Federal Politics
  1. Home
  2. Politics
  3. News
EXCLUSIVE
Save
Print
License article

Twice as many households worse off under Coalition's Medicare levy rise plan

James Massola

Twice as many households will be worse off under the federal government's plan to raise the Medicare levy by half a percentage point than under Labor's alternative, according to new modelling by the ANU's Centre for Social Research and Methods

And middle-income earners will do much more of the heavy lifting under the Coalition than under Labor, the research by Associate Professor Ben Phillips finds.

Up Next

Rolf Harris not guilty of indecent assaults

null
Video duration
01:03

More National News Videos

null
Video duration
02:16

Bill Shorten's Medicare levy defence
null
Video duration
01:03

Rolf Harris not guilty of indecent ...
null
Video duration
01:37

High level defence meeting in Sydney
null
Video duration
01:56

Trump's climate call
null
Video duration
01:13

Swimmers dive into winter
More videos

Bill Shorten's Medicare levy defence

In 2013, Bill Shorten supported an across-the-board increase in the medicare levy. So why doesn't he support the government's NDIS funding proposal?

The Turnbull government announced an across-the-board 0.5 per cent hike in the Medicare levy to 2.5 per cent from July 1, 2019, in the federal budget. The increase aims to raise $8.2 billion over two years, with the money to help fund the National Disability Insurance Scheme.

Labor said it would support the 0.5 per cent rise only for people earning more than $87,000 a year. It also plans to re-instate the deficit repair levy for people earning more than $180,000. This alternative approach, it has claimed, would generate an extra $4.5 billion tax revenue over 10 years.

The modelling will likely be seized on by Labor, with Opposition Leader Bill Shorten to argue in a speech to the Committee for Economic Development of Australia on Thursday that falling wage growth, rising under-employment and stagnant living standards underpin the ALP's policy decision.

Mr Shorten will argue Labor's support for an across-the-board rise in the levy in 2013 compared to its position now is linked to a shift in economic conditions, and that a person on $200,000 a year would only pay 0.2 per cent more tax under the ALP.

Advertisement

If the Liberal policy were in place from July 1, 2019, according to the ANU modelling, 60 per cent of households would be worse off, 39 per cent would see no change, and just 1 per cent would be better off.

In comparison, if Labor's policy were implemented from July 1, 2019, 27 per cent of households would be worse off and 73 per cent would see no change in their circumstances.

Over four years Labor's policy prescription would raise $300 million more tax than the Coalition's. Over 10 years the modelling suggests Labor would raise an extra $6.8 billion, because of bracket creep. This is more than the Parliamentary Budget Office's estimate of $4.5 billion.

The top 20 per cent of earners, or top quintile, would pay about an extra $1734 tax per year under Labor. Under the Coalition's plan they would pay $1105 extra tax.

The Coalition policy would raise $4.03 billion in its first year and leans on middle-income earning households far more.

The second lowest-earning 20 per cent of households, or quintile, would pay on average an extra $57 a year in tax; the middle 20 per cent would pay $288; and in the second-highest earning 20 per cent of households, $572.

Labor's policy would raise $4.102 billion in its first year. Households in the second quintile would pay $7 a year extra tax; in the middle quintile, $67; and in the second-highest quintile, $253.

The bottom 20 per cent of households, by income, would pay an extra $3 a year in tax under the Coalition, and just 0.03 cents more tax under Labor.

Political debate over the levy has been a key post-budget fault line, with both sides claiming their approach is fairest and the federal government accusing Labor of hypocrisy for backing an across-the-board Medicare levy rise of 0.5 back in 2013, when in government, but opposing it now.

Mr Shorten will argue that Labor's position – which was strongly objected to in shadow cabinet – is values-based and fairer.

"Labor will support the 0.5 per cent increase in the Medicare levy for the top two tax brackets – Australians earning over $87,000. But we won't ask millions of people on more modest incomes to pay more tax. And we won't give millionaires a tax cut, while making everyone else pay for it," he will say, according to speech notes.

"The decisions taken in this budget would mean from 1 July 2019, an Australian who earns $200,000 – will pay an average tax rate of 34.1 per cent. Under Labor's plan, the same person on $200,000, would be paying an average tax rate of 34.3 per cent. I find it hard to believe this will herald the end of Western civilisation as we know it."

59 comments

Comment are now closed