Division Description Changes — Bills — Treasury Laws Amendment (Personal Income Tax Plan) Bill 2018; in Committee — 20th Jun 2018

Change	Division
senate vote 2018-06-20#3 Edited by mackay staff on 2023-07-07 08:23:35	Title Bills — Treasury Laws Amendment (Personal Income Tax Plan) Bill 2018; in Committee Treasury Laws Amendment (Personal Income Tax Plan) Bill 2018 - in Committee - The tables Description ~~<p class="speaker">Penny Wong</p>~~ <p>I'd like to seek to move some amendments immediately and then make a few comments. Obviously, in the second reading debate we have outlined in detail Labor's approach to this tax package. We've outlined Labor's better, bigger and fairer tax relief for working Australians. We have also indicated that we do not support steps 2 and 3 of the government's plan and the reasons why, so I don't propose to traverse those again.</p> The same number of senators voted for and against leaving unchanged the the tables dealing with tax rates for resident taxpayers, non-resident taxpayers and working holiday-makers for the 2024-25 year of income or a later year of income. This means that the motion failed and the tables did not get enough support from the Senators. This vote was put after the [Opposition proposed](https://www.openaustralia.org.au/senate/?gid=2018-06-20.25.1) that these table be apposed. <p>I would again remind the Senate that, apart from the Australian Greens, as I have discerned, every contribution from senators in this place has supported step 1 of the tax plan. What we are part of at the moment is a debate on a bill where the government is seeking to hold those tax cuts for working Australians—which would start next month—hostage to a tax plan it wants to implement in six years time. There is no logical reason for that, and the Senate ought not to agree to it.</p> <p>In addition, I want to come to step 3 of the government's tax plan. As I outlined yesterday, we do regard this as both fiscally irresponsible and inherently unfair. It is fiscally irresponsible because, as I outlined in my speech on the second reading, this is a series of changes which grows in terms of its cost to the budget when it comes to fruition, or when it matures, at 12 per cent a year. I made the point in my speech on the second reading yesterday that that is substantially higher than the growth in expenditure we see across other areas of the budget. It is, for example, from memory, some three times faster annual growth than the defence budget and, I think, close to six times faster annual growth than expenditure on family tax benefits and so forth.</p> <p>What the Senate is being asked to do is to lock in a change to the structure of taxation in this country which will grow over the longer term at 12 per cent per year, thereby either rendering other decisions by government unsustainable or imposing decisions on key expenditure programs by government such as health, education and arguably even defence. If there were an expenditure program that was growing at 12 per cent a year you would hear those on the other side demanding that it be reduced.</p> <p>I intend to move a range of amendments consistent with Labor's position that I've outlined in the speech on the second reading. What I would like to get to, because I think it is the area where there is most concern in the chamber about the tax plan, is our amendments on sheet 8450 which seek to remove the step 3 tax rate changes and those in later income years. I would seek leave to move items (4), (6) and (8) together, which remove the step 3 tax rates.</p> <p>These are the tax rates that the government is seeking to change from 2024-25. What I would say to members of the crossbench and senators in this place is that we have two objections to this. One is a fundamental policy objection. It is a fiscal risk. It locks in a very fast-growing program which costs not only billions of dollars a year but grows at 12 per cent, which has consequences both for the budget and for economic and fiscal risk. It is also a fundamental restructure of our tax system. As I referred, one of the academics who made submissions to the Senate committee talked about this as being contrary to essentially 100 years of progressive taxation in this country. It is the wrong thing to do. I make the third point that it was well made by Senator Storer in his very careful and considered speech on the second reading that there is no reason to allow the government to hold these tax cuts, which would occur in six years time—you would have to elect Malcolm Turnbull twice—and make them a pre-condition of tax cuts which can be delivered next month. That is nothing other than a political strategy. As Senator Storer said:</p> ~~<p class="italic">There is no reason to legislate tax cuts four and six years away except to hold future parliaments to ransom and hold out to voters what may well prove to be false hopes.</p>~~ ~~<p>I seek leave to move amendments (4), (6) and (8) together.</p>~~ ~~<p>Leave granted.</p>~~ ~~<p>The Labor Party oppose schedule 2 in the following terms:</p>~~ <p class="italic">(4)     Schedule  2 , item  2 , page 14 (starting at line 3) , table dealing with tax rates for resident taxpayers for the 2024-25 year of income or a later year of income to be opposed .</p> ~~<p class="italic">[tax rates]</p>~~ <p class="italic">(6)     Schedule  2 , item  5 , page 15 (starting at line 6), table dealing with tax rates for non-resident taxpayers for the 2024-25 year of income or a later year of income to be opposed .</p> ~~<p class="italic">[tax rates]</p>~~ <p class="italic">(8)     Schedule  2 , item  9 , page 17 , table dealing with tax rates for working holiday makers for the 2024-25 year of income or a later year of income to be opposed .</p> ~~<p class="italic">[tax rates]</p>~~ ~~<p class="speaker">Mathias Cormann</p>~~ <p>The government will be opposing these amendments. We obviously believe—in fact, we are confident—that the bill as drafted is in the best interests of all hardworking Australians. It of course prioritises low- and middle-income earners in the first instance, providing cost of living pressure relief to low- and middle-income earners. It then also ensures that we provide the right and appropriate incentive to all working Australians to continue to work hard and ensure that working Australians don't go backwards as a result of bracket creep. Bracket creep is the result, even without moving up the career ladder, of inflation. Our income tax thresholds aren't indexed, which means that, if we do nothing, more and more middle-income Australians will be pushed into the higher and higher income tax brackets, which is a significant disincentive to work harder. It is also recognised as a drag on economic growth. What does a drag on economic growth mean? It means that growth will be less than it could be. A growth that will be less than it could be means that there will be fewer jobs created in the economy. Who hurts the most when there are fewer jobs created in the economy? It's low- and middle-income earners. They are the most exposed to lower growth and they have the most to gain from stronger growth, and there are a lot of economic studies that back that up.</p> <p>I would also make the point in response to what Senator Wong has just indicated. This is not an item of government expenditure. This is a decision by the parliament to leave working families around Australia with more of their own money. It's their money. The government should only take as little as possible but as much as necessary to fund the services and the administration of government, which ought to be and must be as efficient and as effective and as well targeted as possible. That is, of course, the commitment of our government.</p> <p>Senator Wong says that this somehow completely undermines the progressivity of our tax system. That is completely and utterly wrong. Right now, the top 20 per cent of income earners across Australia have to pay more than 60 per cent of the income tax revenue generated by government.</p> ~~<p class="speaker">Peter Whish-Wilson</p>~~ ~~<p>So they should.</p>~~ ~~<p class="speaker">Mathias Cormann</p>~~ <p>'So they should,' says Senator Whish-Wilson. Okay. Guess what happens if we legislate our seven-year plan in full? At the end of that seven-year period, do you know how much the top 20 per cent of income earners will be paying in income tax generated across Australia? More than 60 per cent. So, there's no change to the progressivity of our tax system. You know what will happen if we don't legislate this plan in full? We will be hitting aspirational, hardworking middle Australians harder and harder, and that 60 per cent will become 65, 70, 80 per cent.</p> <p>We in this country don't have automatic indexation of our income tax thresholds. That means that just by wage inflation, just by simple inflation, more and more middle-income earners get pushed into the higher tax brackets, where they have to pay more tax on the income they take home. That is not even taking into account the fact that if you work more hours you get penalised. You work more hours; you get penalised by being pushed into a higher tax bracket. So why would you work more hours if working more hours means that you go from 37 per cent to 45 per cent plus the Medicare levy? It is absolutely recognised that bracket creep is a drag on economic growth and that it is absolutely desirable for bracket creep to be addressed in order to ensure that there isn't an entrenched structural disincentive for working Australians to continue to do everything they can to get ahead.</p> <p>Senator Wong says that this is about binding future parliaments and that Malcolm Turnbull would have to get elected two more times for this to take effect. No, no; that is actually not true. The Senate is able to legislate today the full seven-year plan and give certainty to working families right across Australia that not only will we provide cost-of-living-pressure relief in the short term, prioritising low- and middle-income earners; we also will do everything we can to appropriately address bracket creep so that all working Australians have the right incentive, the right encouragement, the right reward for effort, the right incentive to continue to work hard and to contribute to our great country. They don't have to elect Malcolm Turnbull two more times to lock this in. The Senate is able to lock this in today.</p> <p>The Labor Party are making an assumption about what future parliaments might want to do. It might well be that the Labor Party want to add further tax increases to their pre-election agenda. Good luck to them! Good luck to them going to the next election promising to the Australian people that they will increase the tax burden on the economy by more than $200 billion, which everybody knows will hurt the economy. It will hurt families; it will cost jobs. The Labor Party is quite entitled to go to the next election with a higher-taxing agenda. We will not go to the next election with a higher-taxing agenda; we will go to the next election with a commitment to keeping taxes on families as low as possible and to ensuring that taxes on business are maintained at a level that is globally more competitive so that all Australians, today and into the future, have the best possible opportunity to get ahead.</p> <p>Senator Wong also says these tax cuts are not affordable. Yes, they are. Over the medium term the cost is $144 billion, which is a figure that we've openly and transparently released to the public and to the parliament, in sharp contrast to what the Rudd and Gillard governments did when they tried to increase the tax burden on the mining industry. We had to drag them kicking and screaming into releasing the medium-term projections of the revenue they expected to raise from their resource super profits tax and the minerals resource rent tax. We've provided that information quite openly and transparently. And do you know what you can see in the budget papers? What you can see in the budget papers is that over the medium term, over that whole period, not only does the budget get into a small surplus by 2019-20 and progressively into a larger surplus but we are projected to exceed a surplus of one per cent of the share of GDP by 2026-27 and to remain in surplus all the way through—and that is after we have factored in the cost of this important reform which allows working families around Australia to keep more of their own money.</p> <p>I just close on this point. I'm very interested to see that Senator Wong is moving an amendment effectively to excise the third stage out of our three-stage, seven-year long-term plan. I guess that means that the Labor Party have already given up on actually doing what they said they would do, which is to oppose everything other than the first stage of our seven-year plan. It's very interesting. Normally in this chamber the way this process is managed is that you start off with getting all you want and then you progressively work your way backwards to being forced into the position where, if you can't get everything you want, you aim to get an amendment up that gives you 70 or 60 per cent of what you want.</p> <p>It's interesting that Senator Wong in her first amendment hasn't even tried to implement the policy of the Leader of the Opposition. It must mean that the Labor Party's split. It must mean that Senator Wong has stabbed Bill Shorten in the back and turned on Bill Shorten, because she's not in here promoting Bill Shorten's policy to actually excise stages 2 and 3. Maybe Senator Wong is a secret supporter of stage 2 of our three-stage, seven-year plan to provide income tax relief to working families around Australia. I'm very intrigued that the first move that Senator Wong makes in this chamber would not be a move to implement the policy that was articulated by the Leader of the Opposition. Is it now the Labor Party position that you support stages 1 and 2 of our seven-year plan to provide income tax relief to working families around Australia? I would be very interested. Is that now your position? It's a very interesting move by Senator Wong here which is in sharp contrast to what Bill Shorten, as leader of the Labor Party, has signalled into the community would be the Labor Party position.</p> <p>In fact, as the Labor caucus finished and the Leader of the Opposition and the shadow Treasurer gave a press conference yesterday, the indication that the Australian people were given was that Labor would move to remove both phase 2 and phase 3 from this income tax bill. That is not what Senator Wong is doing in her move now. Senator Wong, essentially, has now accepted stages 1 and 2. I congratulate the Labor Party that you've moved along from one to two. There's only one more step to go! Now that you support the first two phases of our income tax relief plan, which is in three parts, I encourage you strongly to reflect on the fact it is very much in our national interests and in the interests of working families around Australia for us to, yes, provide cost-of-living-pressure relief for low- and middle-income earners but also to address bracket creep so that all working families around Australia have the right incentive, the right encouragement and the right reward for effort so the Australian economy can continue to grow as strongly as possible and as many jobs as possible can be created.</p> ~~<p class='motion-notice motion-notice-truncated'>Long debate text truncated.</p>~~

~~Penny Wong~~
I'd like to seek to move some amendments immediately and then make a few comments. Obviously, in the second reading debate we have outlined in detail Labor's approach to this tax package. We've outlined Labor's better, bigger and fairer tax relief for working Australians. We have also indicated that we do not support steps 2 and 3 of the government's plan and the reasons why, so I don't propose to traverse those again.
The same number of senators voted for and against leaving unchanged the the tables dealing with tax rates for resident taxpayers, non-resident taxpayers and working holiday-makers for the 2024-25 year of income or a later year of income.
This means that the motion failed and the tables did not get enough support from the Senators.
This vote was put after the [Opposition proposed](https://www.openaustralia.org.au/senate/?gid=2018-06-20.25.1) that these table be apposed.
I would again remind the Senate that, apart from the Australian Greens, as I have discerned, every contribution from senators in this place has supported step 1 of the tax plan. What we are part of at the moment is a debate on a bill where the government is seeking to hold those tax cuts for working Australians—which would start next month—hostage to a tax plan it wants to implement in six years time. There is no logical reason for that, and the Senate ought not to agree to it.
In addition, I want to come to step 3 of the government's tax plan. As I outlined yesterday, we do regard this as both fiscally irresponsible and inherently unfair. It is fiscally irresponsible because, as I outlined in my speech on the second reading, this is a series of changes which grows in terms of its cost to the budget when it comes to fruition, or when it matures, at 12 per cent a year. I made the point in my speech on the second reading yesterday that that is substantially higher than the growth in expenditure we see across other areas of the budget. It is, for example, from memory, some three times faster annual growth than the defence budget and, I think, close to six times faster annual growth than expenditure on family tax benefits and so forth.
What the Senate is being asked to do is to lock in a change to the structure of taxation in this country which will grow over the longer term at 12 per cent per year, thereby either rendering other decisions by government unsustainable or imposing decisions on key expenditure programs by government such as health, education and arguably even defence. If there were an expenditure program that was growing at 12 per cent a year you would hear those on the other side demanding that it be reduced.
I intend to move a range of amendments consistent with Labor's position that I've outlined in the speech on the second reading. What I would like to get to, because I think it is the area where there is most concern in the chamber about the tax plan, is our amendments on sheet 8450 which seek to remove the step 3 tax rate changes and those in later income years. I would seek leave to move items (4), (6) and (8) together, which remove the step 3 tax rates.
These are the tax rates that the government is seeking to change from 2024-25. What I would say to members of the crossbench and senators in this place is that we have two objections to this. One is a fundamental policy objection. It is a fiscal risk. It locks in a very fast-growing program which costs not only billions of dollars a year but grows at 12 per cent, which has consequences both for the budget and for economic and fiscal risk. It is also a fundamental restructure of our tax system. As I referred, one of the academics who made submissions to the Senate committee talked about this as being contrary to essentially 100 years of progressive taxation in this country. It is the wrong thing to do. I make the third point that it was well made by Senator Storer in his very careful and considered speech on the second reading that there is no reason to allow the government to hold these tax cuts, which would occur in six years time—you would have to elect Malcolm Turnbull twice—and make them a pre-condition of tax cuts which can be delivered next month. That is nothing other than a political strategy. As Senator Storer said:
~~There is no reason to legislate tax cuts four and six years away except to hold future parliaments to ransom and hold out to voters what may well prove to be false hopes.~~
~~I seek leave to move amendments (4), (6) and (8) together.~~
~~Leave granted.~~
~~The Labor Party oppose schedule 2 in the following terms:~~
(4)     Schedule  2 , item  2 , page 14 (starting at line 3) , table dealing with tax rates for resident taxpayers for the 2024-25 year of income or a later year of income to be opposed .
~~[tax rates]~~
(6)     Schedule  2 , item  5 , page 15 (starting at line 6), table dealing with tax rates for non-resident taxpayers for the 2024-25 year of income or a later year of income to be opposed .
~~[tax rates]~~
(8)     Schedule  2 , item  9 , page 17 , table dealing with tax rates for working holiday makers for the 2024-25 year of income or a later year of income to be opposed .
~~[tax rates]~~
~~Mathias Cormann~~
The government will be opposing these amendments. We obviously believe—in fact, we are confident—that the bill as drafted is in the best interests of all hardworking Australians. It of course prioritises low- and middle-income earners in the first instance, providing cost of living pressure relief to low- and middle-income earners. It then also ensures that we provide the right and appropriate incentive to all working Australians to continue to work hard and ensure that working Australians don't go backwards as a result of bracket creep. Bracket creep is the result, even without moving up the career ladder, of inflation. Our income tax thresholds aren't indexed, which means that, if we do nothing, more and more middle-income Australians will be pushed into the higher and higher income tax brackets, which is a significant disincentive to work harder. It is also recognised as a drag on economic growth. What does a drag on economic growth mean? It means that growth will be less than it could be. A growth that will be less than it could be means that there will be fewer jobs created in the economy. Who hurts the most when there are fewer jobs created in the economy? It's low- and middle-income earners. They are the most exposed to lower growth and they have the most to gain from stronger growth, and there are a lot of economic studies that back that up.
I would also make the point in response to what Senator Wong has just indicated. This is not an item of government expenditure. This is a decision by the parliament to leave working families around Australia with more of their own money. It's their money. The government should only take as little as possible but as much as necessary to fund the services and the administration of government, which ought to be and must be as efficient and as effective and as well targeted as possible. That is, of course, the commitment of our government.
Senator Wong says that this somehow completely undermines the progressivity of our tax system. That is completely and utterly wrong. Right now, the top 20 per cent of income earners across Australia have to pay more than 60 per cent of the income tax revenue generated by government.
~~Peter Whish-Wilson~~
~~So they should.~~
~~Mathias Cormann~~
'So they should,' says Senator Whish-Wilson. Okay. Guess what happens if we legislate our seven-year plan in full? At the end of that seven-year period, do you know how much the top 20 per cent of income earners will be paying in income tax generated across Australia? More than 60 per cent. So, there's no change to the progressivity of our tax system. You know what will happen if we don't legislate this plan in full? We will be hitting aspirational, hardworking middle Australians harder and harder, and that 60 per cent will become 65, 70, 80 per cent.
We in this country don't have automatic indexation of our income tax thresholds. That means that just by wage inflation, just by simple inflation, more and more middle-income earners get pushed into the higher tax brackets, where they have to pay more tax on the income they take home. That is not even taking into account the fact that if you work more hours you get penalised. You work more hours; you get penalised by being pushed into a higher tax bracket. So why would you work more hours if working more hours means that you go from 37 per cent to 45 per cent plus the Medicare levy? It is absolutely recognised that bracket creep is a drag on economic growth and that it is absolutely desirable for bracket creep to be addressed in order to ensure that there isn't an entrenched structural disincentive for working Australians to continue to do everything they can to get ahead.
Senator Wong says that this is about binding future parliaments and that Malcolm Turnbull would have to get elected two more times for this to take effect. No, no; that is actually not true. The Senate is able to legislate today the full seven-year plan and give certainty to working families right across Australia that not only will we provide cost-of-living-pressure relief in the short term, prioritising low- and middle-income earners; we also will do everything we can to appropriately address bracket creep so that all working Australians have the right incentive, the right encouragement, the right reward for effort, the right incentive to continue to work hard and to contribute to our great country. They don't have to elect Malcolm Turnbull two more times to lock this in. The Senate is able to lock this in today.
The Labor Party are making an assumption about what future parliaments might want to do. It might well be that the Labor Party want to add further tax increases to their pre-election agenda. Good luck to them! Good luck to them going to the next election promising to the Australian people that they will increase the tax burden on the economy by more than $200 billion, which everybody knows will hurt the economy. It will hurt families; it will cost jobs. The Labor Party is quite entitled to go to the next election with a higher-taxing agenda. We will not go to the next election with a higher-taxing agenda; we will go to the next election with a commitment to keeping taxes on families as low as possible and to ensuring that taxes on business are maintained at a level that is globally more competitive so that all Australians, today and into the future, have the best possible opportunity to get ahead.
Senator Wong also says these tax cuts are not affordable. Yes, they are. Over the medium term the cost is $144 billion, which is a figure that we've openly and transparently released to the public and to the parliament, in sharp contrast to what the Rudd and Gillard governments did when they tried to increase the tax burden on the mining industry. We had to drag them kicking and screaming into releasing the medium-term projections of the revenue they expected to raise from their resource super profits tax and the minerals resource rent tax. We've provided that information quite openly and transparently. And do you know what you can see in the budget papers? What you can see in the budget papers is that over the medium term, over that whole period, not only does the budget get into a small surplus by 2019-20 and progressively into a larger surplus but we are projected to exceed a surplus of one per cent of the share of GDP by 2026-27 and to remain in surplus all the way through—and that is after we have factored in the cost of this important reform which allows working families around Australia to keep more of their own money.
I just close on this point. I'm very interested to see that Senator Wong is moving an amendment effectively to excise the third stage out of our three-stage, seven-year long-term plan. I guess that means that the Labor Party have already given up on actually doing what they said they would do, which is to oppose everything other than the first stage of our seven-year plan. It's very interesting. Normally in this chamber the way this process is managed is that you start off with getting all you want and then you progressively work your way backwards to being forced into the position where, if you can't get everything you want, you aim to get an amendment up that gives you 70 or 60 per cent of what you want.
It's interesting that Senator Wong in her first amendment hasn't even tried to implement the policy of the Leader of the Opposition. It must mean that the Labor Party's split. It must mean that Senator Wong has stabbed Bill Shorten in the back and turned on Bill Shorten, because she's not in here promoting Bill Shorten's policy to actually excise stages 2 and 3. Maybe Senator Wong is a secret supporter of stage 2 of our three-stage, seven-year plan to provide income tax relief to working families around Australia. I'm very intrigued that the first move that Senator Wong makes in this chamber would not be a move to implement the policy that was articulated by the Leader of the Opposition. Is it now the Labor Party position that you support stages 1 and 2 of our seven-year plan to provide income tax relief to working families around Australia? I would be very interested. Is that now your position? It's a very interesting move by Senator Wong here which is in sharp contrast to what Bill Shorten, as leader of the Labor Party, has signalled into the community would be the Labor Party position.
In fact, as the Labor caucus finished and the Leader of the Opposition and the shadow Treasurer gave a press conference yesterday, the indication that the Australian people were given was that Labor would move to remove both phase 2 and phase 3 from this income tax bill. That is not what Senator Wong is doing in her move now. Senator Wong, essentially, has now accepted stages 1 and 2. I congratulate the Labor Party that you've moved along from one to two. There's only one more step to go! Now that you support the first two phases of our income tax relief plan, which is in three parts, I encourage you strongly to reflect on the fact it is very much in our national interests and in the interests of working families around Australia for us to, yes, provide cost-of-living-pressure relief for low- and middle-income earners but also to address bracket creep so that all working families around Australia have the right incentive, the right encouragement and the right reward for effort so the Australian economy can continue to grow as strongly as possible and as many jobs as possible can be created.
~~Long debate text truncated.~~