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.

Look at history, when societies get to the stage where the rich, beaurucrats, politicians and academics, have a massive share of the income of the state, society collapses. We are at that point.

The gaps grows and they do less and less bleeding the populance of advances that have been made in living standards.

Note how turnball got into parliament, is he honest, trustworthy and reliable, don't hold your breath. His agenda only relates to his own selfcentred desire for more power and money.

These fool won't accept how the bottom 70% of people struggle. Some one that is a veterans carer, works most of their time looking after the sick in their home. They receive virtually the same as an unemployed person, yet they save the government thousands a year.

A carer can work up to 20 hours a week outside of their caring duties, yet can only earn just over $60 per week. Do the maths on that. Once they earn over that amount, they lose 40cents in the dollar of their carer payment, a 40% tax. Then on their income they have to pay the relevant rate of tax, which in reality means that they pay up to 60% tax on their income. No deductions and all the costs of living

Now look at turnballs of the world, tax exemption after exception, $14 for a car and fuel. Income tax, fuel tax, GST, entertainment tax (alcohol) and many more taxes targeted at those on the lower income brackets of the poor, pays for everything he avoids paying for. His ilk, are going to receive huge payouts of more than 30 billion unfunded dollars, really good fiscal management.

Malcolm and his ilk take more and more from the people and give it to themselves and their friends. We know how much the little people have lost from buying telstra share years ago, more than 40% of their value has disappeared.

History also shows, that the turnballs,will suffer the same fate as their predecessors, stripped and run out of town. Lets hope it is soon

Where's Robin Hood when you need him ......Little has changed since the days of the Sheriff of Nottingham,increasing the burden on the poorest in the land for the benefit of the rich.
The current system is biased against those on the lowest incomes, The Entrepreneurs and Corporate Sector evaders have to be brought to account before there can be any real reform of the tax system.
Maracas

Some additional thoughts:

Malcolm's ironic concept is that it's cheaper to give the rich a tax cut than give the poor a tax cut.

In the article he talks in terms of x% cuts for the top/bottom y%. Of course, he could say a $x/week cut for those on $y/week. I can understand why this is not done for mathematical simplicity. Bonus for how the cuts for the 97% don't seem pathetic.

Rich people solve their problems by creating trusts and so on. What I get from Malcolm's article is that this has a minimal impact on the revenue base i.e. we loose 1 or 2 billion.

The main problem for the tax system is the EMTR for those about to loose welfare benefits. Lets be clear: this is a big, fundamental and structural problem; a drain on the whole economy and society.

I give Malcolm credit for recognising this as a problem, although he comes across as motivated to obtain a trade off -- give us at the top some cuts and we'll put a band-aid on the EMTR issue.

I've had an interest in the Negative Income Tax concept http://en.wikipedia.org/wiki/Negative_income_tax

David

Malcolm Turnbull makes some valid points about the wealthy keeping their assets in a company structure to minimise tax and the advantages of lowering the top tax rate, however lots of posters have pointed out the inequality aspect of Malcolm’s argument with the rich getting the breaks and the poor possibly losing the benefits.

Maybe a new tax on the rich would help balance out the cost of a lower marginal tax rate. Malcolm’s electorate is full of wealthy people, most of who live in expensive houses. Wealthy people buy expensive houses because the capital gains are tax free and the lifestyle is good. Some sort of annual levy on properties over $1m would provide some balance to Malcolm’s argument.

"Look at history, when societies get to the stage where the rich, beaurucrats, politicians and academics, have a massive share of the income of the state, society collapses"

Gee alchemist are you sure you didnt leave out insurance companies, banks, stockmarket speculators, multinationals?

Come on societies dont collapse under the weight of academics-they collapse because they choose a direction that doesnt foster the creative potential of each individual-including the creativity demonstrated by the entreprenre and inventor.

Look at fuel prices-are academics to blame or selfish speculation and market manipulation?

Malcolm,

It is a good start but again it is an accounting approach.
Tax reforms should not be only about brackets but should:

a) Be consistent with other economies competing to attract foreign investment (ie rethink the Capital Gains tax totally). If we claim Australia
b) Link business tax breaks to employment incentive or georgraphy (ie lower per employee tax or tax breaks to operate or employ of certain geographies). These assumptions should be factored in as ‘profit versus your gains. For example, how many jobs will the economy benefit from by sector to offset the $ 450 Million if, lets say, another 50,000 jobs were created.
c) Provide a BOT (Build, Operate and Transfer) Tax breaks for large corporates willing to invest in long-term infrastructure projects (Since state governments are too busy to think strategic).

Bottom line, tax reforms should be about taxation strategy that is tightly linked to the economy and its targets and performance.
Food for thoughts

Ash