There is a serious flaw in this piece.

The author is removing the tax on the employer, but in its place he is expecting the employer to pay the money he saves from the tax, to give to the employee in higher wages. There is therefore no nett gain to the employer and the price of any manufactured goods will remain the same and lack of competitiveness will continue as before. An additional downside to that is that the employee will be paying additional tax on his increased earnings, possibly at a higher marginal tax rate.

The nett result will be no benefit to the employers and the government will be getting a greater amount of tax from the workers.

David

Whilst I agree with 3 points made by the Author:
- that payroll tax is a regressive tax on employment
- complusory superannuation is to a degree undemocratic in that it takes away individual choice
- Existing tax system encourages and rewards unproductive speculation in residential housing and has driven up house prices

However I cant follow the argument that super is a tax. Also cant see how it can be fairly replaced by high land taxes, though some increase here for non owner occupied properties may be beneficial.

I reckon fair solutions would be:

- No increase in the level of compulsory super above 9%
- Limit the first home vendors grant to new housing only;
- Limit new negative gearing to new housing only; and
- Bring the capital gains tax rate back into alignment with the income tax rate.
- Bring in the carbon tax - which is a tax on wasteful use of fossil fuels

VK3AUU wrote: "The author is removing the tax on the employer, but in its place he is expecting the employer to pay the money he saves from the tax, to give to the employee in higher wages."

Not entirely. In the last two paragraphs I list the consequences as "more jobs, better pay, lower prices..." I don't suggest that the entire saving is swallowed up in "better pay". If it were, that would mean either that the demand for labour is perfectly elastic or that the supply is perfectly inelastic.

Earlier I say: "The present de-facto payroll tax is abolished (the saving being passed on in higher wages and lower prices)." That statement doesn't specify whether the "higher wages" are paid to the same employees or spread over a larger number of employees. The concluding paragraphs imply the latter.

VK3AUU continued: "There is therefore no nett gain to the employer..."

The employer gains from what I call "improved international competitiveness", although that isn't spelt out, and isn't essential to my argument (or to VK3AUU's argument).

Because the tax isn't entirely borne by employees, it isn't true that "the price of any manufactured goods will remain the same..."

But neither does the tax appear *entirely* as higher prices of goods and services. The conventional (and correct) doctrine that the GST "feeds into prices" (my words) does *not* mean that the tax is entirely borne by consumers. It means the tax is borne as a combination of (i) higher prices paid by consumers, (ii) lower prices received by producers, and (iii) less production. For payroll tax, which also "feeds into prices", the corresponding effects are (i) lower profits for employers, (ii) lower wages for employees, and (iii) less employment. Hence the effect of abolishing the tax are (i) higher profits, (ii) higher wages, and (iii) more jobs. These are *immediate* effects. When second-round effects are considered, (i) will be partly competed away in lower prices of goods and services.

Roses1: If you are suggesting that closing income-tax loopholes for land speculation could be a partial substitute for "high land taxes", I have some sympathy for the idea in the short term. But it would further complicate the proposal (and people close to me are telling me it's already too complicated).

Re the "tax" terminology, my point is that the only difference between the super guarantee and a tax-transfer program is that the former is off-budget and the latter on-budget: "In all other respects, Australia's federally mandated, employer-funded 9% superannuation contribution is equivalent to a federally-funded 9% contribution paid for by a 9% federal payroll tax." The latter arrangement would be ridiculed. Why isn't the former?

Of course the super guarantee is simply another form of tax! But a stench by any other name has come up "Roses1".