kewpid.net

Today’s policy announce­ment regard­ing tax cuts over the next 5 years is exactly the kind of half-arsed piece­meal man­age­ment we’ve come to expect from the Coalition.

Per­ceived superi­or­ity on mat­ters eco­nomic is their final strength, and the con­flict­ing goals are clearly evid­ent in the policy. The Coali­tion needs to pile on the lar­gesse without look­ing reck­less. What they’ve ended up with is a rel­at­ively mod­est $30 bil­lion hand­back over the next half-decade. Such a fig­ure will be eas­ily off­set by con­tin­ued strong eco­nomic growth and increased com­pany and other rev­enue receipts.

What should be frus­trat­ing to policy pur­ists across the coun­try is the clear lack of interest in actu­ally reform­ing the tax-welfare sys­tem. The prob­lem of oppress­ive effect­ive mar­ginal rates of tax­a­tion for those mov­ing from wel­fare to work remains unad­dressed. Fur­ther the tax-free threshold is set to remain at a piti­ful $6000. Rais­ing this threshold would deliver an across the board tax cut that main­tains the pro­gress­ive­ness of the tax scales, and assists low income earners the most. Instead, the Coali­tion con­tin­ues to abuse the low-income tax off­set (LITO), tak­ing people’s money, giv­ing it back at the end of the fin­an­cial year, and call­ing it a tax cut. It should be clear to every­one that tax reforms are more than fid­dling with the scales. Reforms must be designed to tar­get a broad base, so that rates can remain as low as pos­sible. Bey­ond that, reg­u­lat­ory bur­dens need to be lif­ted so that com­pli­ance costs and hours can be min­im­ised. The 2007-08 budget intro­duced the very sens­ible innov­a­tion of pre-filled tax returns. Much more can be done.

If the Coali­tion wants their per­ceived superi­or­ity on eco­nomic man­age­ment to morph into an actual superi­or­ity, they are going to have to put in much more robust policy work that can at least with­stand the blow­torch of a uni­ver­sity student.

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