Coalition has put Labor in a tight spot over tax cuts but it faces risks too | Australia news

The finance minister, Mathias Cormann, has warned the crossbench there will be no wheeling and dealing to pass the government’s package on income tax cuts.

He would say that, wouldn’t he? How many times have we seen warnings that nothing is to be gained from horse trading and threats to put legislation to a vote – only for the government to agree to a necessary compromise?

But in this case, the threat has a little extra piquancy because it sets the Coalition on a collision course with Labor over income tax cuts.

Senate showdowns on big business tax cuts through the 45th parliament held little political risk for Labor, allowing it to vote against cuts for the “top end of town”. It was a play that eventually forced the Coalition to separate tax cuts for small to medium enterprises.

But on income tax cuts, to vote against stage three of the plan, which involves flattening tax rates for those earning between $45,000 and $200,000 – Labor would have to vote against the first stage, which delivers an extra $550 in tax relief for low and middle income earners.

On Friday, Anthony Albanese said Labor was still waiting for “information about what the impact is in terms of budget for various income groups”.

“We will make a sober assessment based upon the facts,” he said. “What we don’t do also is disregard the impact on the economy.”

When parliament resumes in the first week of July, Labor will face the political risk of standing in the way of legislation to effectively double the size of tax cuts for low and middle income earners, just as Australians are starting to prepare their tax returns.

But a Senate vote is not without risk for the Coalition. Perhaps voters will blame it for refusing to split the bill rather than Labor for opposing stage three.

And if Labor holds its nerve and votes against the package, it will put a spotlight on Scott Morrison’s incorrect claim during the election campaign that the cuts could be delivered administratively by the tax office with the full benefit flowing from 1 July.

Instead, the tax office will have to reassess claims and send a supplementary tax return cheque to eligible households if and when the legislation passes.

Delay will also have implications for the economy. With sluggish growth demanding further fiscal stimulus, the Coalition is locked in to its existing spending commitments and has little room to move without blowing projected skinny surpluses. The last thing the government needs is for the shot in the arm from tax cuts to be delayed.

Although the last Senate seat in Queensland is still in doubt, with the Greens’ Larissa Waters ahead and Labor’s Chris Ketter still a chance, the make-up of the upper house is relatively clear.

With the Coalition expected to win 35 seats and a reliable vote from Australian Conservative Cory Bernardi, the government will need One Nation’s two votes and one from either Jacqui Lambie or the Centre Alliance to pass legislation.

Lambie and the Centre Alliance are already in talks about sticking together to maximise their leverage and hold the balance of power.

It may not be enough for the Centre Alliance to be granted its demand for domestic gas reservation. Cormann has told Sky News ideas like that should be judged “on their own merits”.

“We will continue to engage with them in good faith – but as far as our plan for income tax relief for all working Australians is concerned, it’s a plan we took to the election.

“If the Labor party is not prepared to vote for a plan … that puts more money in workers’ pockets … a few weeks after the Australian people voted for it, when would they support such a package?”

Clearly the government wants to deal itself out of a messy engagement with the crossbench by making use of the straightest path through the Senate – votes from Labor.

Source link Finance News Australia

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