Treasury Secretary John Fraser has today told the Senate Economics Committee about his concerns about bracket creep and the negative impact higher taxes on middle income earners would have.
The revelation comes as the Treasurer pushed its $44 billion hike in income taxes for low and middle income earners through the House of Representatives today.
Scott Morrison talks the low tax talk but is actually delivering a $44 billion increase in income taxes that hits low and middle income earners while giving big businesses a $65 billion hand out.
The Treasurer Secretary confirmed in answer to questions from Labor Senator Jenny McAllister in Senate Estimates that when compared to higher taxes for higher income earners, higher taxes on middle income earners would have a more negative impact.
Only a few weeks ago the independent Parliamentary Budget Office produced a report which showed the average tax rate for individuals across all quintiles increasing over the next five years with the largest increase in average tax rates for people in the middle income quintile earning just $46,000.
In this report, the PBO specifically states that in addition to the effect of nominal income growth average tax rates are projected to increase due to policy changes, most notably the policy decision to increase the Medicare Levy from 201920.
Here we are, a day after Scott Morrison has supposedly discovered inclusive growth and its back to type, punishing low and middle income earners with an even higher tax burden.
Labors fairer approach to tax protects low and middle income earners from this tax hike.
PARTIAL TRANSCRIPT SENATE ECONOMICS COMMITTEEE TREASURY ESTIMATES WEDNESDAY, 25 OCTOBER 2017
SENATOR JENNY MCALLISTER: Mr Fraser can I just get you to reflect a little on the economic implications of bracket creep, in general terms on the economy?
FRASER: Oh, I don't think it's good. No, seriously.
MCALLISTER: In what ways?
FRASER: Well I'm forthright in the view that the economy, people, jobs benefit from lower taxes. And bracket creep is a means of imposing higher taxes by stealth.
MCALLISTER: I suppose I'm interested in what the specific implications are for the performance of the economy, you know, conventionally people might point to impacts on participation, growth. Are there any particular areas that ...
FRASER: Well participation's one of them. When you have the intersection of tax rates and with welfare payments, child care payments, you get prohibitive situations where people just say it's not worth getting back into the workforce.
MCALLISTER: If you have higher average taxes on middle income earners as opposed to an alternative scenario where higher taxes are imposed on higher income earners, do you accept that it has the potential to dampen overall demand in the economy?
FRASER: If it's on middle income people more than higher income ...
McALLISTER: Yes, simply around propensity to spend rather than save I suppose.
FRASER: Um, it depends again, but yeah on the face of it, higher taxes on middle income earners would have a more negative impact, but it depends.
