If Hockey gets his way and personal income tax rates are massaged to give higher earners some more breathing space, the gap in funds will have to be filled somehow, and given the government’s history it’s pretty likely people less well-off will end up getting slugged more – either at tax time, or just while doing the shopping.
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The speech, to be delivered to a joint conference of the Tax Institute and Chartered Accountants of Australia and New Zealand today, talks about income tax reform in terms of the broader competitive challenges for Australia’s economy.
In Monday’s speech titled “The economic case for personal income tax cuts”, he said that while governments had vital social spending responsibilities in areas such as social security, health, education, and law and order “we should not pretend that everything government spends taxpayer money on has an economic benefit”. “Especially, if it’s the Commonwealth raising taxes to help states increase their spending”, he will say.
TREASURER Joe Hockey is desperate to find the Abbott government a vote victor after some disaster-ridden weeks in the polls. As economist Saul Eslake pointed out on ABC News Breakfast this morning, there are a bunch of potential revenue goldmines favoured by the rich – things like capital gains, trusts, negative gearing and superannuation contributions – that get taxed pretty gently under the current system and could generate a stack of revenue if we tweaked them, but which the government has shown no inclination to go after. Some of these can be viewed as consumer choices, although of a special sort, given they are subsidised.
“There is no doubt that with the exemptions in place in relation to GST, the GST’s base is narrow, particularly with the growth in the healthcare sector, which is essentially GST-free”, Mr Hockey said. Lower tax rates will also encourage budding entrepreneurs to make something of their ideas. But there is still no sign this can be achieved because the consent of the states and territories is needed and they are divided. But he send out contradictory signals about who he thinks it should be “fairer” to.
Bracket creep occurs when people are pushed up into higher tax brackets merely as a result of wage inflation.
So it’s not a surprise he’s spruiking income tax cuts for us all, including the rich.
“We still have a budget to fix, there’s no denying this”.
“Tax reform is about the ongoing sustainability and resilience of the entire economy”, he said.
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“We had a federal treasurer call 200 people to a hotel to tell them what we already knew”. In its defence, the government points out that we are not at the green paper stage yet, let alone the tax reform white paper, which comes next year.
