More than 100 economists and tax experts are urging the Labor government to reconsider the impending stage 3 tax cuts for high income earners, including a former RBA boss who called it a "slap in the face for disadvantaged groups".
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The tax cuts are part of the previous Coalition government's three-stage tax overhaul, which changed tax brackets and were passed with the support of the Labor party in 2019.
Progressive think tank, The Australia Institute penned an open letter to Prime Minister Anthony Albanese on Tuesday, calling on his government to "reconsider the size, shape and timing of the stage 3 tax cuts".
"We the undersigned all agree that the stage 3 tax cuts are unfair and, given the inflationary environment and the emerging pressures of higher priority government commitments on the Budget, unaffordable," the letter said.
Former Reserve Bank of Australia governor Bernie Fraser, who was a signatory of the letter, said the tax cuts are "a slap in the face for disadvantaged groups in the community" and will mainly benefit already well-off people.
He said Labor will not be able to deliver on its funding commitments if it continues to allow the tax cuts, which are scheduled for July 2024, calling the government "selfish".
"If the Labor government really wants to make an impact on those commitments that really matter, like aged care and child care and so on, they're going to need all the revenue they can get," he said.
Prime Minister Anthony Albanese has continued to support the already legislated tax cuts, even after Treasurer Jim Chalmers revealed the package would cost about $254 billion over a decade, $11 billion more than first estimated by the Parliamentary Budget Office.
Other notable signatories of the letter included Nobel Prize winning economist Professor Joseph Stiglitz, former ACCC chair Professor Alan Fels, and former Department of Prime Minister & Cabinet secretary Dr Mike Keating.
The third stage of the tax plan abolishes the 37 per cent marginal tax bracket, decreases the 32.5 per cent marginal tax rate to 30 per cent and increases the 45 per cent marginal tax rate threshold from $180,000 to $200,000.
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Tax expert Professor Miranda Stewart, who also signed the letter, said the government should introduce legislation to revert the impending changes and not remove the 37 per cent marginal tax bracket.
She said the plan "makes the tax system permanently less progressive than it used to be" and will have worsening effect on the fiscal deficit, inflation and inequality.
"I think the economic situation has changed substantially, as has the fiscal situation. We're in a post-COVID recovery period and now that the Albanese government is in power, I hope that they take seriously both the fiscal issue and the issue of inequality especially at the top end of our income distribution," Professor Stewart said.
The Australia Institute said research conducted by them "shows the majority of the stage 3 income tax cuts will go to high-income earners in general and men in particular".
Executive director of the Australia Institute Dr Richard Denniss said "Economists and tax experts are telling us that these cuts are bad for an inflationary economy, unaffordable, and unfair".
"Handing out a quarter of a trillion in tax cuts to high-income earners will fuel inflation, damage our fair-go tax system, and lead to cuts of essential services. Scott Morrison's scheme from 2018 is the wrong economic plan for the Australian economy in 2022," he said.
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