High-income earners will pay more tax until 2017

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About 400,000 taxpayers earning more than $180,000 will pay an extra 2 per cent tax as the government breaks a pre-election promise not to raise taxes, with the introduction of a ”temporary budget repair levy” for three years.

The revenue-raising measure was first promoted weeks ago and forms a key part of the government’s message that everyone will contribute in what is a horror first budget from Treasurer Joe Hockey.

The measure will contribute $3.1 billion to the budget bottom line over three years from July 1, until June 30, 2017.

In his final budget reply speech as opposition leader, Tony Abbott pledged that, if elected, the Coalition ”will keep the current tax thresholds” and that ”no one’s personal tax will go up”.

But someone earning $200,000 will pay 2 per cent more tax on the final $20,000 of their income, which equates to $400. A person earning $300,000 would pay $2400 each year for three years, while someone earning $400,000 would pay $4400 of levy.

Mr Hockey said the levy would ensure his budget – which will scale back family tax benefits, introduce tough earn or learn requirements for the unemployed, and cut into education and health spending – shared the pain around.

”We are asking higher-income earners to pay a temporary budget repair levy,” he said.

”It is only fair that everyone makes a contribution. This includes members of parliament.”

To that end, Mr Hockey said a one-year freeze on the pay of MPs and senior public servant salaries would be put into effect.

”And the gold pass entitlements will be wound back for former and current MPs before the scheme is abolished. As I said, we all must contribute.”

In recent weeks, Mr Hockey and Mr Abbott have variously argued that they have not broken a promise by introducing the levy and that the most significant promise the Coalition made was to fix the budget – and by implication, that the levy could not be avoided.

Several Coalition MPs have already spoken out against the introduction of the levy, questioning the political wisdom of the measure and pointing out that it contributes relatively little to the Coalition’s plan for fiscal consolidation and debt reduction. The government has watered down its original idea of imposing a 1 per cent levy on people earning more than $80,000. And the possibility of the 2 per cent levy beginning at $150,000 was also not adopted because a new tax bracket would have had to be created.

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