Scrap them, save them or tweak them: economists weigh up stage three tax cuts | rachelclun
Stage three tax cuts have reentered the debate after a spectacular U-turn from the UK’s new prime minister and chancellor on a plan to cut income tax for wealthy Britons. Treasurer Jim Chalmers says the government has not changed its tax policy, but he willThe tax cuts, due to take effect from July 1, 2024, will abolish the 37 per cent marginal tax rate for those earning over $120,000. It will also reduce the 32.5 per cent tax rate to 30 per cent for people earning between $45,000 and $200,000.
However, EY chief economist Cherelle Murphy said the effects of the cuts will flow through the whole economy. “The electorate does believe in fairness, and in higher income people paying higher rates,” she said.Yes. By giving people back more of their income, some of that will be spent on things like groceries or clothes, increasing demand and putting upward pressure on prices.
thanks largely to the pandemic, while also increasing spending on programs including aged care, child care and the NDIS.“It’s madness. It effectively booby traps the budget and the tax system, and it was entirely unnecessary,” she said.Stewart said they should keep the 37 per cent rate, but really the money from the tax cut would be better spent on delivering universally free childcare.
Wood said the tax cuts should stay but be offset by other reforms such as reducing the capital gains discount or changing negative gearing. Murphy said the current economic circumstances give the government room to talk about alternatives.Can we leave the tax system like it is?Former head of the Australian competition watchdog, Rod Sims, will use a speech on Thursday to argue the government needs to raise more revenue to cover its growing expenditure.
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