“Everyone talks about the weather but no one does anything about it,” Mark Twain once remarked. For “weather” substitute “tax”, and you’ve got Australian politics in a nutshell.
We no longer have parties that propose markedly different fiscal systems expressing differing values. Instead, politics is around differing schemes for the differing discussions we’ll have on the tax system.
All of which end up in the same place. Australians allegedly won’t accept much higher taxes, but they sure won’t accept reductions in services either. And so everything remains the same, a system where the mere ratcheting up or down of a tax rate comes to be compared to FDR’s first 100 days of the New Deal in terms of its courage and impact.
Meanwhile, bracket creep does all the rest. Labor and the Greens like that for obvious reasons; the Coalition does because it allows them to pose as a low-tax party, while administering the largesse gained from a higher-taxing one.
Neither side of politics should be happy with the situation. Bracket creep puts an increased burden on average earners and reduces the gap between high and average earners.
We don’t simply need a tax debate in this country, but a much wider ranging debate on our whole fiscal system, which takes in proposals for new taxes and new rebates.
GST, negative gearing, bracket creep — these should be the minor matters in a fiscal system debate, not the major focus. The current debate is a measure of how small our politics has become. But then, everyone talks about Australian politics, but no one does anything about it.
Sure, ratcheting up the GST is NOT a tax reform, although these days it almost passes for one.
Let’s face it, if the government had the numbers in the senate they wouldn’t need the states to be on board either.
And bracket creep is not the great bogey it’s made out to be. The vast majority of PAYE suckers (me include) are in the bracket between $37,000 and $180,000 per annum. The great bogey of ‘bracket creep’ amounts to a jump from 32.5% for every dollar over $37K to 37% for every dollar over $80K.
37% (plus medicare) is not a particularly high marginal tax rate historically. And it’s 4.5% difference.
So it rakes in extra dollars with minimal impact on behaviours. Actually sounds like a good mix to me.
But the $180k cut in to the 45% rate is very high. Perhaps it just needs another hike in the $140k mark, perhaps at 40%.
Or is having a progressive tax system now up for debate as well?
Close the minimisation loopholes available to the wealthy..most of our politicians would be aware of these from personal experience..
Bracket creep is not a problem. It allows government to take back the excessive cuts that Howard and Rudd legislation on the back of a resources boom. True, the average earner will hit the second top marginal rate in a year or two but the average earner is not the same thing as the median earner, which no one seems to remember. The average earner earns more than 70% of Australians earner, since our wage distribution is skewed to the top. The median earner has 50% earning less and 50% earning more and is currently well placed in global terms but will take a long time to reach the second top marginal tax rate.
As to the gap between top earners and earners in the 70% decile, well we could legislate for another tax rate to hit the top 2%. This will draw yelps from those whose simplistic understanding of economics makes them think that the rich will work less hard. They won’t: the worst that will happen is that they will save less, which is not a bad thing in present conditions.
Why we should continue with the Coalition’s 2014 budget attempt to transfer income and wealth from the poor to the rich is a mystery. We need an increase in the GST like a hole in the head, which is not to say that an increase in its scope to cover financial transactions to fund a reduction in the company tax rate is a bad idea. It is probably a good idea.
Meanwhile, we could get on with dealing with grandparents changes to negative gearing, immediate reduction of gains tax concessions, and closing loopholes in super concessions and tax holidays organised by multinationals.
In order to let Turdbull and his motley crew off the hook Crikey, you imply that no one is doing anything about tax reform. Go have a look at the number of detailed, costed policies that the Labor party has released on this issue, for doG’s sake.
They have formulated policy on ALL the big and difficult areas in the tax debate (some still to be released), but get NO credit from you and the MSM for their diligence.
As far as the so-called bracket creep ‘problem’ is concerned, I agree with Dogs b and Hunt Ian. I would also add that in order to pay more tax, you need to have a pay rise! Don’t know many low and middle income workers who have seen one of those in the last few years??!!
Now, if you are talking about the top end of town, that is probably correct. But I don’t have a problem with them paying a bit more, since their pay rises are usually in the millions of dollars!
In conclusion, I would just say it is okay for Crikey to criticise the political parties, but it is not clear from your editorial exactly what you want done about ‘tax reform’. A few suggestions wouldn’t go astray!!!
We no longer have parties that propose markedly different fiscal systems expressing differing values. Instead, politics is around differing schemes for the differing discussions we’ll have on the tax system.
This is not true.
There is barely daylight between Liberals and Labor economically – both are pursuing neoliberalism to varying extremes – in that their approach is fundamentally based on the question of “how much tax revenue [0] do we have to spend, what can we get with that”, with an unstated, implicit rule that tax rates should always decrease.
The Greens approach is “what assets should be publicly owned and what services should be publicly funded”. While they are still stuck in the mindset that the Australian Government must first have tax revenue before it can spend – they have not been immune to the cancerous beliefs of neoliberalism either – they are at least approaching the idea from the right direction.
We will not see genuine reform from either of the two major parties. They are both far, far too deeply and fundamentally committed to economic policies designed to funnel wealth upwards.
[0] A nonsensical concept in a sovereign country like Australia.