Peter Costello’s “forgotten people” will eventually be getting a tax cut of up to $139 per week under the Coalition’s tax plan unveiled in the budget on Tuesday.
Before the budget, it was leaked that low- and middle-income earners would be getting up to $530 per year back via an increase in the low income offset, and expanding it to include people earning up to $90,000 per year.
Former Coalition treasurer Peter Costello warned on Monday that people earning between $100,000 and $200,000 per year were becoming the “forgotten people” in tax cuts, but treasurer Scott Morrison’s full tax cut package reveals that those earning $200,000 will be getting back $7,225 per year by 2024-25, or $139 per week.
Those on $100,000 would be getting $43.26 per week by 2024-25.
To achieve this, the government plans to eventually cut out the second highest tax bracket entirely, bringing down the top tax rate for people earning between $87,000 per year and $200,000 per year to 32.5%.
Those earning above $200,000 would still be taxed at 45%, but Morrison said that by 2024, that would be just 6% of the population.
The change would mean that 73% of Australian taxpayers would be paying the 32.5% rate.
The cost of the policy over seven years is $140 billion, Morrison told journalists in budget lockup on Tuesday.
Previously, Labor’s deputy leader Tanya Plibersek was critical of the size of the tax cut for low- and middle-income earners, saying it wouldn’t cover the cost of a hamburger and a milkshake per week.
Morrison defended the estimated $10.50 extra per week going to low- and middle-income earners, stating that those who believed it wouldn’t make much of a difference, “clearly [aren’t] in touch”.
“That stuff does matter," he said. "Your power bill matters. What you pay to get on the train matters. What you pay to put fuel in your car matters. Your rego matters. That is real relief and it comes in one go to help families with bills."
The government will need to legislate the tax cuts, and Morrison indicated that the entire policy would be a package deal for the Senate to pass, suggesting that the government was not open to splitting out parts in negotiations with the Senate as it did with the company tax cut.
Morrison also suggested that the package would be used as part of negotiations with the Senate to get the remaining two votes required to pass the company tax legislation.