Recent voting patterns indicate that Australians engage with economic policy in a more sophisticated way than may politicians and mainstream media commentators give them credit for.
The majority of voters are not concerned only with the impact of government policy on their hip pockets, but also with the implications for their personal wellbeing and that of their families, friends and the wider community.
The annual Per Capita tax survey bears this out. Australians are alive to the opportunities and threats to their way of life that are contained in government tax and spending settings. The 2016 survey found that: The public believes that quality and availability of public services is declining; they want higher spending on those services; they are personally willing to pay higher taxes to fund this spending; but they think the overall system should be made fairer with high-income earners and big businesses paying an appropriate share of tax.
In short, the Australian public remains broadly supportive of policies that ensure affordable access to high-quality school, tertiary and vocational education, universal access to comprehensive healthcare, and subsidised disability and aged care services.
Australians are lukewarm, at best, about the prospect of receiving small personal income tax cuts, apparently recognising that these are not worthwhile while the budget position is under pressure. They believe the budget deficit needs to be fixed, but they would rather see this done through higher taxes for corporations and wealthy individuals and the closing of loopholes and overly generous tax concessions, rather than through spending cuts.
This demonstrates a receptiveness to changes in the tax system to make it more progressive — to tax the well off a little more and redistribute the gains to those in need.
So a Per Capita fantasy budget would start by addressing income tax scales. Currently, there is a massive gap in the $87,000 to $180,000 income range.
New income tax scales might look something like this:
- Lift the tax-free threshold to $22,500;
- 19 cents from $22,501 to $45,000;
- 32.5 cents from $45,000 to $90,00;
- 37 cents from $90,001 to $120,000;
- 41 cents from $121,000 to $170,000; and
- 49 cents from $170,001 and above.
A rough, “back of the envelope” costing suggests the above would be approximately revenue neutral.
Additional measures
Medicare levy
Increase the Medicare levy to 3%, yielding approximately $6 billion per annum, with an explicit commitment that the extra revenue would be hypothecated to Medicare, the PBS, hospitals and health funding.
Negative gearing and capital gains tax concessions
Limit new applications for negative gearing to investment only in newly constructed dwellings.
Limit the number of properties an investor can negatively gear to one established dwelling, including existing investment properties.
Cut the capital gains tax concession by half, to 25%.
The revenue effect of these measures will compound over time.
Education
Support the needs-based funding model, including the reduction or stagnation of government funding to over-funded private and independent schools.
Return school funding to original Gonski 1.0 levels.
Ramp up funding of TAFE and vocational education, including trades skills development. End the failed experiment with private, for-profit providers of vocational education and training.
Overhaul vocational education to provide genuine lifelong learning provision, with a focus on retraining workers to take advantage of newly emerging industries and innovative technologies, and ensure all potential workers have a strong skill set and access to job-ready training, regardless of their age or employment history.
Commit to funding 15 hours per week of early childhood education for all three-year-olds, and 22 hours per week for all four-year-olds.
Unemployment / participation
Reset our approach to unemployment, moving away from current practice that uses unemployment to suppress wage demands and keep inflation in check, and return to policies that support full employment.
Set clear annual targets for unemployment and an employment to population ratio widening the top end of the age range to 70 years. This could be calculated independently the Parliamentary Budget Office each year with an aim to meet and then exceed low unemployment targets and a higher employment to population ratio, especially in older age cohorts.
Initially, set an unemployment target of less than 4% within three years.
Establish incentives to both companies and individuals to stay in the labour market longer, while still allowing for retirement at 65 for those who want it.
Retirement savings
Cut superannuation tax concessions to prevent high-income earners using the super system as a tax haven.
Introduce a government co-contribution to super balances for any individual reaching the age of 40 with a super balance at less than 40% of the median.
Age pension
Increase the maximum rate of Commonwealth Rent Assistance (CRA) to reduce the gap between age pensioners who are home owners and those who are renters, and index the CRA to housing costs instead of CPI to more accurately reflect increases in rents in metropolitan areas.
Provide nationally standardised, Medicare-funded dental care to all full rate age pensioners.
Infrastructure
Commit to government spending on infrastructure as needed, with priorities to be determined through independent assessment by Infrastructure Australia and in consultation with the states.
Priority should be given to projects that can clearly demonstrate significant productivity gains in the medium to long term. These would likely include regional and urban transport, renewable energy, fibre-to-the-premises broadband and other utilities.
Carbon pricing
In the current environment, putting a price on carbon emissions is the most effective way to reduce emissions and play our part in avoiding the worst impacts of climate change.
Introducing a tax and dividend system where all proceeds of the tax are distributed equally among citizens is a progressive measure that would create a price signal with minimum economic disruption.
And one final thought …
Buy submarines off the shelf with huge saving to the budget!
Per Capita should have a look at the Tax Expenditure Statement published by the ATO in January each year. The Tax Expenditures Statement 2016 reveals that the 13 most expensive tax concessions come with an annual cost in terms of revenue foregone of $132.23 billion. Of this GST could yield up to $18.85 billion (without an increase in the rate); capital gains tax $71.11 billion; and, superannuation $33.1 billion.
Remember, the 2016 – 17 MYEFO estimated the projected deficit for the 2016 – 2017 financial year at $41.5 billion (or – 2.4% of GDP) so there is plenty of “fat” just in tax revenue foregone. And that is before there is consideration of other expenditure issues such as negative gearing and pulling in more company tax.
Australia is a developed economy with a high standard of social infrastructure for delivering such things as health care, school and tertiary education, roads and public transport and a free, fair and orderly society. There is clearly scope to fund our national aspirations with fair and equitable taxes. There just needs to be work done on the revenue base.
No new taxes, just the existing ones applied to more people.
Agree totally, 49% top bracket is harsh, then if you add their 3% Medicare levy, that’s 52%. Dealing with the plethora of tax concessions (particularly on property) and welfare measures for business and the well-off would apply the tax burden more evenly, or even a Buffet Tax for both individuals and corporates. The states need to get their tax house in order as well. The family home is subject to so much preferential treatment it’s ridiculous.
Any changes to the Medicare rebate need to address the upper end of the GP consultation fee. The non-bulk bill GP’s (the majority) have been pushing up the gap payment in the absence of a rebate increase and I’m sure their prices are never going backwards. $65-75 for a 15 minute consult is ridiculous. I avoid my GP like the plague.
Sounds too sensible, it’ll never get up.
My highest spending priority is increasing the dole or job search allowance; it is way too low, and now far below the age pension.
I’d vote for any party that promised – with some probity – to implement such a Budget.
Nearest I can get at the moment is Green but, as Woop-Woop notes, too sensible, it’ll never be taken up.
I’d expect nothing from the COALition but, hey bumBoil Shlernt – make a response or are you too busy trying not to fall off your chair?