I'm not sure why MP have all decided that moving into a higher tax bracket is a disincentive to get a promotion or work harder. What complete rubbish. Even if you do end up in the next tax bracket, you get more money. If you can't work that out you probably didn't deserve the pay rise.

It's time the Government got back to basics with the tax system. Tax is used to provide services for the community; and the more money you make, the more tax you pay. Simple.

It's good to see that Mal Turnbull has thrown the proverbial spanner into the works and now both sides of politics can't wait to cut taxes for all (some more than others). But the debate seems to be focused on the higher marginal rates, when it should be focusing on the methods wealthy people use to avoid paying their share.

Raising the bottom threshold via increasing the Low Income Tax Offset (LITO) is somewhat regressive, especially if the current clawback arrangements are retained. The universal nature of the LITO means that the bottom end of the current tax scales look something like this:

$0 to $7,566 - 0%
over $7,566 to $21,600 - 15%
over $21,600 to $27,475 - 34%
over $27,475 to $63,000 - 30%

That makes for quite a long income range where the tax scale is higher for lower income earners than the following step (34 followed by 30). If you make the LITO equal to $600, that 34 to 30 point will increase to $36,600. This does not seem like a progressive tax scale. One way to fix that would be to start the withdrawal of the LITO later, so that the 34% ended just as the next higher step started. That is exactly the same as just increasing the tax free threshold, and bringing in the higher tax bracket earlier.

Oddly, if you did the latter, people would complain that you'd increased the tax rate on those people newly in the higher bracket. Doing it via the LITO seems to blind people to what's going on. But it's identical, and it's not particularly nice now.

Flat tax of 25% for everyone (person,companies,trust,whatever) no deductions. Most people would not have to file a tax statement!

Dear Mr Craig Emerson,

I am tired of politicians falling over themselves to come up with plans for income tax cuts for the top money earners. One would think that they were trying to devise a universal panacea that would rid society of all its woes.

I would rather they devote themselves to trying to improve the lot of all Australians!

I am on a modest income ($50K pa) and I don't like paying tax (does anyone?) but ... I would rather pay the same amount of tax than enjoy a tax cut at the expense of reduced spending on Welfare, Health or Education.

I believe we need to look after our fellow Australians. Stop talking about cutting tax ... start talking more about improving the health system for everyone! Start talking about about increasing the income of our poorest Australian Brothers & Sisters! Justice for our weakest citizens should come before some imagined relief for the richest!

My wife went for elective surgery a few months ago at a private hospital (we have private helath insurance). The experience made me feel disgusted in myself. The hospital was more luxurious than a 3 star hotel ... yet the public system is crippled because of a lack of resources. But why are holders of health insurance getting a 30% rebate? Is it so they can go to a private hospital with gleaming marble floors and porcelain toilets!

What's the matter with you pollies? What are the issues in this country! Read what I said in my paragraph above. Your stupid 30% health rebate is taking resources away from dialysis machines in public hospitals and and spending it on marble floors in private hospitals.

This is not what made Australia great.

I want to live in an Australia where we Aussies look after each other.

Craig Emerson ... please tell your the Labour Party that Australia needs to get back to basics. Fix the fundamentals first ... worry about tax relief for the wealthiest later.

Your sincerely,
A Concerned Australian

I find myself in agreement with all of the above comments.

Australians should be proud to pay tax-we use that money to create the country we want to live in and also (incidently) the sort of country we will leave for those who come after us.

I would like to see the costings of the 25% plan-even if just gain a reference point.

How about a modest flat wealth tax to round the whole thing out-less that 1%

[ Quote} On " ... Howard Government's so-called welfare reforms, single mothers will lose up to 75c in every dollar they earn from taking a part-time job, and that's not counting the cost of child care, travel and work clothes".

This senseless economic reform making - proves the government has no understanding about "family matters" when it comes to the building stablity and security into the social fabric of Australian Society.

I believe all governments within this country need to re-access the the kind of "Employment Program" targets that were being argued, in the open, back during 1977.

Many of these debates held sustainable economic principals, that could to be re-emerged economically, with a brand new focus. This is because we do have more knowledge and many of the right policies available - to promote "well being" within civil society today.

For example, for many; Economic "self-determination" means we must ask questions about how to stimulate employment through local market integration, through policies that outline Ecological Sustainable Economic Development for 2005.

Sector Development does not start with bullying mothers that are socially under pressure in work domains , and already, seriously under strain.

Get it Right, for example, Child Care facilities are no way adequate for supporting Mothers, who raise children, and keep up with demands of working out side the home.

Youth progams also fall short of demand.

Community and Health Cares facilities are seriously waning.

Policy guidelines for Community Employment programming in sector development, must to be re-vamped across the board.

The whole provocation of targeting mothers through this reform appears up-side down and beyond anything reasonable

"...single mothers will lose up to 75c in every dollar they earn from taking a part-time job, and that's not counting the cost of child care, travel and work clothes..."

Partnered mothers will lose even more.

In 1951 the average tax on income was just 11%.Today we have the GST and taxes,charges,stamp duty on every posssible good or service.Back then, people survived without the Nanny State.They were tough and self reliant.Now we have huge bureaucracies that actually perpetuate the dependance on social security.This coupled with housing costs has forced both parteners to work long hours and pay the taxes for all this nonsense.

I propose we take a serious look at an "expenditure tax" or really a turnover tax that takes say 2% of all turnover with no imput tax credits.All the tax office has to do is to look at your bank account for the year and say pay 2%.The beauty of this system is that it compounds.Once money changes hands 5 times it has an effective compound rate of well over 10%.Many multi-nationals would be paying tax for the first time.There would be no point in hiding cash money.Who is going to take cash for a 1% discount?Well,you aren't going to give the full 2% discount for no advantage.

Many Govt bureacracies would simply disappear.Whole armies of lawyers and tax accountants would cease to exist.Human intelligence could be into research and development instead of tying ourselves in knots under mountains of bureaucracy,legal disease,and confusion.

The mechanism for this tax is already in place.It is called the GST.Simply reduce the GST and also decrease by a greater proportion the imputs tax credits.It could be an evolutionary system that could well free up human intelligence to add to the nation's productivity and give everyone more time off work to grow our family life.

I advocate the abolition of income tax entirely. So whatever reform they come up with that reduces income tax is a step in the right direction.

Malcom Turnbull and Craig Emerson are singing from the same song sheet. Malcom sings the high notes and Craig sings the low notes. It is a truely beautiful song. It has been too many years since we had such sweet music reverberating from Canberra.

http://en.wikipedia.org/wiki/Laffer_curve

well it is about time that we as a nation face reality .
how long can ordinary paye taxpayers continue to subsidise property investors through negative gearing.

if everyone jumped on the bandwagon and negatively geared then we will be faced with fiscal disaster.

politicians are too scared to face up to the reality that the system is completely broken and needs major surgery not a cosmetic touch here or there.

i understand that negative gearing returns something like $7Billion/yr to those that in on the racket.

can anyone explain to me why we want to allow capital losses from investors to be offset against income. my understanding is that this is not the case in other western/oecd countries.

I understand the political dilema in that so many are in on the racket now that complete abolition cannot be obtained.

Therefore I recommend the following:- grandfather existing negative gearing arrangements and set a limit for existing investors as to how much they claim. therefore reduce revenue lost from $7b/yr to $2b/yr.

Then I would recommend that you would have $4b/yr for tax cuts and $1b/yr that could be devoted to public housing to make home affordability greater and get round the perennial furphy of housing shortages that is brought out every time that negative gearing is discussed.

we have a crisis in asset inflation in the residential housing market which is making it impossible for ordinary aussies to own their own home.

this asset inflation will burst just like the commercial property markets did, the commercial market adjustment hurt those that invested in commercial property, when the residential property bubble bursts it will hurt ordinary people who have borrowed heavily against their home.

if the Labor Party is going to be fair dinkum it has to develop a plan for the future for a better society not play with merchant bankers in the cosmetic surgery of public life.

Slasher ,get real,Labor got rid of negative gearing years ago and the was a shortage of both rental and residential accommodation for purchase.Interest paid on any business activity is a legitimate tax deduction.There are better ways of making housing more affordable if you are interested?

i earn a salary and pay taxes and make investment decisions to make a profit and hence pay more tax. i am sick and tired of bludgers who think the public should underwrite their investments. if you make a loss then you should not expect hardworking people to subsidise your lifestyle.

negative gearing is the biggest rort out, we should be encouraging investments into productive profit bearing activities not subsidising through the public purse of individual wealth creation.

the most cost effective way of making housing more affordable is through public housing being rented and then over time sold to enable future investment to meet demographic trends and shifts.

Though it needs to be dispersed through the community not concentrated in particular locations, this can be achieved by public housing authorities purchasing certain percentage of housing from developers in new estates.

if negative gearing was eliminated you could substantially reduce income tax, not just tinker at the edges. sacrificing $7b a year in revenue is a very expensive way of ensuring sufficient rental accomodtion exists. in fact it would be labelled irrational and an interference in the market. it must be removed to ensure neutrality between alternative investment decisions.

Slasher: I don't think we do allow capital losses against income. We allow capital losses to be offset against capital gains, and we add capital gains to income. The fact that we add gains to income might be one rationale for allowing losses as a deduction, but while we do the former, I don't think we do the latter.

If you are talking about negative gearing, that is a deduction of a cost of obtaining income (in this case the interest on the borrowings) against income, not a capital deduction.

spog,

if I am receiving a salary of $60 000 a year and decide to borrow $350 000 for an investment property which is rented at $300/pw ($15600/yr ) and pay interest of approximately $21 000/yr why should this reduce my taxable income. I have no problem with interest on the investment property being offset against the income derived from the investment property so no tax is paid on the rent received but why should it be offset against my total income, if there is no link between my salary and the investment property why should losses on one asset be allowed to carry over to my income derived from a totally different source. If I decide to make an investment that will not make a profit then why should I pay less tax than another salary earner making the same money.

In effect my wealth accumulation is being subsidised by other taxpayers and I would be bludging on my fellow aussies.

We are in effect encouraging capital investment that has very little prospect of generating a positive return, this is inefficient use of capital. The gain comes from the cycle of speculative investment to reduce taxes being paid, as more and more enter the market all that is occurring is asset inflation in the residential property market making it harder for first home buyers to enter the market.

Hello slasher

I'm not necessarily disagreeing with your sentiment. I just wanted to clarify how the tax thing works (at least, as I understand it - I could be wrong).

I'm not sure that any but the deluded invest in a loss making activity. The investors you're talking about are after a profit too - but as capital growth.

The tax thingy works this way.If you have an investment property the tax office lets you write the interest off as a deduction against your income for the last financial year.Rather than waiting for you to sell the property and then subtract the interest against capital gain ,the tax office has decided the is is simpler to do it on an annual basis.

If you were allowed to deduct the interest in total after 10yrs upon selling your property we, have the complexity of inflation and you not being able to afford to keep the property in the interium.When you sell the property you still pay capital gains tax and council rates.Don't forget you have also paid stamp duty upon purchase.You also have the have the additional costs of repairs and maintenance.Very few of these costs are incurred in owning shares for instance.Owning property is a very marginal investment at the best of times and that is why negative gearing is necessary.

As I said ,the socialist Labor Govt got rid of negative gearing years ago and a shortage of housing resulted.If we get Govt to build all our housing,it will cost twice as much and you as an individual will still own nothing and take no pride in the house in which you live.

You cant negatively gear the house you live in Arjay. Or is that what youve been doing?

Negative gearing is a way of getting out of paying tax and would dissappear anyway under a flat tax system with no deductions

Jellyback,I said investment property.You seem to have a comprehension problem with negative gearing.See your accountant.