,000 gains $11,640.

Analysis for the Australian Greens by the Parliamentary Budget Office found that the one per cent of taxpayers on the highest incomes would gain $11.8bil in total cuts by 2031. The more than forty per cent of taxpayers on less than $60,000 would get just $3.1bil.

The modelling also revealed an alarming widening of the gender gap with women expected to receive $1 for every $2 pocketed by men!


The huge disparity between cuts for the wealthy and those on middle-to-low incomes reflects a flattening of the tax scale. The stage two cuts which were brought forward a year to begin this year increased the threshold where the 32.5 cent marginal rate kicks in from $37,000 to $45,000. It also extended the threshold of the thirty-seven cent bracket from $90,000 to $120,000.

Stage three would reduce the 32.5 cent rate to thirty cents and be expanded to cover taxable incomes of between $45,000 and $200,000. In the process the 37 per cent rate would be eliminated. The highest marginal rate of forty-five cents would kick in at $200,001.

As a result, a worker on $45,000 or more per annum would pay the same marginal rate as someone on $200,000. Albanese and Chalmers, hang your heads in shame!

There has been an insidious and regressive flattening of the tax rates for more than half a century by both Labor and the Coalition. Australia once had a fair and progressive tax system where the higher a person’s income, the higher the percentage of that income that was paid in tax. The basis of this system was a made up of a number of marginal rates (percentage of income), each higher rate applying to income above a certain level.

Stage three would result in a tax-free threshold and four marginal rates including the tax-free threshold. Back in 1951-52 there were twenty-eight marginal rates which got progressively higher, rising from zero to seventy-eight per cent in small increments. In the 1970s the Fraser Coalition government began flattening in earnest and was followed by the Keating Labor government in the early 1990s.

It is an example of quantitative changes leading to a qualitative change edging towards a flat income tax rate of thirty cents in the dollar. From progressive to regressive! The relatively small changes at a time deflect attention from the big picture.

It will not stop at a flat thirty per cent. Former Treasurer Joe Hockey let the cat out of the bag when he indicated the aim was for zero income tax. Instead, he advocated higher indirect taxes, meaning the GST. The GST is regressive, with those on lower incomes paying a higher percentage of their earnings in taxes.


Claims that it is to compensate for workers’ incomes creeping up are nonsense. That doesn’t explain the flattening of the marginal rates.

Likewise claiming the tax cuts will stimulate the economy are nonsense. They won’t. Putting more money in to the pockets of low to middle income workers and social security recipients will. They will spend the extra money in the economy, unlike the extremely wealthy parasites.

The stage three cuts alone are estimated to cost $17bil in the first year and $130bil over ten years. This is at a time when the government has run up a huge budget deficit debt related to pandemic measures, military spending, and corporate welfare.


Taxation and budget spending are class questions. Tax revenue comes from the pockets of workers and company profits (if they pay them). Company profits are extracted through the exploitation of workers.

All wealth is created by workers through their labour. Capitalists do not create a single cent of wealth. Machinery on its own cannot create wealth. Even where robots are used, those robots were built by workers, by the working class.

When workers create wealth, there is a distribution of that wealth:

  • profits (surplus value)
  • wages
  • taxation of workers and profits.

How much tax is paid, who pays it, and how it is spent are class issues. The proposed stage three and previous tax cuts benefiting the wealthy come at the expense of billions of dollars in spending. When the government sets about wiping the budget deficit and government debt, it will have tens of billions of dollars less in income because of the personal and corporate income tax cuts.

No prizes for guessing where the money will come from!

It will not be from cutting spending on future war preparations, abolishing fossil fuel subsidies, or phasing out the $7bil subsidy for private hospitals. No, the government will cry poor and make cuts to the NDIS, social security, Medicare, the Pharmaceutical Benefits Scheme, public education, and other services.

Labor must be persuaded that this is not a good electoral move with a massive campaign of social media, letter-writing, phone calls to MPs and Senators, etc.

At the same time we get on with the task of building a broad movement of left and progressive forces including trade unions, peace activists, environmentalists, and political parties to provide a genuine political alternative.

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