Labor and the Greens are entering a head-on election battle over how to raise extra revenue to address growing inequality – by increasing taxes or closing tax loopholes – to fund hospitals, schools and other public services.



Labor leader Bill Shorten and the party’s families spokeswoman Jenny Macklin launched a sweeping stocktake of social policy on Wednesday, saying increasing inequality had both a social and economic cost. Labor has already unveiled policies to raise revenue from cuts in superannuation tax concessions, negative gearing and capital gains tax concessions, higher tobacco excise, and cracking down on multinational tax avoidance.

Inequality is dragging Australia down Jenny Macklin, Labor families spokeswoman

The ALP has promised to use the money to pay for services, including an increase in education funding recommended in the Gonski report and reversing the Coalition’s higher education cuts, and the report recommends a review into the inadequacy of unemployment benefit payments.

“Inequality is dragging Australia down,” Macklin argued, saying the “gap between the very wealthy and everyone else is getting wider. Living standards for the middle and working classes are falling.”

On Thursday morning, Greens leader Richard Di Natale countered with costings of a Greens plan to raise another $4bn over the next four years to pay for social services and counter rising inequality.

The Greens want to make permanent the 2% temporary deficit levy introduced in the first budget of Tony Abbott’s government, meaning those earning over $180,000 a year would continue to face a marginal tax rate of 47%, instead of returning to the former 45% rate in July 2017.

The Greens are also proposing that those earning over $1m a year face a marginal tax rate of 50% and that the fringe benefits tax rate should rise to 52% – reflecting the highest marginal tax rate and the Medicare levy.

Di Natale also labelled as “sensible” the new tax on sugary soft drinks announced by UK chancellor George Osborne and said the Greens would reveal more tax policy in the lead-up to the next election. He said the Greens would release a “comprehensive” tax policy before the election.

In stark contrast, the government is vowing to reduce government spending as a proportion of GDP and not to raise tax as a proportion of GDP.

Treasurer Scott Morrison has said “bracket creep” – taxpayers moving into higher marginal tax brackets as their incomes rise – is a major drag on economic growth, although it now appears unlikely that the government is going to offer tax cuts to address that.

After it emerged that the heavily-forecast tax cuts may now not happen, Morrison pointed to the end of the deficit levy next year as a looming tax cut for higher income earners.

The government also says new spending on social policies such as the National Disability Insurance Scheme should mostly come from other spending cuts, although it is also considering changes to superannuation tax concessions and tobacco excise.

The pre-election positioning sets up a stark ideological contest between the major parties, and a fight over progressive taxation policies between Labor and the Greens, who are already engaged in a bitter political stoush over the Greens’ backing for the government’s Senate voting reforms.

Outlining his tax policy on ABC radio on Thursday, Di Natale said the Greens “have a proud record of standing up in favour of progressive taxation systems”. He claimed the Greens had “led the charge on negative gearing” saying “we are pleased the Labor party has now come on board with that.”

“The Greens believe that tax reform needs to raise the revenue required to fund the services we need and to address the growing gap in Australia between the haves and have nots. If we want a decent social safety net we have to have revenue,” he said.

According to the Greens’ costings from the parliamentary budget office, if the temporary budget repair levy was made permanent it would affect the top 1.3% of taxpayers, 382,000 people. A new marginal tax rate of 50% for those earning more than $1m would catch 0.08% of taxpayers, or 9,850 people.

The measures would raise $4.1bn over the first four years, and up to $23.9bn over 10 years.