HANSARD EXTRACT
|
Tax Laws Amendment (Personal Tax Reduction and Improved
Depreciation Arrangements) Bill 2006: Second Reading |
| 31 May 2006 |
Mr
HAYES
(Werriwa)
(12.11
p.m.)—I
rise to support Labor’s second reading amendment to the
Tax Laws Amendment (Personal Tax Reduction and
Improved Depreciation Arrangements) Bill 2006 and give
voice to some of the concerns of residents in my electorate who are
sick and tired of seeing massive federal surpluses piling up while
getting a few coins by way of tax cuts in return. I am sure that the
constituents in my electorate are no different from constituents in
other electorates represented in this chamber who feel that they
should get out of the tax system as much as they put in. I am sure
some members opposite, if they spent a little more time with their
constituents, would find out how they actually felt about this
so-called tax reform. Ultimately, this is not about tax reform; this
is about throwing a pittance at the electorate, and particularly an
electorate like mine which makes up Middle Australia, and hoping
that that satisfies them while this government continues to ever
expand its budget surpluses.
For the last week or so we have seen a parade of members opposite
coming into the chamber and into the Main Committee to praise this
government’s budget. The member for Boothby was no different. They
are talking about the government’s financial record. One thing that
strikes me as a little bit odd is that you have the Mid-Year
Economic and Fiscal Outlook and then have a budget delivered not
long thereafter where we find another $51 billion tucked away,
something for the government to play with. One has got to wonder.
This sofa in the Treasurer’s office must be pretty luxurious if we
can discover that amount of money that can become play money for
this government—money that could have been put into infrastructure
and a whole range of different things that would have benefited not
only electorates like mine but electorates of members opposite. But
that is not what has occurred under this government. Members
opposite have heaped praise on the government for these tax cuts and
how they are so well deserved. The people in my electorate work very
hard for what they earn. They are hardworking Australians. They are
supporting families and doing a sterling job under the
circumstances. To have members opposite heap praise on the
Treasurer—I am sure in an attempt to jockey for positions in the
pending leadership change—is selling Middle Australia short.
Members opposite continually criticise previous Labor governments,
not realising that the prosperity that we are experiencing today,
the great growth they lay claim to, was in fact delivered as a
result of some of the actions taken by the Hawke and Keating
governments—the economic vision, the great efforts in creating
efficiency and initiative in that period and the efforts that
supported hardworking Australians. The figures actually speak for
themselves. The member for Boothby was talking not so long ago about
productivity. The simple fact is that, under the Hawke and Keating
governments, the average productivity growth was around three per
cent. Under this government, productivity growth has been around one
per cent. As a matter of fact, in 2004 it actually went backwards.
If that is what they have to crow about in their financial
management, it is not taking the interests of the country forward,
it is not giving vision and it is not giving some excitement to the
electorates at large such that they are able to think we are living
in a prosperous nation which is going to deliver to us into the
future.
Members opposite have the audacity to talk about the higher interest
rates of the Hawke and Keating governments and they do it at a time
when house prices are at record highs and unaffordable. If you use
that as the measure, we are hitting an unprecedented time for those
people in electorates such as mine, in the south-west of
Sydney, who require two incomes to support their mortgages and to
buy into that market. As I say, that is the outer western areas of
Sydney. I would think that is not dissimilar from anywhere else
within the country and the government has the audacity to then refer
back to the interest rates in the Hawke and Keating period as if
they were somewhat of a disincentive. I was able to pay my mortgage
back then—I worked hard, as everyone else did—but my kids are faced
with having to borrow up to half a million dollars to buy into the
Sydney market, and that is taking into account their savings. Not
only they but their partners have to work and commit themselves to
working for another 25 years. They propose no reforms in what has
been put to us. They are more than happy to sit idly by, trying to
ride the wave of the resources boom while not taking any action to
invest in the future, be it through education, training or
investment in the nation’s infrastructure.
We saw it in this budget. In proportional expenditure the government
has reduced the amount of funding going into vocational education
and training. This is at a time of—one of the buzzwords around this
place—a skills shortage. What are we doing? Proportionally we are
reducing the amount of money going into that area. Over time this
government is going to deliver higher costs for international
businesses to trade with
Australia, because we are cutting short on our skills and on meeting
the necessary infrastructure development that is going to allow us
to participate in world exchange into the future.
Members opposite should not be surprised that the tax cuts they have
delivered do so little for them in the polls. They did not give them
much of a bounce because they have delivered little into the pockets
of real Australians. The bill we have before us today introduces the
changes to personal income tax rates and thresholds that the
Treasurer heralded in his budget speech as a significant restructure
of the tax system. It might be a significant restructure if you are
earning around $100,000, but they have not really cut it in any test
as assessed by Middle Australia. I doubt very much that these are
the sorts of significant tax reforms that people facing effective
marginal tax rates of more than 50c are looking for out of this
budget. I doubt more that they are significant tax cuts for the
residents of Minto, Ingleburn,
Hoxton
Park and Hinchinbrook or that they are what they would be looking
for in tax cuts for them and their families.
Labor’s second reading amendment notes two important points that the
Treasurer seems to have neglected when he was considering this
year’s budget. It importantly notes that there will be little in the
way of benefit to low-income earners from the change in the
low-income tax offset because it will not be incorporated into the
fortnightly withholding rates. The member for Boothby tried to tell
us how people on less than $25,000 will effectively pay no tax. The
facts are that, when they work hard week in and week out, they most
certainly will be paying tax. They will have withholding tax taken
from them for their hourly work. They will have tax deducted in
respect of their overtime. These low-income earners are the very
people who are going to have to engage an accountant at the end of
the financial year to try to get back down to the position where
they can offset the low-income tax offset, because this government
has not applied this on a fortnightly basis.
Secondly, Labor’s amendment points to the fact that the government
once again has failed to address the problems that middle-income
Australia cares about most—that is, the crippling high effective
marginal tax rates that they face. I do not know how many times
recently I have heard people comment to me locally that they feel
that they are putting in a lot at work and seem to be getting
precious little out of it. People believe they are working harder
and harder to make ends meet. When you consider the composition of
income earners in my electorate of Werriwa, it is not unsurprising
that people feel that they have not got a hell of a lot out of this
budget when they will not get a lot out of the changes to the tax
rates and thresholds introduced by this bill. The most recent
statistics available indicate that the average total income in
Werriwa is a little under $36,000. It is estimated that 97 per cent
of income earners in the Werriwa electorate in the 2000-01 financial
year earned less than $78,000, more than 80 per cent of them earned
less than $52,000, while more than one in four earned less than
$28,800.
The residents in my electorate of Werriwa are not high-income
earners, but that does not make them any less deserving of tax
reform. It does not make them any less deserving of getting a break
from the high effective marginal tax rates. It does not make them
any less deserving of getting back out of this tax system exactly
what they have been putting into it. This bill will result in the
vast majority of income earners in my electorate receiving around
$10 a week. They will receive only an increase of about one per cent
of their disposable income. They will receive tax cuts that are
spent well before they have been received. That is this government’s
fantastic new deal with Middle Australia.
Let me just raise a few things. Since my colleague the member for
Boothby took it upon himself to raise Work Choices, I would like to
talk about Work Choices in conjunction with this new deal for Middle
Australia. He claims it introduces flexibility, but what it does is
take away the right of job security. It allows your boss to sack you
without reason. It allows your boss to take away penalty rates and
overtime rates, as we have just seen in the Spotlight arrangement.
Currently, overtime and penalty rates are so important for people in
the western suburbs of
Sydney in maintaining their family budgets. The member for Boothby
has indicated that that is one of the positives of this triumphant
approach of the government. I know he did not mention Welfare to
Work, but I will put that in on his behalf to complete the
triumphant approach that includes this tax arrangement and Work
Choices. All in all, as a tax arrangement, it ends up at around $10
for people in my electorate; but, in having been subjected to Work
Choices, they now lose their job security. They now have a situation
whereby their potential for wages growth has been significantly
impacted upon in the negative.
To say that Middle Australia has been short-changed you would have
to be rather kind. This government is presenting a deal to Middle
Australia that is similar to the appalling deal that was recently
imposed on new employees of Spotlight. Despite the Treasurer’s
comment that tax cuts contained in the budget meant that
middle-income earners would no longer be subject to bracket creep,
we all know from the changes to the rates and the thresholds
contained in the bill that that is just not the case at all. Anyone
in this place who has done the calculations—and I have done a
breakdown of people in my electorate—knows that that does not stack
up. A typical income earner in the south-west of
Sydney on around $50,000 a year is expected, if wages continue to
grow at the current rates, to pay more in bracket creep than they
will get in tax cuts over the next 10 years. That is on top of the
government having done nothing in this bill to address the effective
marginal tax rates faced by middle-income Australians. As I say,
over the next 10 years, if wage growth continues, they will have
paid more in bracket creep than they will have gained from these tax
cuts.
Just relating that back again to what the member for Boothby had to
say, he waxed lyrical in discussing the wages growth that has been
experienced over the last 10 years, but what he did not say—and he
made a point of calling the overlay of Work Choices the flexibility
needed—is that this government is backing itself in on containing
wage growth in the foreseeable future. This is not about continuing
the wage growth that occurred over the last 10 years; this is about
trying to address the problem it sees as existing by containing wage
growth, by cutting wages, by cutting overtime, by cutting penalty
rates and saying it can contain the impact on effective marginal tax
rates.
We know that is wrong. We know that this is simply a plank in the
government’s overall approach which seeks to exploit middle-income
Australia.
It seeks to exploit their situation not simply by looking at their
household budgets and how they are going to maintain paying their
mortgages, their rent, their car payments and matters that are
affected by interest rates changes or alternatively affected by
higher petrol prices but also at the same time by directing their
concerted efforts into containing the growth of wages and conditions
in the immediate future through the introduction of Work Choices.
Embarrassed as it might be about Spotlight and the abattoirs at
Cowra or Naracoorte, this is what is happening. As all those
organisations have said, ‘We are only doing what the government is
allowing us to do.’ That is precisely the strategy that is being
developed in this place.
I mentioned earlier that people are regularly telling me that they
face a tough choice when they are offered a little bit more overtime
because they have to weigh up the cost of the benefits that are
taken away from them, particularly when they look at the effective
aspects of the taper as it applies to family tax A. People are
telling me that they keep working, and working hard, but that they
feel they are not getting ahead. They work hard and they work longer
hours, but they do not seem to be getting any more in their bank
account and, at the end of the day, their spending probably remains
the same—although it has probably increased when you take into
account their mortgage, their credit card, repayments on vehicles,
petrol costs and child care, which have all increased over the
recent period of time.
These people are describing the problems associated with high
effective marginal tax rates. They are describing the problems they
face working and paying tax in a system that does not give them back
what they put in. The tax system is a reverse incentive. It
discourages people from trying harder. It discourages people from
working extra hours in overtime or in other ways trying to add extra
income to the family budget. Middle-income families—families on
meagre incomes, between $40,000 and $65,000—are facing effective
marginal tax rates of 51.5 per cent. This is the level at which the
tax and welfare systems collide. These are real barriers and real
disincentives, which should be addressed by any real tax reform. The
tax rate for those on incomes between $40,000 and $65,000 is a whole
lot higher— (Time expired)
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