The stage 3 tax cuts are back in the news, with inflation added to their list of ill effects.

Teal independent MP Monique Ryan has suggested we trim $8 billion from them and spend the money on building houses and boosting rent assistance for those on low incomes.

Treasurer Jim Chalmers has some tricky decisions ahead.Credit: Alex Ellinghausen

More than a year ago in these pages, I suggested a redesign of one part of stage 3, not because of inflation but as a matter of basic tax design. Today, it’s worth asking: are the ongoing critiques of stage 3 reasonable, and does persistent inflation change things?

Stage 3, as the name suggests, is the third of three stages of tax cuts, with the earlier stages focused on low and middle earners. Due to start on July 1 next year, stage 3 is a package of three changes: a reduction in the marginal tax rate from 32.5 per cent to 30 per cent on all income earned between $45,000 and $120,000; the elimination of the 37 per cent bracket between $120,000 and $180,000; and an increase in the income, from $180,000 to $200,000, at which the top 45 per cent tax rate kicks in.

The main criticism of stage 3 has been about fairness. And there’s no doubt it’s skewed towards higher income earners. But some context is needed.

Tax relief for low and middle earners came with the earlier stages, and........

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