Some tax commonsense


In the wake of Treasurer Costello receiving (but not yet announcing) the results of his tax review from Dick Warburton and Peter Hendy, we’ve seen ongoing usual op-ed nonsense over the last couple of days from the hucksters for cutting the top marginal income tax rate. Fortunately there’s also been some commonsense and useful analysis from Ross Gittins, who is always well worth reading except when he goes off on one of his occasional Clive Hamilton-ish “money doesn’t buy you happiness” trips.

But the most sensible contribution IMO has been one from the Australian Democrats’ Andrew Murray, which received almost no MSM coverage. I suppose that’s understandable given that the Dems will never be in government (and conceivably might not even be in Parliament for much longer) so that their tax policies are just a matter of idle curiosity. But one of the nice things about a blog is that you can happily pursue idle curiosity without answering to anyone. Here’s what Murray had to say:

“Our income tax system is too complex, inefficient, and inequitable. Full reform of the system will be costly and difficult and will have to be phased in over a number of years.

“The Democrats ‘five pillars’ structural income tax reform plan to be phased-in consists of: raising the tax-free threshold significantly; indexing the rates; broadening the base; reforming the tax-welfare intersects; and only after all that is done should the top tax rate and threshold be addressed.

“The first priority is protecting tax revenue. The Democrats have long argued for greater tax revenue to meet legitimate unmet needs – education, health, environment, infrastructure, etc. Australia can do that and have tax reform. We argue for base-broadening to help make tax reform affordable.

Broadening the base gains extra revenue by cutting out existing tax concessions that are inequitable, inefficient, outdated, unnecessary or distortionary. Broadening the base helps pay for reform by cutting tax concessions. The wealthy should end up paying more tax, not less.

“Some measures are means testing welfare benefits so that the rich don’t get them, cutting out the private health insurance rebate for the rich, tightening FBT on company cars, and removing work equipment claims above a certain level.

“Our income tax should include a high tax-free threshold which keeps genuinely low income earners out of the income tax system, a progressive income tax scale (but one with few rates, say, 3 to 5), and indexing the rates to ensure real value is maintained and bracket creep avoided.

“The fat cats are already doing very well in Australia. No tax cuts for them this time please. Long-term tax reform must focus on lower and middle income Australians,” Senator Murray concluded.

PS Cartoon courtesy Tom Briscoe’s Small World.

  1. photopress:taxcartoon.gif,full,alignleft[]

About Ken Parish

Ken Parish is a legal academic, with research areas in public law (constitutional and administrative law), civil procedure and teaching & learning theory and practice. He has been a legal academic for almost 20 years. Before that he ran a legal practice in Darwin for 15 years and was a Member of the NT Legislative Assembly for almost 4 years in the early 1990s.
This entry was posted in Uncategorized. Bookmark the permalink.
Notify of

Newest Most Voted
Inline Feedbacks
View all comments
18 years ago

Indexation of the tax thresholds has a few things that worry me. One is that public perception of it will be easily hijacked into a “it only benefits the rich” position. The reason? We ostensibly claim to support progressive tax rates, but if we index them, the biggest tax cuts will go to those in higher brackets. This is an entirely appropriate outcome if you think about it, but presentationally, it’s too easy to distort the result into a supposed favouring of the rich.

18 years ago

If only such common sense were the way to get election. Sadly this looks like it will be lost. Thanks for putting it up – it is an antidote to the rather sickening constant bleat to lower the top rate with all the usual fig leaf arguments covering naked self interest.