The Coalition would implement caps on federal tax and spending measures if it came to power at the next election, Shadow Treasurer Angus Taylor has said.
Delivering his budget reply address to the National Press Club on Wednesday, Mr Taylor pledged to reintroduce a 23.9 per cent cap on tax receipts as a share of the economy that was self-imposed by the former Coalition government during its nine years in power.
Mr Taylor also committed to limiting spending growth, promising to introduce rules that would stop real spending outpacing an expansion in GDP.
Ahead of an election slated for May 2025 at the latest, the shadow treasurer will seek to reframe the debate over fiscal management, arguing that the Coalition will deliver structural reforms to the budget and ensure surpluses over the medium term, while Labor will not.
“Labor has no fiscal guardrails and has abandoned the rules that have supported every budget since Peter Costello established the Charter of Budget Honesty,” Mr Taylor said.
According to the budget papers, the total federal tax take is set to hit an 18-year high of 23.8 per cent of GDP in the current fiscal year, the highest since the Howard government’s penultimate budget of 2005-06.
Treasurer Jim Chalmers has previously declared the tax-to-GDP cap as an arbitrary figure, motivated by political rather than economic reasons, and does not feel constrained by the limit despite meeting it in each of his three budgets.
The tax-to-GDP is expected to fall over the four-year forward estimates period, as the stage three income tax cuts, falling commodity prices and a weakening economy reduce the federal tax take.
Also hinting at changes to income tax relief for those high income earners left worse-off by the Albanese government’s overhaul of the stage three tax package, Mr Taylor indicated the Coalition would ease the income tax burden if elected.
“Jim Chalmers and Anthony Albanese are the first Treasurer and Prime Minister to add a tax bracket into the law since 1993, and the first to lower the top tax threshold since 1984,” he said.
Analysis released by the Treasurer’s office on Tuesday claimed that reinstating elements of the Morrison-era stage three tax package would cost the budget bottom line an additional $38.9bn.
According to Treasury estimates, the Albanese government’s amended stage three tax cuts, which is skewed towards supporting those on low- and middle-incomes, is set to cost $150.7bn over the forwards.
Signalling the Coalition would oppose Labor’s changes to tax superannuation balances above $3 million, Mr Taylor argued the measure was “unprecedented” as it taxed unrealised capital gains.
“It adds complexity and inequity – unevenly, and unequally taxing people on the basis of their career, their fund, and their age,” he said.
While railing against much of the additional spending announced in last week’s federal budget, Mr Taylor said the Coalition would support some of Labor’s measures.
The establishment of a financial services regulatory grid, the mooted one-stop-shop for investors and streamlined foreign investment board approvals would not be opposed by the Coalition, he said.
More to come.