Abbott to use White Paper for regressive tax 'reform'

The Treasury white paper apparently complains that only Denmark relies more on income and company taxation than Australia. But 'just because other people are doing something' is not a strong argument to follow suit. More appropriate would be to consider what –if anything – is wrong with the Danish tax system and economy.

Wikipedia states of Denmark that:

It has the world's lowest level of income inequality, according to the World Bank Gini (%),^[8]and the world's highest minimum wage, according to the IMF.^[9]As of January 2015 the unemployment rate is at 6.2%, which is below the Euro Area average of 11.2%.^[10]As of 28 February 2014 Denmark is among the countries with the highest credit rating.

So Denmark has a strong economy. It has chosen 'a different path', say, compared with the Anglosphere. But its path of high, progressive taxes, labour market regulation and strong social welfare works!

Finally the Treasury White Paper has considered the threat of bracket creep, and apparently the Abbott Conservatives are considering an increased GST as an alternative.

Bracket Creep refers to workers being pushed into higher tax brackets as a consequence of inflation, and (only nominally) increasing wages. Both Labor and Liberal governments have a history of dealing with bracket creep by returning the proceeds to tax-payers through tax cuts. Though even under Labor arguably this has sometimes been dealt with in a regressive way. Higher brackets have been eliminated or cut - or raised so high as to minimise their progressive impact - and restrict strongly progressive taxation to only the most wealthy of all. Arguably this is to the benefit of the upper middle class and the wealthy; and to the detriment of working people, including the working poor. It means the working class and the poor pay more proportionately; and that those in need suffer with the constriction of the social wage and welfare.

But this is not an honest Liberal-National Federal Government. Joe Hockey made the ingenuous claim, for instance, that Australians pay 50 per cent of their income in tax.

As Ben Phillips explained at 'The Conversation':

Nobody in Australia pays 50% of their income as personal income taxation. According to NATSEM modelling, around 3.5% of those who have a tax liability actually face a top marginal tax rate of 49 cents in the dollar. Around 25% of taxpayers are paying a top marginal tax rate of at least 39 cents in the dollar.

To summarise – Australia's income tax system involves several brackets. Higher brackets and rates only apply after specific thresholds are met. So as Phillips insists: NO-ONE is paying 50 per cent of their income in income tax!

Hockey is not stupid. Surely he understood this. Apparently he was attempting to tap into populist anti-tax sentiment through a deceptive and false argument.

But depending on your notion of 'the good society' tax as a whole needs to go up; and the tax and spending mix also needs to be reformed.