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Joe Hockey proposes income tax cuts

AAP

AAP

Federal Treasurer Joe Hockey has made the case for income tax cuts, including for Australia’s highest earners, and highlighted the problem of “bracket creep”, with the Government expected to take any proposed changes to next election.

Mr Hockey has given a speech to the Tax Institute and Chartered Accountants Australia and New Zealand in Sydney.

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He said the Government had to cut taxes for middle and low-income earners because “bracket creep” is driving them into higher tax rates and that without the changes, almost half of all taxpayers will be in the top two tax brackets in a decade.

Mr Hockey warned that the existing tax structure would create disincentives for people working extra hours and argued that tax changes would help economic growth.

“If people are left in those higher tax brackets … the incentive for hard work is blunted — and inflation means that without a real wage rise, people pay a higher and higher average tax rate each year,” he said.

“If people are discouraged from work and we cannot address our workforce participation challenges, then Australia will face greater economic pressures.

“My view is that our tax system is holding us back from reaching our end goal of a stronger economy.

“The price we pay for failing to strengthen and improve our tax system is less income than Australians should receive and fewer jobs than Australians could hold.

“Our existing taxation system is increasingly reducing the incentive for many Australians to work harder, earn more, invest and, in the end, give our families greater financial security.”

Asked on 612 ABC Brisbane whether income tax cuts or returning to surplus was his priority, Mr Hockey replied: “Well, it’s both.”

“We illustrated that in our May budget, where we were able to give small business a $5 billion tax cut. We were able to do that by finding [and] offsetting savings.

“It is hugely important that we have targeted tax cuts that help grow the economy … which in turn helps to create greater wealth and then gives us more revenue.”

Mr Hockey later denied talking about the cuts was aimed at winning the crucial Canning by-election.

“There’s no correlation,” Mr Hockey told Sky News.

“I’ve been talking about taxation reform for months now. We are engaging in a discussion and it doesn’t stop for any one event.”

Prime Minister Tony Abbott weighed in from Mer Island in the Torres Strait, where he started a week-long visit to Indigenous communities, by saying his government were constantly looking at how they could cut taxes.

“This government has a good record when it comes to spending,” he said.

“We’re always looking for sensible savings and we’re always looking to cut taxes further.”

Shadow treasurer Chris Bowen said Mr Hockey brought no credibility to a discussion about tax changes.

“This is more talk from the man who’s been talking about lower and fairer taxes for several years now and has delivered higher and more unfair taxes, and especially unfair spending cuts,” Mr Bowen said.

“The billions of dollars of cuts that would be necessary to fund the sort of tax cuts that Joe Hockey’s flagging today would come at a very significant cost.

“Joe Hockey needs to outline in much greater detail than he has in a thought bubble today, how he’s going to go about this plan.”

– ABC
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