Tuesday, 10 November 2015

Confected outrage? Or genuine debate? Increases to the GST and tax reform

I am delighted to hear some of the debate occurring on Radio National and the news at the moment. Not at the tone of the debate, but at the content.

The Coalition has indicated it is considering tax reform. It has clearly said that it isn't ruling anything in or ruling anything out at this stage. The idea of an increase to the GST is definitely on the table.

Labor, by virtue of the fact that it is in opposition, is crying wolf, and confecting a huge issue about the fact that the GST is a 'regressive tax', whatever that means. It is pointing to the fact that an increase to the GST will have a disproportionate impact on the poor, which is not contentious.

The Coalition, in respose, is arguing that before it publishes its policy, it will put together a cohesive package which includes compensation to low-income-earners. It is talking about lowering the personal tax rate, but also real compensation for those who are below the tax free threshold anyway.

This debate, to me, has actually been fairly productive. Although we don't have any definite time-frame for a proper policy, (other than 'before the next election'), we suddenly seem to have a leader who is willing to take the time to consult widely, and formulate policy by consensus, rather than by fiat or on an ad-hoc basis. I think this can only be better for Australia, regardless of what policies they implement.

The bigger issue here is that the debate has suddenly matured. Not enormously, but noticeably. The biggest improvement is that the ALP and the LNP are both taking positions based on their fundamental theoretical origins, and not on what is the most popular.

The Coalition, as with most economically conservative governments, has an approach centred on lower taxes, and smaller government. (I am separating, for the moment, social policy with economic policy.) Therefore, their debate has been framed around the following concepts:

  • Reducing government spending instead of increasing tax revenue;
  • Improving the 'tax mix' to be as economically responsible as possible;
  • Spending being limited to the most important and fiscally responsible initiatives; and
  • Streamlining government operations. 
Therefore the Coalition is refusing to agree to any proposition which alleges that we need to raise more money in tax. Their default response is 'we don't need to tax more, we need to spend less.'

Then, when pressed on their discussions about tax reform, they argue that they are not increasing the total tax intake, but instead playing with the 'tax mix' to ensure that taxes are as fair and as effective as possible. 

The ALP, on the other hand, has an economic policy based on bigger government, better regulations, and a stronger safety net. By default, this means that they offer more and better services (IE education, health, public transport) but necessarily intend to tax higher. Thus they align more closely with some of the Scandinavian countries, even if they would never dare to tax that much. 

Shorten and Plibersek have been quick to point out that we are in a deficit, and that we need to be raising more money, but have been equally quick to jump on any hint of an increase to the GST. 

It is very frustrating to listen to these arguments over and over, because we can't have any sensible debate until one party decides to publish their policies. 

But what is somewhat encouraging is that the ALP and the LNP are finally displaying something of a division in their approaches, based on their history and policies. We are finally having a debate which acknowledges the differences on principles, and the difference in styles of government. 

And there is a glimmer, just a glimmer, of a debate where the economic arguments are being separated from the social arguments, so we can finally get something done!

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