The Australian federal opposition party decided on Monday to drop its previous stance and deliver the same legislated tax cuts as the Coalition after six years of opposition, or two election cycles, to the policies.
“The Shadow Cabinet and Caucus have today confirmed that Labor in government would uphold the legislated changes to personal income taxes and maintain the existing regimes for negative gearing and capital gains tax,” Labor leader Anthony Albanese and Shadow Treasurer Jim Chalmers said in a joint statement on Monday.
Albanese said the move is providing “certainty and clarity” for over nine million working Australians.
This means Labor now supports stage three tax cuts that will abolish the 37 percent tax bracket and see the tax rate flattened to 30 percent for everyone earning between $45,000 and $200,000. People earning over $200,000 will remain in the 45 percent tax bracket.
The move comes against the backdrop of strong division within the party on supporting the policies. Previously, Labor vehemently criticised the legislation, arguing that it favoured the wealthy and would cause greater inequality.
“Stage three is the least responsible, 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,” Chalmers said in October 2020.
However, he said the party has since “listened and learned” from the last election.
“We said that we wouldn’t take an identical set of policies to the next election that we took to the last election,” Chalmers told ABC radio on Monday. “People want us to look forward rather than try to prosecute fights from the past.”
In addition to stage three tax cuts, Labor has dumped its proposal to remove negative gearing on all existing properties, a policy that was aimed to improve housing affordability. Likewise, the plan to reduce capital gains concession from 50 percent to 25 percent has also been discarded.
The housing industry has welcomed the change in approach and congratulated the party for “seeing sense” ahead of the next election.
“The Opposition’s previous position on negative gearing and capital gains tax was always the wrong policy, at the wrong time, and voters at two elections knew it.
“The vast majority of property investors are not rich property barons—they are everyday Australians looking to get ahead and providing the rental accommodation that is needed by the one-third of households who rent,” Property Council of Australia CEO Ken Morrison said.
Finance Minister Simon Birmingham criticised the move as the “most half-hearted concession” ever made in Australian politics and one that could not be believed.
“They’ve done it after months, years of bickering and arguing inside Labor,” Birmingham told reporters. “We know they’re divided. We know that they don’t believe in it, and they can’t be trusted with it.”
New South Wales Liberal Senator Andrew Bragg called the change a “huge internal defeat” for Chalmers in a post on Twitter.
The Greens party blasted Labor for “capitulating” to Prime Minister Scott Morrison’s demands, arguing that the policies would worsen inequality in the country.
“These are tax cuts for people who need them the least,” the Greens said. “We can’t afford it. We don’t need it. This money should be spent on creating a better society.”
Australia Institute senior economist Matt Grudnoff agreed with the Green Party’s stance, saying Australia already had lower tax rates than other OECD countries.
“As inequality worsens in Australia, we need a debate and better policy on how to properly increase wealth and reduce inequality,” Grudnoff told the Canberra Times.