Fair tax cuts would be for all, not just high-income earners

There is something intrinsically fair about an equal tax cut.

Despite progressive tax rates, financial inequality in Australia is increasing. Even the Prime Minister admits that although the rich are getting richer, the standard of living for the poor has not improved. Lower-income earners need a helping hand, not just to survive but to be able to improve their situation. Taxation policy is an important contributor to social justice.

The primary aim of the tax system should be to raise money from those with the ability to pay. A system that taxes someone for every dollar they earn over $6,000 fails this basic test.

In addition to income tax applying at ridiculously low levels, the withdrawal of welfare benefits can mean that low-income Australians pay effective tax rates up to 100 per cent. When the cost of transport, childcare, additional food and clothing are included, a person may be worse off entering the work force. By increasing the amount that can be earned without paying tax, the impact of this "poverty trap" is reduced.

We believe that people living well below the poverty line shouldn’t be paying income tax.

By increasing the tax-free threshold from $6,000 to $10,000 the tax system is significantly improved. If the $235 low-income rebate is included, income up to $11,382 would be effectively tax-free. This is still too low an amount to live on but it is a positive first step towards improving equality within Australia and reducing the high effective tax rate faced by low income earners.

Until the government addresses the problem of "poverty traps" and the high effective tax rates faced by low and middle-income Australians, the Democrats are unlikely to support any exclusive tax cut for high income earners.

We will certainly be encouraging Mr Latham’s Labor Party to allow the Senate to do its job and scrutinise the Budget tax cut.