Behind Labor’s new tax stance is an estimate that almost half the cuts announced in the last two budgets, worth a combined $302 billion over 10 years, go to those on higher incomes.
Mr Shorten will intensify the fight over the fairness of the tax relief by outlining more help for workers earning up to $40,000 a year and limiting the benefits for those on more than $125,000.
Accusing the government of slugging “working mums” on low incomes, Mr Shorten will offer higher tax cuts to the 2.9 million workers earning less than $40,000 a year, about 57 per cent of them women.
“Families are already dealing with cuts to child care and no funding certainty for kindergarten under the Liberals, the last thing they need is higher taxes under the Liberals,” Mr Shorten says in an extract of his speech.
“Whether it’s lower taxes, better super or universal preschool, Labor is the party for working mums and working families.”
At the same time, however, Labor will accept a big part of the second stage of the government plan, worth $550 a year for workers earning more than $41,000 a year and due to start in July 2022.
Labor is preparing to back the increase from $41,000 to $45,000 in the threshold for the 19 per cent tax rate, saving workers money by applying the 32.5 per cent marginal tax rate only on earnings above the upper threshold.
But Mr Shorten will reject the third stage of the government reform plan in the name of fairness, saying the budget cannot afford a cut in the 32.5 per cent marginal tax rate to 30 per cent from June 2024.
The decisions set the scene for a crucial election argument over tax reform, with the government promising $158 billion in tax cuts over 10 years while Labor rejects the third stage, worth $95 billion over the period, and questions some of the second stage.
This mirrors the decisions taken one year ago when the government outlined tax relief worth $144 billion over seven years and Labor voted against tax cuts worth $70 billion when the full package was legislated.
The tax benefit that is due to arrive soonest under the government plan, an expanded tax offset worth up to $1080 for 10 million workers when they file their tax returns after July 1, is now backed by Labor as well as the Coalition but will not be legislated until after the election.
The key difference between the two parties on this part of the package is that Labor offers an offset worth $350 for workers earning up to $37,000 while the government offers only $255.
In a fast-moving policy fight ahead of the election, the government was forced into an embarrassing backdown on a one-off energy assistance payment to those on income support.
Mr Morrison and Treasurer Josh Frydenberg decided on Tuesday night, hours after the budget was unveiled, to extend the payment of $75 for singles and $125 for couples to include Newstart recipients.
Mr Frydenberg said the change, adding about $81 million to the policy’s original cost of $284.4 million, was needed to prevent the payment to four million recipients being delayed or blocked in the Parliament.
Mr Morrison also hit back at claims the forecast budget surplus was built on a $1.6 billion shortfall in spending on the National Disability Insurance Scheme, arguing the underspend was due to the fact that fewer people than expected applied for assistance.
While Labor argues that a worker on $200,000 a year would get a tax cut that is 45 times higher than a worker on $40,000 a year, the government argues the benefit is greater because those on higher incomes pay more tax.
“The progressive nature of our system sees the top five per cent of taxpayers currently paying about a third of all tax,” Mr Frydenberg told the National Press Club on Wednesday.
“When our plan is fully rolled out, by 2024-25, that proportion that 5 per cent pays actually increases, so the system arguably even gets more progressive under our plan.”
The government estimates the top 20 per cent of taxpayers by income paid 60.6 per cent of all income tax revenue last year and this would fall to 59.5 per cent in 2025 if all its changes were legislated.
An independent analysis of the budget plan by the National Centre for Social and Economic Modelling showed the biggest benefits in the government plan go to middle and high-income couples with children.
The NATSEM analysis found the per capita gain in annual disposable income from June 2022 would be worth $283 to those in the eastern Sydney electorate of Wentworth, held by independent Kerryn Phelps, and $291 to those in the electorate of Sydney, held by Labor deputy leader Tanya Plibersek.
The other electorates with similar income gains were Macnamara in Melbourne and North Sydney and Grayndler in Sydney.
But the gain would only be worth $118 in the regional NSW electorate of Lyne, held by Nationals MP David Gillespie, and $118 in the Queensland electorate of Hinkler, held by Nationals MP Keith Pitt.
It would be worth only $126 to those in the NSW south coast seat of Gilmore, where Liberal MP Ann Sudmalis is retiring and new Liberal candidate Warren Mundine is facing a close contest against Labor candidate Fiona Phillips.
David Crowe is Chief Political Correspondent of the Sydney Morning Herald and The Age.