John Howard, in bolstering Costello’s push for the states to cut business taxes (interesting how the debate has slipped from demands that the states spend money on services to favours for business…), has accused the states of “rolling in money”. So is the Commonwealth, unless the weakening economy means that the Treasury knows something we don’t. Wouldn’t it be possible to turn this around and ask the PM why the bloated surpluses aren’t spent on infrastructure, education, or even as Wayne Swan suggests, fixing the effective marginal tax disincentives for low income earners? Instead, we’ve got ever proliferating tax rebates and payments for everything from pensioners’ utility bills to having a baby. Oh, and the Commonwealth is rolling in money.
Swannie’s doing a good job as Shadow Treasurer, I think…
I think Swannie is doing okay, despite still not really having the media presence that Costello has.
Perhaps this cartoon from Nicholson says it all. Note the “Wayne Swan” on Swannie’s shirt, just in case nobody knows who he is.
Maybe this is an issue where we can get a bipartisan stance to fix the absurd situation where people on welfare are worse off when they go out and earn some money. Actually I thought there had been some progress there but there is a lot still to be done. What if the pollies settle on some minimum moves in the right direction that both sides can support and quarantine these to put them in place quickly before bogging down in all the other contentious areas?
Agree with Rafe.
Is there anyone out there who thinks the minimum tax threshold should NOT be lifted? That has to be the lowest common denominator of tax reform that everyone can agree on.
Swan disagrees, Fyodor. He suggested – which I thought very interesting – that the tax threshold be abolished altogether and replaced by tax credits or negative income tax for low income earners. This, he argued, would be both cheaper and make tax changes more equitable by not cutting the tax of high income earners as well as you would necessarily do by raising the threshold for everyone.
Good to see some interesting policy work being done by the ALP after a long absence of same!
Swan disagrees, Fyodor. He suggested – which I thought very interesting – that the tax threshold be abolished altogether and replaced by tax credits or negative income tax for low income earners. This, he argued, would be both cheaper and make tax changes more equitable by not cutting the tax of high income earners as well as you would necessarily do by raising the threshold for everyone.
Good to see some interesting policy work being done by the ALP after a long absence of same!
True, Mark, but whereas lifting the minimum tax threshold yields a quick and simple payoff of lower taxes for everyone (but proportionally greater for the poor) PLUS a steep reduction in the true marginal rate of tax for the poor, you have to fiddle with a whole range of benefits to get a similar outcome with his proposal. I think his option is administratively more complex, and could work iwell in the context of an overhaul of the entire system, but in terms of simple yet effective changes, the increased tax threshold is tough to beat.
True, Mark, but whereas lifting the minimum tax threshold yields a quick and simple payoff of lower taxes for everyone (but proportionally greater for the poor) PLUS a steep reduction in the true marginal rate of tax for the poor, you have to fiddle with a whole range of benefits to get a similar outcome with his proposal. I think his option is administratively more complex, and could work iwell in the context of an overhaul of the entire system, but in terms of simple yet effective changes, the increased tax threshold is tough to beat.
I think he’s saying get rid of a lot of benefits at the same time, Fyodor – which I think is a desirable outcome. NZ seems to do very well with a massively simplified tax system and they’re working on a single welfare benefit. I think that Howard and Costello are reluctant to grasp the nettle on this because they want the political kudos of things like baby bonusses and so on. It’s crap policy as far as I can see – open to political manipulation (ie bringing forward or bonus payments before elections), of largely symbolic value (like small payments to contribute to pensioners’ utility bills) and not only expensive but also introduces all sorts of unintended distortions which impair equity.
I reckon Swannie’s on the right track in the longer term.
Gotta dash now!
I think he’s saying get rid of a lot of benefits at the same time, Fyodor – which I think is a desirable outcome. NZ seems to do very well with a massively simplified tax system and they’re working on a single welfare benefit. I think that Howard and Costello are reluctant to grasp the nettle on this because they want the political kudos of things like baby bonusses and so on. It’s crap policy as far as I can see – open to political manipulation (ie bringing forward or bonus payments before elections), of largely symbolic value (like small payments to contribute to pensioners’ utility bills) and not only expensive but also introduces all sorts of unintended distortions which impair equity.
I reckon Swannie’s on the right track in the longer term.
Gotta dash now!
Agree entirely, Mark, but I doubt Howard’s ability to pursue a rational and efficient tax policy when old-fashioned pork-barrelling – sorry, “targeting” -will get him more votes. In the meantime, we need quick wins.
Agree entirely, Mark, but I doubt Howard’s ability to pursue a rational and efficient tax policy when old-fashioned pork-barrelling – sorry, “targeting” -will get him more votes. In the meantime, we need quick wins.
Agreed, Fyodor, but it’s good to see Swan thinking both laterally and long-term.
Agreed, Fyodor, but it’s good to see Swan thinking both laterally and long-term.
“I think that Howard and Costello are reluctant to grasp the nettle on this”
Until the hostile Senate has been put rigtfully back into their box Govts of both persuasions have been unable to implement proper reforms.
“I think that Howard and Costello are reluctant to grasp the nettle on this”
Until the hostile Senate has been put rigtfully back into their box Govts of both persuasions have been unable to implement proper reforms.
rog, but as Andrew Bartlett’s pointed out, the Government has never presented any tax reforms that have been rejected by the Senate and the only significant welfare policy initiative to my recollection was tightening of the DSP.
If Howard had wanted to do some serious tax/welfare reform, it would have been possible to get it through I dare say with some negotiation – as with the GST. But he never bothered.
rog, but as Andrew Bartlett’s pointed out, the Government has never presented any tax reforms that have been rejected by the Senate and the only significant welfare policy initiative to my recollection was tightening of the DSP.
If Howard had wanted to do some serious tax/welfare reform, it would have been possible to get it through I dare say with some negotiation – as with the GST. But he never bothered.