The Coalition’s tax plan is bollocks

The media seems to have decided that Labor must agree to the Coalition’s tax plans.

Bollocks.

If they want to stimulate the economy, it would be much better to increase the tax-free threshold than fiddling around with low and middle income tax offsets.

If they increased it to $25,000, that would give everyone who earns more than that an extra $1,292 a year.  No envy in sight.  They all get the same.

It would also save all those people who earn between $18,200 and $25,000 from having to submit a tax return and it would save the tax department from having to process them.

Combine that with an increase to Newstart and pensions and it might make an actual difference.  Promised tax cuts in five years time are just silly.

We hear a lot about bracket creep.  Whilst it does make a difference to the budget bottom line, it actually makes very little difference to individual “aspirationals”.

For example, if you were on the threshold of $90,000 pa and got a 2% pay rise ($1,800), had you not crossed into the next bracket, you would take home an additional $23.37 a week.  As the thresholds stand now, you would take home an extra $21.81 a week.  The difference is hardly a game-changer.

And if you are so worried about bracket creep, why not adjust the thresholds every few years to reflect wage growth?

The cost of the third tranche of tax cuts is about $95 billion of which an estimated $33 billion would go to people currently earning over $180,000.

The opportunity cost of handing out about $11,000 to everyone earning over $180,000 is huge.  High income earners will most likely put that money towards more shares or investment properties or private school fees.  If that money went to increasing Newstart and pensions and the tax-free threshold, it would be spent on goods and services.

Labor is taking their time to think about things.  Why do they have to either agree with the Coalition’s plan or be wedged?  Why not come back with a better plan?