That looks familiar…

I didn’t watch the Liberals’ campaign launch, but according to the Sydney Morning Herald, Tony Abbott commended the review’s plan ”for lower, simpler, fairer personal income taxes and an end to the money-go-round that traps people in poverty”, with the journalist suggesting that would mean following one of the Henry Review’s proposals for tax reform – increasing the tax-free threshold to $25,000 and a flat rate of 35% up to $180,000 (45% thereafter).

That is strikingly similar to the Liberal Democrats’ 30/30 plan, although our tax reform is more comprehensive, incorporating a negative income tax component as a natural extension.

The LDP has always said we don’t mind people taking our ideas. In fact, we encourage it. I suspect ex-LDP luminary John Humphreys, who joined the Liberals to – I assume – help the libertarian wing of that quite conservative party, and who came up with the 30/30 plan almost 10 years ago, might have had something to do with it. Or at least, I like to think he did.

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5 Responses to That looks familiar…

  1. If:
    “increasing the tax-free threshold to $25,000 and a flat rate of 35% up to $180,000”
    were to be implemented, it wouldn’t be too much more of a step from there to a Negative Income Tax.

    Not surprisingly, I favour more NIT generosity than the LDP for low income earners (perhaps funded by removing exemptions from the GST and upping the rate 1 or 2%). In fact I envision a slightly more complex scheme than the LDPs. But certainly I’d love to see Centrelink vastly reduced in size or even abolished outright.

  2. Jarrah says:

    Considering 30/30 was first published in 2001, it definitely needs an update to take into account inflation of various kinds. I’ll note, however, that as recently as last year the $9000 that 30/30 would give to the unemployed was equivalent to the payment made to independent students. It’s a very small income, but livable.

    I truly hope the Liberals make the increased-TFT-flat-tax combo a central plank for the next election. It could get discussions about tax rates out of the doldrums that they almost got out of with the crippled Henry Review.

    NB If we extrapolate from the Henry levels for a NIT – ie 25/35 – then it’s $8750, less generous than the LDP’s outdated rate! If the LDP moved to a 40/30 or 40/35 policy, that would mean $12000 or $14000 respectively.

  3. Yes, well, Henry isn’t proposing we scrap the welfare system, so its not surprising that extrapolating his proposal into a 30/30 NIT doesn’t quite add up.

    The great thing about this change is that it doesn’t need to be as “tear it up and start again” as Humphrey’s makes out in 30/30. For example if Henry’s suggested changes go through, that would lay the groundwork for the introduction of an NIT matched by a phaseout of most current Centrelink payments.

  4. Peter Patton says:

    The problem I see with a negative income tax is that it is very easy for a government to chop and change it with very tough and even cruel effects for those genuinely up shit creek. If all unemployment and disability were only ever temporary and very short-term it might make sense, but not the way our society currently is. The 30/30 idea is too drastic. The welfare issue has to be addressed reasonably slowly to give those in the shit some breathing space to adjust.

  5. Shem Bennett says:

    The 30-30 idea is catchy but well out of date. As a student on Centrelink receiving rent assistance and bi-annual start-up scholarships I receive roughly $12000 in welfare. I think the 30% tax rate is a good idea, but the NIT should probably be indexed, which means, however the tax-free threshold would increase at a bit over 3 times the rate (100/30 times specifically). I don’t know what that means, but perhaps a more rapidly increasing tax-free threshold would slowly starve government and get them to do away with some of the waste (yeah- funny I know).

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