February Snapshot
Key points
- The Australian Government’s changes to the Stage 3 tax cuts have refocussed attention on the need for tax reform.
- The Australian tax system has five key problems: it’s heavily reliant on income tax; it’s complicated by numerous tax concessions; it’s highly progressive; it has ongoing problems with “bracket creep”; & suffers from several anachronisms.
- Failure to reform the tax system risks further damaging productivity growth and Australians’ living standards.
Introduction
The Government’s decision to revamp the Stage 3 tax cuts has stirred up a hornet’s nest. The move to reduce the size of the benefits for higher income earners (with those on $200,000 or more getting $4546 a year less) and redistribute them to lower and middle-income earners (with those earning between $50,000 and $130,000 now getting $804 a year more) in order to provide cost of living relief is something that’s easy to understand.
The arguments against it though are a bit more esoteric…
