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By the People and for the People: a Fairer Tax System and Stronger Economy

By Max Ogden and John Lord

One of Australia’s most vexing questions is a more equitable taxation system.

At the 2019 election, the ALP presented a couple of mild tax reforms, which unfortunately contributed to its defeat.

Later, when reflecting on his defeat, Bill Shorten admitted that perhaps he should have taken a different approach with personal tax cuts for millions of workers.

He conceded that his proposed tax reforms on franking credits and negative gearing went over like a lead balloon:

“Mr Shorten also acknowledged he should have campaigned with “fewer messages” and taken a different approach on franking credits, the tax reform that infuriated older Australians who stood to lose thousands of dollars.”

Most Australian economists and taxation experts think tax reform should be high on the agenda of any Australian Government. Many have tried, but none have succeeded.

Why? Because they have all tried an “all at once reform” which the electorate refuses to accept in any shape or form.

Remember, the beneficial Henry Tax Review commissioned by PM Rudd that never got off the ground. It now gathers dust in the bottom drawer of some bureaucrat’s desk.

Economists thought it was groundbreaking, whereas politicians knew that they couldn’t sell it in its totality.

These and other experiences show that achieving equitable tax reform is complex compared with the ease with which a government can cut taxes.

It requires sizeable public support, which can only be achieved by profound and long-term discussion by the electorate.

The Albanese government should establish a Tax Commission, or maybe a National Tax Cabinet, which will be charged with generating an extensive and deep public discussion about the whole system, with the objective of achieving three principles.

  1. A more equitable system
  2. Generating a stable economy.
  3. Contributing/supporting climate change action.

The ALP government will not legislate significant tax changes during its first term, except for what it is already committed to.

The Tax Commission/National Tax Cabinet will organise discussions in local communities, workplaces, with state and local governments, employers, employer organisations, small businesses, unions, and ethnic groups, and facilitate any groups which want to be part of the nationwide discussion.

The ABC and SBS could replicate its recent Compass project as a Tax Compass on Australian policy preferences.

The Tax Commission/National Tax Cabinet will conduct surveys, polling, and research, including examining the best international tax systems which achieve the three principles.

An urgent consideration for the Tax Commission/National Tax Cabinet should be to enquire into the various tax advantages open to the rich and privileged in society and the enormous handouts to mining companies.

Towards the end of its first term, the government should convene one or several prominent summits to discuss a new tax system based on the three principles.

Arising from the summit, it should formulate policies to take to the next election, seeking a mandate to implement legislation when elected for a second term, as it currently looks likely.

This is similar to what John Howard did when he legislated for the GST but did not enact it until after the election, so there is a precedent, except this discussion would include the whole community.

The suggested process is similar to the Uluru Statement From The Heart, where there was extensive discussion among indigenous communities, leading to the unanimous agreement at the Uluru Summit.

Polling over many years consistently shows that most electorate is prepared to pay more tax, provided they are assured it will be used for public assets such as health and education.

This does not manifest at an election because there is never a widely discussed detailed proposal, such as suggested here. Such polling provides a reasonable basis on which to develop the process outlined.

The book “Nordic Edge” by Andrew Scott and Rod Cambell indicates that Nordic countries like Sweden, Finland, Denmark, Norway and Iceland have the highest tax rates in the world but also have the most robust economies.

Known as The Nordic Model, these countries have the highest living standards with low-income disparity. The Nordic model merges free-market capitalism with a generous welfare system.

Rather than appoint an economist or tax expert to head the Tax Commission/National Tax Cabinet, it should be someone with expertise in adult and community learning, as they will know the best processes for getting broad involvement, polling, and knowledge. Tax experts and economists should be employed to undertake the research that will be required to assist the Australia-wide discussion.

Contributing authors: Phil Drew, Luke Whitington, Neil Watson, Brian Aarons.

My thoughts for the day

Never in the history of this nation have the rich and the privileged been so openly brazen.

The rise of narcissism and inequality and the demise of compassion illustrate the state of the world.

 

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11 comments

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  1. New England Cocky

    Somehow economists and the ill-educated main stream media scribblers always overlook the expenditure side of the Taxation Question, by ignoring the enormous multi-MILLION free, gratis & for nothing handouts gifted to foreign owned multi-national & national corporations. These amount to well over $10 BILLION PER YEAR. Why spend it thus?

    So why does Australia need to discover more oil reserves for foreign owned multinational oil corporations to exploit without contributing to the Australian tax base? Then there is the charity for the wealthy, items like over-funding private schools without accountability for spending public monies and negative gearing of residential housing investments to name just two.

    With Australia now aiming for a 21st century future in alternative energy supply, why is the Cannon-Brookes backed enormous solar farm near Mt Isa exporting electricity to Asia instead of supplying Australian households and manufacturers?

  2. wam

    Remember the lying rodent’s battlers, lord? https://insidestory.org.au/howards-victories-which-voters-switched-which-issues-mattered-and-why/ They accepted his, there will be no gst promise, then re-elected him on a gst promise. Albo’s election promise of no new taxes could he expect the same result, if he delves into taxes? All my contemporary rabbottians are health card carrying frankers who not only love the tax system but have never ‘battled’ in their life. However there are plenty of blue-collar battlers who think of themselves in howard’s terms as not needing labor. My scottish bridge partner has a two story council flat for which she pays $32 rent. The council periodically offers her far more suitable accommodation but if she moves the rent become $150. At tax time I ring ATO for her, they cannot understand her accent, and complete her tax return. When necessary, she sends $10k to her grandson to minimise her tax. I have to bite my tongue because she and they have been winning for far too long. But for her labor tax reforms risk her losing. Albo must tread softly at all levels of reform.

  3. John Lord

    Albo must tread softly at all levels of reform. That’s exactly what the article suggests about tax reform Wam.

  4. David Stakes

    Was not paying more tax, and some to pay where they were not. The whole gist of the 2019 election, was so we could have more Government services.

  5. Stephengb

    When the Majority of the population discovers how the macro-economy, actually works (in a broad sense) the population will understand the important functions that taxes actually play rather than the ridiculous idea that taxes are required for governments to provide services.

    Modern Money is nothing like what 80% of people think ?

    Politicians, public servants and the majority of economists are ignorant, misleading, misrepresenting or just plain lying.

  6. leefe

    “TAX THE RICH”

    Have we moved on from eating them? What a disasppointment; I just got the new recipe book along with a stock of fava beans and chianti.

  7. Fred

    Stephengb: It appears there are as many economic theories as economists and none are 100% accurate across major economies including MMT. I might be a little unfair, but it appears that economic theory and modelling is a blend of “science” and “faith”. We do not yet have the ability to model high variable count, complex, interrelated systems although AI is helping. (Clearly the modelling done by the RBA has flaws.) Those using algorithmic trading know that no matter how many factors are considered by their package there is always room for improvement. Governments can make stupid non-fiscal decisions that have severe economic impacts (ref: Sri Lanka – implementing organic farming, Russia – Special operation in Ukraine, etc.)

  8. Terence Mills

    What the RBA have done in recent months is put more money in the pockets of the bankers by taking it out of the pockets of homeowners trying to pay off their mortgages.

    And, their stated aim is to cool down the economy by slowing borrowing and spending.

    Is that the theory ?l

  9. Wobbles

    People forget that every tax cut legislated for the few results in a reduction of services for the many.

    The wealthy still rely on roads to carry their products, hospitals and schools to service their customers plus fire and police services to protect their property so it’s only fair that they contribute.

    The less tax they pay means others have to pay more than they should.

  10. margcal

    It’s all so very circular.
    We have shortages of doctors, nurses, tradies, teachers, aged care workers, etc, etc ….. We have shortages of some of those because people are not paid a fair and decent wage for the work done. For other shortages, we have priced education out of the reach of an ever increasing number hence fewer of some sorts of people are produced.

    However it’s paid for (whatever monetary theory you prefer), we need to re-establish the trashed TAFE system and bring back free tertiary education.

    I’d suggest that the well-paid need to pay more tax when they earn more. But that might not suit some theorists.
    What we should not do, as we have for the past several decades, is saddle everyone, across the board, with a crippling HECS debt before they earn a cent …. remembering that just because you get a tertiary education does not automatically mean you will be well-paid, it depends on your field of study.

  11. paul walter

    New England Cocky.

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