Topics: Tax cuts package.



Waleed Aly: Simon Birmingham is the Acting Treasurer, you saw him in that story there and he joins us now. So ultimately the controversy here boils down to that one big tax bracket in stage three of the cut so that bracket would then span people who are earning $45,000 right through to people earning $200,000, can you explain to us why someone who would be on say $47,000 a year should have the same marginal tax rate as someone who’s on $198,000 a year.


Simon Birmingham: Well firstly Waleed those thresholds have already been legislated so that’s not really in contention. The parliament already passed those reforms before the election. But to answer your question there, obviously somebody who’s on $47,000 a year would be paying under the currently legislated rates, thirty two and a half cents on the dollar in just $2000 worth of their earnings whereas the person on $200,000 is going to be paying that thirty two and a half cents in the dollar on some $160,000 worth of their earnings. So that’s the way the marginal tax rate system works.


Waleed Aly: Just on your point about the marginal tax rate and how it only affects the bit over the threshold, I understand that but that’s effectively like arguing that everyone should just have a flat tax and you more or less get taxed the same across, it’s the size of that of that bracket is so huge that it captures people who are in completely different life circumstances.  Just going back to first principles, how is that justified? 


Simon Birmingham: And so essentially somebody who’s earning close to $200,000 will be paying in terms of their effective marginal tax rate, somewhere just above 30 cents in the dollar. But for somebody who’s earning less than that much less than that just around that $47,000 that you gave well their effective marginal tax rate is of course going to be somewhere in the teens and higher so you get…


Waleed Aly: And I understand that but the reason we have these tax brackets and they step up like that is that we accept that people who are at the top end should have a higher marginal tax bracket, tax rate not just effective tax rate, a higher marginal tax rate. This seems to be trying to undo that basic idea which has been at the heart of our tax system for a long time. I’m just wondering philosophically what the point of that is?


Simon Birmingham: Well it’s not and what it’s trying to do is make sure that Australia has about the same number of steps as comparable countries around the world and similar tax rates. Having a big, broad, tax rate for those who are essentially earning middle incomes is to ensure that if you get a promotion, if you do a bit of extra overtime, you’re not going to suddenly be pushed into a higher tax bracket.


Peter Hellier: Birmo, we’ve had our cameras following you around for a couple of days mate. I just want to show you a couple of things that I noticed. Look this is you after a press conference here trying to walk through a door or find to find a door. This is of you today and you can’t get in.  Now Birmo…


Simon Birmingham: I am having a run.


Peter Hellier: I have to ask the question, should Aussies have faith that you’re the man to deliver these tax cuts if you cannot walk through a door?


Simon Birmingham: Pete, you know obviously a few sliding doors moments that went a little wrong there. But I think Australians want their tax relief. If they want to pay less tax, and I’ve just got to make sure that I check the doors are unlocked in future clearly. 


Waleed Aly: Surely, the last thing you could call them was sliding doors moments.


Lisa Wilkinson: That maybe was your first mistake.


Simon Birmingham: Looking for, you know I’ve got some sliding doors I might need to get them installed elsewhere, that’s what I’m used to clearly.  


Waleed Aly: Senator thank you very much for your time tonight.


Simon Birmingham: Thank you.