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Money Comment: The question Scott Morrison will not answer

02:10  07 may  2018
02:10  07 may  2018 Source:   msn.com

'We cannot push this to breaking point': Scott Morrison on why tax relief is coming for Australian households

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Video provided by ABC News

There is one big question Scott Morrison does not want to answer about the tax cuts he will reveal on Tuesday night.

Will the government honour its rule of allowing any improvements in tax revenue to be “banked” on the budget bottom line?

This is the rule imposed after the global financial crisis to guard against political decisions that spend any revenue gains that are otherwise needed to produce a surplus. The question goes to the heart of the debate on whether the country can afford the new income tax cuts.

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There is one big question Scott Morrison does not want to answer about the tax cuts he will reveal on Tuesday night. Will the government honour its rule of allowing any improvements in tax revenue to be “banked” on the budget bottom line?

Morrison’s initial response is this: “We’ll continue to ensure that we return improvements in the economy to the budget bottom line, and you’ll see that next week.”

Treasurer Scott Morrison announces a reduction in the tax burden on craft beer at a Canberra brewery on Friday. © Alex Ellinghausen Treasurer Scott Morrison announces a reduction in the tax burden on craft beer at a Canberra brewery on Friday. Does that mean the government will break its own rule? “I’m just not being drawn on it,” Morrison says. “You can ask it, but what I’m saying is that the answers to those questions will all be in next week’s budget. And you can’t infer from that one thing or the other.”

Australians cannot be sure, yet, whether the Treasurer has got the balance right. The size of the income tax cut is yet to be confirmed. Morrison may be able to deliver it while still producing a budget surplus one year earlier than forecast.

If that is the case, no wonder he was celebrating with a craft beer in Canberra yesterday.

Morrison says net debt will start falling and it is wrong to claim taxes will have to rise to pay it off.

But the question about “banking” those tax gains will not go away. The Coalition went to the 2013 election warning of a budget emergency. It said it would start reducing government debt so the government “won’t need to spend $7 billion a year” on interest payments.

The budget will show what happened to that promise. The total interest expense is likely to be $20 billion in 2020.

The seven-year tax offset plan means more than $10 a week for many .
Scott Morrison did his best at explaining the tax cuts on budget night but how many Australians understood exactly what it means to them? With talk of the Low Income Tax Offset, marginal tax rates changing, and then completely abolishing one of marginal tax rates over a seven-year plan, the only number most can remember is a $10-a-week benefit.Take a closer look at the seven-year tax plan and the cuts are much bigger, delivering tax cuts of up to $11,815 for some Australians.Before we take a look at the cheat sheet, this is the three-phase plan.

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