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The Prime Minister is facing mounting pressure to scrap the stage three tax cuts with the federal budget just days away.

That is despite Prime Minister Anthony Albanese repeatedly saying he has no plans to dump the former government’s scheme.

Treasurer Jim Chalmers said last week that the world was bracing for another global downturn and while the October 25 budget would not forecast a recession for Australia, the nation would not escape unscathed.

“We are in much better nick than most of the countries with which we compare ourselves but we won’t be immune from a global downturn,” he said.

“It will have implications for our own growth forecasts. It will have implications for our unemployment forecasts. That much is obvious and that much is clear.”

The stage three tax cuts, which are due to come into effect in July 2024, are part of the former Morrison government’s tax plan.

Legislation passed with Labor’s support in 2019 despite some concerns and Mr Albanese went to the 2022 election promising no changes.

But the tax cuts could still be tweaked.

Mr Chalmers has repeatedly noted global economic conditions have changed, including rising inflation and several interest rate hikes following the peak of the Covid-19 pandemic.

What was the Morrison government’s tax plan?

Stage one was a low and middle income tax offset worth up to $1,080 per year to taxpayers earning between $30,000 and $126,000.

Stage two raised the 32.5 per cent marginal tax bracket from $37,001-$90,000 to $45,001-$120,000 and the threshold for the 37 per cent tax rate was raised from $90,000 to $120,000.

The low income tax offset was also boosted to include those earning less than $45,000.

Stage three scraps the 37 per cent marginal tax bracket and lowers the 32.5 per cent marginal tax rate to 30 per cent.

It also increases the threshold for the 45 per cent marginal tax rate, so people earning between $45,000 and $200,000 will pay the same 30 per cent tax rate.

The tax cuts are aimed at solving the so-called “bracket creep”, which threatens to increase average tax rates.

What will the cost be to the budget?

The stage three tax cuts are estimated to cost the budget $243bn in lost tax revenue over a decade.

Are the tax cuts a good thing?

The cuts appear to benefit high and middle income earners more than low income earners.

Australia Institute analysis indicated high income earners would receive a tax break of $9075 per year under stage three.

For about 90 per cent of taxpayers who earn less than $120,000 per year, bracket creep will still be an issue.

“When economic circumstances change, economic policy should change too – even if that means breaking an election promise,” Australia Institute executive director Richard Denniss said.

Article Credited to Angie Raphael, news.com.au

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