Cost of Australia’s Tax Cuts to Increase by $11 Billion

Treasurer Jim Chalmers at a press conference at Parliament House in Canberra, Australia, on July 20, 2022. (AAP Image/Mick Tsikas)

Australian Treasurer Jim Chalmers has said that the cost of the stage three tax cuts could reach over $250 billion (US$158 billion) as the government is trying to strike a balance in the federal budget.

According to new estimates, the tax cuts would reduce the government’s tax revenue by $254 billion over a ten-year period, an increase of $11 billion compared to the previous forecast by the budget office.

The treasurer said that the federal budget would not include any new item when it was handed down on Oct. 25, which suggested that the government had already legislated the tax cuts.

Pressures to Scrap the Tax Cuts

As the budget release is approaching, the Labor government has faced pressures to scrap the stage three tax cuts, which it had promised to keep at the election.

Specifically, the Green Party has said the extra cost of $11 billion should be the reason for getting rid of the tax cuts.

“Next week’s budget will be a statement of this government’s priorities. It is still not too late to scrap the stage three tax cuts and invest in genuine, immediate cost of living relief,” Greens senator Nick McKim said.

Independent senator David Pocock has also called on the government to abolish the stage three tax cuts. However, the Opposition said doing so would result in breaking an election promise.

Pedestrians move past the the Queen Victoria Building in Sydney, Australia, on Oct. 18, 2022. (Lisa Maree Williams/Getty Images)

However, economist Robert Carling, a senior fellow at the Centre for Independent Studies, who was the Executive Director, Economic and Fiscal at the New South Wales Treasury from 1998 to 2006, told The Epoch Times that the Labor government should go ahead with the stage three tax cuts.

He explained that it was not a stand-alone tax cut but part of a package that was being implemented in stages.

“While stage three is of greater benefit to higher income earners, stages one and two were of greater benefit to lower and middle-income earners,” Carling said.

He also mentioned that there were problems in the way the cost of the tax cuts was portrayed, as any costs in the budget could be made to look massive by adding them up over ten years.

“The estimated cost of stage three is less than one percent of GDP per annum,” Carling said.

Furthermore, the senior fellow noted that the tax cuts would bring about additional tax revenue from higher economic activities, which would offset part of the cost.

“The cost of stage three is not a major issue for economic and fiscal management. And in any case, tax revenue continues to grow strongly notwithstanding that cost,” Carling said.

Budget to Include Extra $6.4 Billion in Spending

On another topic, the treasurer said the budget would include an extra $6.4 billion in spending on some areas, such as health and COVID-related programs.

He added that the extra spending was due to the former Morrison government “booby-trapping” the budget with unavoidable expenditures.

However, Opposition Leader Peter Dutton said Labor supported the Coalition’s COVID-19 response measures when they were introduced.

“Labor supported every dollar of that, and they promised, and they advocated at the time for another $80 billion of spending,” Dutton told Sydney radio 2GB.

“But in the last nine years, we have taken decisions to keep the economy strong. Without COVID, we would have gone back into surplus,” Dutton said.