Federal Budget, Jim Chalmers: Cost of Phase 3 tax cuts explodes by $11 billion

Jim Chalmers revealed that the cost of the Phase 3 tax cuts had skyrocketed by $11 billion.

The Treasurer said Thursday that the latest cost of Treasury policy had fallen from $243 billion over a decade to $254 billion.

Dr. Chalmers made the revelation on ABC Radio National, five days before delivering his first federal budget.

The revelation is likely to reignite the debate over the fairness of tax cuts for high-income workers at a time when the budget is facing considerable constraints.

The cuts, which are due to take effect in July 2024, would mean that no one earning up to $200,000 a year will pay more than 30 cents on the dollar in tax.

In 2019, Labor backed the Morrison government to legislate three tiers of tax cuts – starting with relief for low and middle incomes – and later said ahead of this year’s election they would stick to stage three in place.

Dr Chalmers had asked Treasury officials to prepare a new estimate of the policy’s costs earlier this month after a week in which the Albanian government gave free rein to speculation over whether the cuts would be reversed or reduced.

Critics of the tax cuts, including some within Labour, say they are neither affordable nor fair.

But Dr Chalmers has ruled out changing the policy, at least for now.

Asked on Thursday whether he was alarmed by the $11 billion blast, Dr Chalmers said it was “pretty clear to everyone” that the tax cuts would hit the budget.

“But I think what we’ve argued for is that they’re coming in a few years,” he said.

“We have more pressing priorities, the budget will not be about these tax cuts.”

Dr Chalmers said next week’s budget would focus on responsible cost-of-living relief, “targeted investments” to create a more resilient economy and the start of fiscal repair after what he calls ” decade of waste and destruction” by the Coalition.

He said his predecessors had effectively ambushed Labor after a government audit uncovered $6.4billion in extra spending on services such as aged care which had not been funded but should be included in this budget.

“Our predecessors more or less trapped the budget with heaps of spending, billions of dollars of spending, which is unavoidable, for which room had to be found. And we did it,” he said.

He said high commodity prices had resulted in a windfall for Commonwealth exports, which would relieve the budget over the next two years.

But he warned the boost was only temporary and would not keep pace with the amount of money the government would need to spend on public services and repay interest on nearly $1 trillion of debt.

Dr Chalmers has repeatedly said that the Albanian government would have to make ‘tough decisions’ in order to cover the spiraling costs of the ‘big five’ government services, including the national disability insurance scheme, care for the elderly and defense.

Asked later on Thursday how the government could justify maintaining the Stage 3 tax cuts, Prime Minister Anthony Albanese said “we haven’t changed our position on this.”

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