Peter Costello has announced an inquiry into how competitive Australia’s tax system is. As Andrew Leigh points out, it’s not hard to “establish the facts” which is apparently the purpose of the exercise according to Cossie. It’s much more likely that Costello is either trying to establish some wiggle room to back away from his previous opposition to cutting top marginal rates, or that he’s trying to avoid further flak in the tax debate (”let’s wait for the inquiry to report”…), or both. But he should carefully ponder some other insights from Andrew Leigh, who argues in a recent paper [link to pdf] that the case for addressing effective marginal tax rates at the lower end of the income distribution is far more pressing than giving tax “relief” to the top 5% of households, whom the last round of tax cuts favoured disproportionately. There’s nothing more illuminating to economic and social policy debates than some actual facts rather than self-interested arguments for “reform” which translate into skewing the progressivity of the tax take even further.
4 Responses to “Taxing times for Costello”
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It’s apparently a quick and dirty one month turnaround and I suspect it’s aimed at the Libs backbench - particularly those who come from the Wentworth division.
Personally, I wouldn’t be at all surprised if it results in some not insignificant tinkering in the welfare to work area. Chuck in a return-to-work chronic illness health concession card and Bob’s your DSP reducing uncle…..
Geoff, I hope that EMTRs for those on welfare and low wages are addressed - this is the missing element in welfare to work. But I’m not holding my breath.
It wouldn’t be a right and proper lead-up to a federal election without the usual round of tax-cut bribes, now would it?
Here’s hoping that the review turns out something sensible, and not just the usual predictable claptrap.
Of course, given that the review is to be conducted by Peter Hendy (aka. Howard Government unofficial mouthpiece) and Dick Warburton, it’s highly unlikely that the outcome will be remotely fair or balanced.
Treasury already has this information available and a look at the OECD website as Andrew Leigh points out gives one a pretty good picture.
It is the priorities which will be interesting.
Tax reform as opposed to tax cuts will require spending cuts and neither Howard nor Costello have the guts/ticker for that.
Tis a pity it isn’t a conservative government