The scent of elections and tax cuts: Democrats offer alternatives

Big tax cuts are now inevitable.

Labor has ensured it by endlessly rabbiting on about the Coalition being the highest-taxing Australian government ever. (True but irrelevant, since Australia is among the lowest-taxing nations in the OECD.)

Labor's line is dangerous. It encourages a resistance to raising additional revenue to invest in education, health and the environment.

The Liberals have guaranteed tax cuts by constantly saying surpluses must be paid back.

So the question is: When?

My bet is in the May budget. One reason is that such an election sweetener is irresistible for the government. Two, the Coalition would want to spend any surplus money in advance, leaving Labor with nothing to promise. Three, pay packets would only benefit from tax cuts legislation in the second half of next year, when an election is most likely. Four, tax cuts will be seen as some relief against expected higher interest rates.

The government have trapped Mark Latham into virtually guaranteeing Labor support for raising the present top tax rate of 48.5 per cent from $62,500 to a much higher threshold.

ACOSS say anyone earning $100,000 has an average tax rate of 34 per cent on all income. Is that really that high?

The well-off have already had their tax cuts. The Coalition's 30 per cent rebate on private health insurance, costing the taxpayer nearly $3 billion a year, favours higher income earners. Capital gains tax was halved just a few years ago, with Labor support, despite the Democrats' opposition and despite the fact that it clearly mainly benefited those wealthy Australians with investment and share portfolios.

Democrats like me can cry all they like that Commonwealth revenue and expenditure are still insufficient to meet the pressing and legitimate expectations and needs of Australians for health, education and the environment, amongst other things. (Health will remain an issue, even if Medicare Plus passes the Senate.)

We say we do not so much need increased taxes as increased revenue. We attack some tax expenditures and tax wastage as the means of assisting the growth in revenue to meet expenditure needs.

But tax cuts it will be. The two majors will have the numbers.