JOE Hockey might be committed to take personal income tax cuts to the next federal election, but he’s vague about how they will be funded.
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Increasing Australia’s rate of goods and services tax (as well as broadening it to cover health and education) might have provided the Coalition with just the tax-cut salvation it so desperately seeks. But having done big business’s bidding by axing the carbon and mining taxes, and having dismissed a GST increase, it is poorly placed to deliver anything other than promises before 2016. 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.
“That’s exactly what was promised prior to the 2013 election”, Mr Bowen said. Lower tax rates will also encourage budding entrepreneurs to make something of their ideas.
Treasurer Joe Hockey has announced he intends to slash income tax, in a move that could end up saving many Australians thousands of dollars. While the 2015 budget adopted a much more pragmatic approach, there is little doubt that a Coalition government re-elected on anything other than a tiny margin, would be gung ho once again, though it would probably face Senate problems.
He hinted the relief would be focused at the low and middle end of the income system and contain changes to welfare as well.
Hockey suggested Australia relied too heavily on income tax, and this was reflected in “high rates of tax, particularly at the top level”, which would increasingly create an incentive for Australians to live and work overseas. But he send out contradictory signals about who he thinks it should be “fairer” to. He’s also concerned about the large proportion of the overall income tax take is falling on a small proportion of high income earners. “But we still have a budget to balance – we still have a budget to fix…it will be managed through continued discipline on spending decisions”.
Efforts to spruce up the government’s tax and reform credentials ahead of the next election now rest entirely on Mr Hockey’s ability to substantially prune public spending.
“Back in 1996-97, under the Howard government, the tax burden was less concentrated, with the top 25% paying a majority of income tax”.
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Mr Hockey said the volatility would hit confidence in Australia and that’s why the government had to keep reminding people they had one of the fastest-growing economies in the world right now.
