It seems a long time ago now, but in the months leading up to the 2006 Budget, there was a whole lot of people, including many members of the Coalition, engaging in debate about possible tax reforms. I did a series of blog posts on it at the time.
When Budget time came, the Treasurer squibbed it as usual and went with vote buying instead. The momentum behind the debate basically fizzled, failing to resurface again in the lead up to this year’s Budget. The failure to engage in any meaningful tax reform – or even any debate about it – has meant the Coalition’s just released tax policy was less than it might have been.
It includes some income tax changes which give some equity improvements and incentives for lower income earners.
The increase in the effective tax-free threshold and lift in the range of the 15% tax rate reduces the income tax impact on lower income people and the current penalties on them if they try to earn a bit more.
But what I’d really like to see is some indexation of the bottom tax thresholds so these sort of election promises retain their value and don’t disappear through bracket creep.
Those in the middle also lose out to yet more, bigger, cuts for the highest income earners.
There’s also more that could be done to broaden the tax base and reduce some of the multitude of deductions and other tax expenditures. This would make the Coalition’s planned tax cuts at the top end of the income range more justifiable. However, that involves taking away an existing entitlement, which is politically more difficult to do. Which is why building the arguments for such change through extended public debate, such as was happening 18 months ago, would be a good idea.