Howard signals tax cuts for rich
August 26, 2005
PRIME Minister John Howard has signalled tax cuts for the nation's most well off, saying generators of wealth need to be looked after.
In a move that puts him in direct conflict with Treasurer Peter Costello, Mr Howard said he believes the top marginal tax rate of 47 cents in the dollar is too high and, despite government changes, still cuts in too early.
Although not absolutely pledging further income tax cuts, Mr Howard said it was an issue that had to be considered in the next budget.
The lowest tax rate was cut to 15 cents from 17 cents this year, while thresholds for the 30 cent, 42 cent and 47 cent rates were all lifted.
Next year the 42 and 47 cent thresholds will be lifted again. The 47 cent rate will only apply to people earning more than $125,000 a year.
Mr Howard said his aim was to reward and encourage the rich for all their hard work.
"We've got to look after the achievers and the contributors and the wealth generators of our society"
But Mr Howard's push on tax rates is in direct conflict with Mr Costello who, the day after delivering this year's budget, defended the current tax rates and argued changes needed to be made to the thresholds.
At the time, Mr Costello said lifting the tax threshold delivered fairer outcomes than cutting the tax rate, which substantially benefited those on high incomes.
Labor's treasury spokesman Wayne Swan said Mr Howard's comments were a poke in the eye of Mr Costello and his position on tax thresholds and rates.
He said the government had to provide tax cuts to low and middle income earners and not just those earning more than $125,000 a year.
"We're going to have a sensible look at the whole system, and we're going to put some incentive in the system starting with the rates of taxation across the board; for all Australians, not just for a select few," he said.
The head of Labor's economics committee, Craig Emerson, gave some insight into where Labor may head with its tax policy.
In a paper, he said just 330,000 well-off taxpayers would benefit from abolishing the 47 cents in the dollar tax rate.
Millionaires would be $840 a week better off, while people earning less than $125,000 a year would get nothing.
He said ditching the 42 cent in the dollar rate would be much better, giving substantial tax relief to at least one million people while stopping those on lower tax rates from being pushed into higher tax brackets.