Government set to amend controversial stage three tax cuts

The Albanese Labor government is poised to open a raging battle over tax reform and trust in politics, and is set to amend the controversial stage three tax cuts.

The government is set to offer significant tax changes benefiting low- to middle-income earners, while a scaling back is expected at the high end.

The Prime Minister on Tuesday reassured that "everyone" would get a tax cut while the federal opposition is gearing up to attack over "the mother of all broken promises".

The contentious Morrison-era stage three tax cuts, which are due to take effect in July and don't affect those who earn less than $45,000, are firmly in the spotlight as the Albanese government works to resolve options to relieve spiralling cost-of-living pain for families without increasing inflation.

The Labor caucus will meet on Wednesday in Canberra to discuss government plans following meetings of cabinet and the full ministry.

Despite a changed economic environment, Anthony Albanese has been at pains not to break an election promise to deliver the stage three tax cuts and has given his strongest hint so far that lower-income earners are about to benefit.

"Across the board, what we're doing is looking at how we can help low- and middle-income earners," Mr Albanese said. "Middle Australia are doing it particularly tough."

"I support tax cuts and everyone will be getting a tax cut."

Angus Taylor, the shadow treasurer, is fixed on the expected manoeuvre rather than the relief.

"This would be the mother of all broken promises. This is something that the Prime Minister and Treasurer have committed to over 100 times," he told the Sunrise program.

"As you said, it's in legislation and Labor voted for it. And it's been to two elections. So this is not something you change. And frankly, if the Prime Minister decides he wants to change this, it tells us that he is not good for his word. His word means absolutely nothing."

The opposition has also criticised the move to call Labor MPs to Canberra for a two-hour meeting while Federal Parliament is not sitting.

As speculation mounts, the Prime Minister accused the media of a little bit of "hyperventilating" but did not counter a 2GB report on Monday that the government was planning to keep the current 45 per cent tax rate between $180,000 and $200,000. It would also, reportedly, raise the tax-free threshold.

Treasurer Jim Chalmers told The Canberra Times in May that the government would not be raising the tax-free threshold, which has been stuck at $18,200 for the past decade.

As legislated, the stage three cuts will apply a 30 per cent tax rate on income earned between $45,000 and $200,000 from July.

The Greens want the tax cuts axed, arguing that, as legislated, they will largely benefit the rich, eventually make lower-income earners pay more by failing to compensate them for bracket creep and add to inflation by injecting $20.7 billion into the economy in their first year.

The party published updated Parliamentary Budget Office estimates on Tuesday, showing the cuts will cost an additional $10 billion over a decade bringing it to $323.6 billion. The Greens suggest the money would be better spent directly on providing cost-of-living support.

Senator Pocock has been calling for the tax cuts to be redesigned to make them fairer.

He told RN Breakfast someone earning $45,000 should not pay the same rate of tax as someone earning $200,000.

"I think people want governments to have integrity," he said. "They also want them to respond to the challenges in front of them. And that's what these days from tax cuts are. This is an opportunity to change the policy to be fit for the current economic environment."

"I would argue that redesigning them would have a lot more support than scrapping them."