February 3, 2024

Labor aims stage 3 tax pitch at Coalition voters, as Liberals amp up fight on integrity

By Lisa Visentin
February 3, 2024 — 10.30pm
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Treasurer Jim Chalmers is seeking to tighten the screws on the Coalition to support the changes to stage 3 tax cuts by arguing that more than 80 per cent of taxpayers in Coalition electorates in NSW and Victoria will be better off, as the opposition gears up to hammer Labor over its broken promise.

Opposition Leader Peter Dutton is set to announce the Coalition’s position on the revamped tax cuts early this week, with senior Liberals expecting shadow cabinet will resolve on Monday to try to amend, but ultimately not oppose, Labor’s changes on the grounds it would be untenable for the opposition to vote against greater tax relief for millions of Australians.

However, there are mixed views in the Coalition party room about whether waving through Labor’s legislation will weaken the parties’ ability to campaign against Labor’s broken promise, with some MPs believing the changes should be opposed on principle to reinforce this point.

Treasurer Jim Chalmers challenged the Coalition not to vote against tax cuts for their electorates, as the stoush over the stage 3 tax overhaul will hit the parliament this week.Credit: Alex Ellinghausen

In his efforts to bolster Labor’s case for the backflip, Chalmers will claim that a government analysis of the top five Coalition electorates in Victoria to benefit from the policy change shows between 85 and 88 per cent of taxpayers will receive a bigger tax cut than they would have received under the Coalition plan. In NSW, the analysis shows between 84 and 89 per cent of taxpayers in 10 Coalition electorates will receive a bigger tax cut.

“If they oppose our tax cuts, Peter Dutton and the Coalition are supporting higher taxes for middle-income earners in their own electorates,” Chalmers said.

The analysis has been prepared internally within the government and is not formal Treasury modelling. It purports to show that the Liberal seat of La Trobe in Melbourne’s outer south-east is the leading beneficiary among Coalition-held Victorian seats, with 88 per cent of taxpayers better off, dropping to 85 per cent in the Nationals-held seat of Nicholls. The seat with the smallest benefit was Menzies, in Melbourne’s outer east, where 81 per cent were still in line for greater tax relief.

In NSW, the government claims 89 per cent of voters in Nationals frontbencher Kevin Hogan’s north coast seat of Page will be better off, while 85 per cent in Barnaby Joyce’s New England electorate will get more tax relief as will 84 per cent in Liberal frontbencher David Coleman’s south Sydney seat of Banks.

Dutton prepared the ground last week for a Coalition position that would wave through the tax changes, telling Nine’s Today show that “the Liberal Party is the party of lower taxes” when asked if the opposition would stand in the way of the changes. He sought to drive home Prime Minister Anthony Albanese’s broken promise on stage 3 as a “brazen lie” as he campaigned in the Melbourne seat of Dunkley on Friday ahead of next month’s byelection. Dutton claimed there was a “black hole in the government’s costings” of the changes and bracket creep would cause an “extra $28 billion of tax [to be ripped] off Australian taxpayers over the course of the next decade”.

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Albanese rejected Dutton’s claims of a black hole on Saturday as he too hit the hustings in Dunkley, saying “he doesn’t know what he’s talking about … these are Treasury costings that we put out with a full comprehensive Treasury analysis of why this was an appropriate measure.”

Liberal MPs, speaking on the condition of anonymity ahead of this week’s party discussions, said the Coalition would use the return of parliament to strongly prosecute Labor’s broken promise and make the debate about the government’s integrity. But ultimately, there was a view in the party’s senior ranks it would be untenable for the Coalition to vote against the tax cuts while pledging to be the party of lower taxes.

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However, there are divergent views on the backbench about this approach.

NSW Liberal senator Andrew Bragg, chair of the Coalition backbench economics committee, said he was firming to the view that the opposition should oppose Labor’s changes when the legislation comes to a vote in the parliament.

“We have to maintain our position on 37 cents. We must remove that threshold – that was the key to the reform, and if we abandoned that pro-aspirational measure then we are giving up on the only income tax reform in the last decade,” Bragg said.

Liberal backbencher Julian Leeser used a speech to the Young Liberal National Convention on Friday to also argue the changes should be opposed, saying Labor was “resurrecting bracket creep”.

The stage 3 revamp unveiled by Albanese means the lowest tax bracket rate will be reduced from 19 to 16 per cent for earnings under $45,000, and it will retain the 37 per cent tax rate for those earning between $135,000 and $190,000. The top income tax bracket of 45 per cent will now kick in for earnings over $190,000, lower than the original $200,000 threshold.

Several senior Liberals said a likely outcome from the party room discussions was that the Coalition would resolve to take a revised tax policy to the election that restored elements of its original stage 3 plan, centring on the abolition of the 37 per cent tax rate.

If the Coalition were to go to the next election promising to scrap the 37 per cent threshold and lift the threshold for the 45 per cent rate back to $200,000 this would cost an extra $39 billion over four years and $120 billion over 10 years.

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Lisa Visentin is the federal political correspondent for The Sun-Herald and The Sunday Age.Connect via Twitter.
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