Budget may never return to surplus under Hockey’s ‘magic pudding’ tax cuts
Greens Treasury spokesperson Adam Bandt MP today said new research suggests that Treasurer Joe Hockey’s mooted ‘bracket creep’ tax cuts may see the Budget never return to surplus, unless the government increases other taxes or introduces new spending cuts.
"We don't have a budget crisis but we will have a revenue crisis if a $25 billion hole is punched in the government's income stream,” Mr Bandt said.
“The government says it will get back to an early surplus, keep unfair tax breaks for the wealthy and reduce income taxes all at the same time, so it will have to cut services, lift other taxes or find a magic pudding.”
“The Greens won’t join Joe Hockey’s tax cuts bidding war because it will just mean more pain for everyday people.”
“The next election should be about getting rid of unfair tax breaks to the very wealthy, not offering more unaffordable tax cuts.”
“Tax is the price we pay for a civilised society. Addressing inflation-related bracket creep is one thing but blowing an unaffordable hole in the budget is another.”
Media contact: Adam Pulford, 0429 109 054
Table 1: Impact of ending bracket creep on Commonwealth deficit
(Figures from the Parliamentary Library)
|
Financial year |
Value of bracket creep revenue |
Commonwealth deficit |
||||
|
With bracket creep revenue |
Without bracket creep revenue |
|||||
|
$’m |
% GDP |
$’m |
% GDP |
$’m |
% GDP |
|
|
2015-16 |
2,500 |
0.2 |
-35,115 |
-2.1 |
-37,615 |
-2.2 |
|
2016-17 |
5,000 |
0.3 |
-25,836 |
-1.5 |
-30,836 |
-1.8 |
|
2017-18 |
7,500 |
0.4 |
-14,396 |
-0.8 |
-21,896 |
-1.2 |
|
2018-19 |
10,000 |
0.5 |
-6,905 |
-0.4 |
-16,905 |
-1.0 |
|
2019-20 |
12,500 |
0.7 |
1,821 |
0.1 |
-10,679 |
-0.6 |
|
2020-21 |
15,000 |
0.8 |
11,528 |
0.6 |
-3,472 |
-0.2 |
|
2021-22 |
17,500 |
0.9 |
14,189 |
0.7 |
-3,311 |
-0.2 |
|
2022-23 |
20,000 |
0.9 |
10,693 |
0.5 |
-9,307 |
-0.4 |
|
2023-24 |
22,500 |
1.0 |
11,281 |
0.5 |
-11,219 |
-0.5 |
|
2024-25 |
25,000 |
1.1 |
9,521 |
0.4 |
-15,479 |
-0.7 |
|
2025-26 |
27,500 |
1.1 |
10,045 |
0.4 |
-17,455 |
-0.7 |
The analysis shows the likely effect of removing bracket creep on the Commonwealth’s Budget, leaving all other parameters as currently forecast.
The analysis assumes that revenue collected from bracket creep is cumulatively $25 billion over the forward estimates. This figure was given by the Treasury Department at the Economics Legislation Committee Estimates Hearings on June 2 this year. You can read the full transcript online here.
The analysis uses the longer-term forecasts of the fiscal position of the Commonwealth until 2025-26 as a percentage of GDP presented in 2015-16 Budget and the long term estimate of nominal GDP growth.