Which workers will benefit most from $140 billion income tax plan

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Voters in Labor-held seats will be some of the biggest beneficiaries of the Turnbull government’s income tax overhaul, according to new data which also reveals which workers will benefit most from the $140 billion plan.

Analysis shows residents of the federal electorate of Sydney, held by deputy Labor leader Tanya Plibersek, Melbourne Ports, held by Labor MP Michael Danby, and Grayndler, represented by frontbencher Anthony Albanese, would gain an average $6,000 extra disposable income per year from 2024 under the tax plan unveiled by Treasurer Scott Morrison on Tuesday.

In contrast, voters in the Labor seat of Blaxland will secure an average saving of $3034, and those in the government-held seat of Hinkler $3067.

The size and timing of tax cuts will be a major factor in the next federal election, and an imminent ‘Super Saturday’ series of byelections in June caused by the dual citizenship crisis.

Opposition Leader Bill Shorten confirmed on Thursday night Labor will oppose the Coalition’s tax package despite many of its electorates being listed in the top 30 beneficiaries of the full seven-year plan.

A range of modelling released since Mr Morrison’s budget has been studied by Senate crossbenchers who remain unconvinced about the biggest element of the plan: putting all taxpayers earning between $40,000 and $200,000 on the same bracket from 2024, at annual cost to the budget of $17.8 billion.

One Nation leader Pauline Hanson – who controls three key votes in the Senate – said she was not prepared to go there yet.

“It’s too far ahead,” she told Sky News.

Budget benefits
Tax benefits by household income range

Q5 = highest earners (top 20%)

Q3 = middle earners (middle 20%)

Q1 = lowest earners (bottom 20%)

Source: NATSEM

The post-budget analysis, released on Thursday by the National Centre for Social and Economic Modelling, has also challenged Treasurer Scott Morrison’s claim that the budget’s tax cuts are directed to “middle to lower income Australians”.

The analysis shows that the first of the three rounds of tax changes set out in the budget overwhelmingly benefits middle income households, with high income households getting more than low income households. This is because most low income households don’t earn enough to pay tax and receive the proposed tax offset.

The second round, due in 2022, benefits the top 20 per cent of households the most, boosting their disposable incomes by up to 2 per cent. The third and final phase due in 2024 delivers benefits almost exclusively to the top 20 per cent, boosting their disposable incomes by up to 4.5 per cent. Middle income get a lift of around 1 per cent. Most low income households get less than 0.5 per cent.

Asked whether it would be wrong to claim that the first round of the tax cuts was concentrated on middle and lower earners as the Treasurer had, NATSEM modeller Dr Jinjing Li said it would be.

Dr Li said the second and third round of tax cuts were clearly directed to the highest earners, making Australia’s better paid workers easily the biggest beneficiaries of the three rounds put together together.

Mr Morrison disputed the interpretation, telling Fairfax Media that once all stages of his plan had some into effect someone earning $200,000 would still be paying 12.5 times more than someone on $41,000.

“The latest tax statistics show those on the top tax bracket paid 30 per cent of all personal income tax,” he said. “Under the government’s plan Treasury estimates those on the top tax bracket will pay around 36 per cent of all personal income tax collected in 2024-25.”

“Income tax will still remain overwhelmingly paid by the few, not the many.”

The NATSEM analysis shows Ms Plibersek’s seat of Sydney will see an average benefit of $215 in 2018-19, the highest in the country, and $7275 per year by 2024-25. Prime Minister Malcolm Turnbull’s seat of Wentworth will get the highest average dollar benefit of $8340 a year by 2024, and the sixth highest of $184 in 2018-19.

The third phase of the proposal has become the major sticking point for Labor and the crossbench.

Independent Senator Derryn Hinch was not convinced the government would have to split the bill to get it through the Senate, but said he would ignore pressure to pass it as soon as possible to deliver some tax-relief to workers this year.

A separate analysis released by the Grattan Institute on Thursday found that more flat tax structure would do little to undermine the progressivity of the tax system. But most of the benefits would flow to Australia’s highest earners.

source: https://www.smh.com.au/politics/federal/new-analysis-shows-which-workers-will-benefit-most-from-140-billion-income-tax-plan-20180510-p4zei5.html

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