Henry Tax Review

The Australian Libertarian Society is preparing it’s submission to the Henry Tax Review, and there’s some good discussion on their blog on this matter.

My rather spur-of-the moment thoughts would be:

1)Immediate increase of the tax-free threshold to $12,000 – this would still be significantly less than it would be if it were indexed to inflation, but the immediate benefits regarding effective marginal tax rates for unemployed persons entering the workforce would be particularly useful in our current economic climate, and would push many people off welfare (particularly students) – I recall writing a paper for ALSF on this some time ago.

2)Index all marginal tax rates to inflation. I know some people, like Mitch Fifield, argue that this reduces the impetus to cut tax rates, but particularly in the current climate, I think that the benefits of indexing outweigh that risk

3)Gradually reduce the top rate of income tax to equalize it with the corporate rate of tax at 30% (and then obviously keep reducing it to 0 :-p). In reply simplify the deduction system (aka get rid of a lot of deductions)

4)Allow the states to levy income taxes

5)Personally, I don’t know enough about Terje Peterson’s submission that the Estonian Model of corporate tax (where profits are taxed when paid as dividends rather than when first realized in accounting terms) be adopted, so I can’t comment on that but thoughts would be appreciated.

I’ll put more thought into it but comments/suggestions welcome!

Update: By the way, I specifically didn’t mention the abhorrence of stamp duty, but that’s simply as it’s a state not federal tax, and so is outside the perview of the review (0r so I think at least)

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3 Responses to “Henry Tax Review”

  1. TerjeP (say tay-a) Says:

    It’s PeterSEN. đŸ˜‰

    I looked at the numbers a while ago and if my memory serves me then if we abolish LITO we could afford to more than double the TFT. I’ll check the numbers. And if you are going to index the tax scales it really ought to be in line with nominal wages growth not CPI. After all it’s a tax on income not a tax on consumer goods.

    The Estonian model would offer a major simplification. It would also allow start ups that can generate profits to self fund expansion to a greater extent. It is a pro-growth reform. It turns company tax into a mere withholding tax which dovetails into the personal income tax system. Esentially it says profits are not profits until they transfer to a person.

  2. Tim Says:

    Yes I completely agree it should be linked to wage growth not CPI.

    LINO still does have some advantages though regarding welfare-to-work and effective marginal tax rates though that simply increasing the threshold wouldn’t quite mitigate…

  3. TerjeP (say tay-a) Says:

    The following article that I wrote a while ago outlines the impact of abolishing LITO and incorporating its effect on tax into the tax scales. Simply doing this alone would be good for transparency and simplicity.

    http://alsblog.wordpress.com/2008/06/19/lito-2009-09-take-2/

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