Greetings Malcom,

I am not one of those that believes you are just going on about tax reform because you think it will make you and your mates richer or that it will help build a powerbase for your future push for PM via the treasurers office. I think that you, like myself, enjoy the intellectual challenge of this debate.

It was Colbert who said the art of taxation is to pluck the goose so as to obtain the greatest amount of feathers with the least noise. Bearing this in mind what would be your coments on the following.

A flat low single rate for buisness and individuals(say 26%?). No deductions just get rid of them all-execpt maybe wage/salary costs for buisness.
A flat wealth tax on all personal and company/buisness assests of 0.1 to 0.3%.
A Tobin Tax on monetary transactions entering and leaving the country (0.1%).

Refering to the income tax if we can keep it low and flat with the other measures then how would it look if we scrap the tax free threshold and make up the difference with the low income earner rebate. Negative gearing does not feature in these conjectures but perhaps it would be better to let it die a slow death of 2-4% per year rather than kill it all at once.

Anything that will BOOST conservative funds eh malcolm, and yours, of course. Bloody hypocrite, just like your idol howard. numbat

Malcolm says anyone "with substantial business income or interests is able right now to structure their affairs so that most of their income is earned through companies, which pay tax at 30 per cent"

So the effect of the 42c and 47c brackets is
- a complex and leaky tax system
- a growing army of tax lawyers

Why does a holding company or trust pay less tax than, say a middle manager? Does Malcolm provide a revenue-neutral solution where the company rate is tied to the top tax rate?

What about a system involving 15c and 30c income tax rates plus a 40c company and top income rate? The revenues from companies would offset the reduction in the top tax bracket. Small-time shareholders would get a terrific bonus from their dividends.

Would this deliver equity in our tax system? I look foward to other comments.

"Tax reform is not just about tax cuts; at any level."
Should be: "Tax reform is not about tax cuts; at any level." And by that I mean the purpose of reform should be to increase efficiency, simplicity and prevent tax avoidance. The appropriate level of tax is a separate issue that will vary depending on the needs of the community.

"Lowering the rates goes hand in hand with broadening the base."
No, I don't think so; at least not to the extent that you get much benefit out of it.

I don't like how Turnbull, and others elsewhere, go on about "everbody gets a tax cut", as if it is something special. Unless the purpose is to alter the proportion of tax that different economic groups pay, then why shouldn't everyone get a cut? And that's the important thing: making sure that any changes in the tax burden are distributed fairly. Other than the ease of filing your own tax return, is there any reason why we don't have more tax brackets, with the bracket edges indexed? I'm don't even want to touch the idea of a flat tax.

David, increase the tax on trusts, companies etc. and you drive away foreign investment and rich people. Ie. not gonna happen, even if it would be fairer.

I think we should abolish income tax outright. I think the dead weight cost is not worth the revenue.

Malcolm said "As we discuss in our paper, means-testing of benefits has the consequence that welfare is withdrawn as income is earned. The combination of a withdrawal of benefits and the imposition of income tax can result in high effective marginal tax rates for low-income earners moving from welfare to work."

My own personal EMTR is 80% and I am not a low income earner. The 30% phase out in Family Tax benefits combined with the top tax rate of 50% ensures that every extra dollar that I earn leaves me 20 cents richer after tax. So the high EMTR effects more than just those on low incomes.

Its odd that we have pretty broad concensus today that a tariff on trade between nations is bad for productivity. And yet we tolerate this enormous tariff on trade between domestic households. The top income tax rate is akin to a 100% trade tariff.

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

A simpler tax system is an excellent idea. The difficulty is in implementation.

It is impractical to change the existing system in incremental ways to make it more efficient. It is impractical to change the system to a more efficient system with a big bang approach of changing from the old system to a new one.

There is another way.

Let us have an optional simpler system alongside the old system and allow people to optin to the new system. The new system would also optin to a new transfer system such as family benefits. This approach would enable the system to cope with the change and would remove the objections that some people benefit and some don't because if you did not like the new system you could stay in the old.