As a conservative person who has followed various tax reform arguments for sometime, I have no hesitation in stating that a flat tax rate is not the way to go. Not only would the public sector take a bashing beyond the even wildest dreams of any conservative, inflation is also adversely effected by the flat tax system. Eastern Europe is a prime example of this.

Having said that lower tax rates can be achieved for everybody very easily. I would propose a 35/25/15 split with a tax free threshold of $15,000. While to some this may seem outlandish, the @$10 billion needed to fund it would be very easily recouped. The key to this is a simplified system.

Firstly no more tax deductibles. It is a bizarre state of affairs when as a mid twenties professional I can avoid tax by purchasing a luxury car, and writing depreciation/lease payments off. It shouldn't be just those with a social conscience that find this wrong. The trend towards extravagant consumerism poses more of an economic threat than any tax cuts.

Secondly having a $15,000 tax free threshold would eliminate much of the justification for unemployment welfare, and encourage low skill workers away from taking the dole option. Orchards, construction sights, and bars are just a few of the avenues available frequently to the unskilled labour force. The jobs are there. This threshold would also encourage more of our seniors out of the house, and onto casual/low hrs employment.

"no more tax deductibles"

Surely you agree some items should be tax deductible?

You said luxury cars shouldnt be tax deductible, but what about utes for farmers?

What about small business owners who have to pick up goods from warehouses, shouldnt fuel for these trips be tax deductible? Likewise, sparky's and plumbers, who need to travel for their jobs. With fuel prices what they are, those in the lower income bracket should be allowed to claim these costs back.

I think a better way to decide what is and is not tax deductible should be to base this on income, lower incomes should allow for greater tax deductions.

We should be seeking to abolish income tax (ie a flat rate of 0%).

We can make a start by increasing the tax free threshold and indexing the tax brackets to wages growth (not CPI).

Lower taxes is more important than flatter taxes. I think the top tax rate should be cut but I would also support reductions in the other tax brackets even if these happened first. The less people that have to pay income taxes the better.

Oh and yes spending will need to be cut. Mostly all the middle class welfare (ie Family Tax Benefits etc). Welfare should be a state responsibility anyway.

We should also stop lieing about the medicare levy. 1.5% does not cover the health budget. It would need to be an 8% levy if it was to really pay for the cost of Medicare. Perhaps we should cut tax rates by 6.5% and increase the levy to 8% just in the name of honesty.

Income tax is a tariff on interhousehold trade. A trade barrier we would be better off without

I recognize that the Flat Tax article was merely a progress report rather than an endorsement or criticism. However, all income tax is essentially confiscatory since it penalizes human labor; worse yet, the graduated tax polarizes society into various classes so beloved of socialists. I'm reminded of a school-boy joke as to why Robin Hood robbed the rich and he replied "Because the poor don't have any money." A noneteenth century America, Henry George proposed a taxation system which horrified Karl Marx who was moved to declare that it would destroy Communism. Perhaps that is why left-leaning countries (are there any other kind?) never consider Henry George's Single Tax proposal. I would ask the professor to comment on the Single Tax system and George's "Progress and Poverty"

I welcome any movement towards a lower taxing, lower spending, smaller government. Advocating that the tax code makes life fairer disguises the fact that life isn't fair. The confiscate and redistribute mentality of the modern Australian state encourages pork barrelling and inefficient (and often ineffective) wealth allocation. This includes, of course, tax minimisation schemes, which the complicated tax code rewards, but which result in non-economic allocation of capital, as well as government spending, which directs public funds to the squeakiest wheel, rather than the most efficient. Throwing taxpayer's hard earned rarely solves the problems they are directed at, but certainly lead to unintended consequences such as high marginal rates of tax for those seeking to move from unemployment into employment, that results in the unnatural, although highly rational behaviour of choosing to remain outside of paid employment.

Australians are smart enough to manage their own personal affairs without needing the nanny state to wrap them in cotton wool. A decrease in government services would inexorably lead to private provision of those services, services directed to where demand leads, to within the capability of the consumer to pay. Rather than be forced into providing a uniform service level to all consumers, as public service providers are chartered with, private providers would be able to tailor services to the needs of specific consumers. Lowering tax, be it by a flat tax or any lower tax scheme, would enhance the consumer's ability to pay for services they require.

Defenders of high taxation point to all the government services they pay for, without feeling they have to defend the actual provision of public services in the first place. To those that see the solution in the state, public services are sacrosanct, reductions in services heinous, and failure to increase services irresponsible, the law of unintended consequences be damned. The fact that so much taxation is simply a churning excercise of confiscate and reward, reducing people to merely taxpayers and welfare recipients, more like children than responsible adults.

Wrighta your comment above is obviously ill informed, and based on nothing but the notion of 'the rich owe us.'Why is it impossible to help the poor without penalising those who work, or who have competed in high paying positions? Surely you don't tell your children at school to only achieve C's in order to not upset the other kids? Arguments like yours are why the brightest amongst us are leaving for overseas, the middle class is becoming increasingly burdened and welfare will become unsustainable in the long run.

I don't agree that there should be any tax deductibles at all. The whole idea of eliminating them is to make the system more transparent,less costly,and easier to understand. The savings that could be achieved are astronomical. By the time a farmer saved accounting fees, time lost dealing with bureaucrats and his income tax the loss of other benefits wouldn't seem so bad.

I’m not saying ‘the rich owe us’, my parents ran a small business and their accountant helped a lot, but they were still always over-taxed (in my humble opinion). If anyone sympathises with your argument- it’s me.

You’ve completely misread my comment.

There’s nothing better than competition- especially from an early age in education. Higher education could certainly do with a dose of competition instead of the crap we have now.

They were genuine questions (as shown by the question marks), which you’ve answered by saying:

“I don't agree that there should be any tax deductibles at all […] The savings that could be achieved are astronomical. By the time a farmer saved accounting fees, time lost dealing with bureaucrats and his income tax the loss of other benefits wouldn't seem so bad.”

No need to overreact and treat me like some fool advocating a command economy.

We need tax cuts. Not more so called "revenue neutral" tax reforms that take with one hand so they can give with another. Removing tax deductions and cutting the headline rate is no tax cut at all. It would just be more silly games, played merely for the theatre of it all

Wrighta in your words:

"I think a better way to decide what is and is not tax deductible should be to base this on income, lower incomes should allow for greater tax deductions." This isn't creating an anti competitive environment based around class?!

In regards to Terje's comments I think we are both on the same wavelength. Although I think real tax savings can be delivered with the fundamentals of my model. All tax deductions do is make it harder to forecast one's earnings, and even harder to keep track of expenditure.

In addition it would be far easier to justify a cut in the top tax rate to say 35%, if people in this bracket weren't driving around in leased Porsches claiming a tax deductibility through a business. Earners who can afford such luxuries (ie $75k pa) should be paying 35% in the top bracket without being equiped to write that down further through deductions.

Hi guys
I think we need to keep our 'complicated' tax system for many of the obvious reasons pointed out during this forum.
However...I believe the actual specifics of it - ie % rates need to be revisited in line with the fact that we brought in GST.
GST has provided wonderful extra $ to state governments and a classic example of that is the Queensland Government where we have Peter Beattie being able to beat his chest that he has built a decent size sports stadium and a walking bridge across the river in Brisbane and we are running out of water and electricity across the state. They had blown out their budget, even though no infrastructure had been built (except the sports stadium) and along came their GST windfall which thankfully saved the day. However, in the process I believe we have become overtaxed and therefore should reassess percentage of tax paid - with the poorer paying a lot less. www.nancysommerfield.com

"I think a better way to decide what is and is not tax deductible should be to base this on income, lower incomes should allow for greater tax deductions." This isn't creating an anti competitive environment based around class?!

Originally I saw this as encouraging entrepreneurship, but after more recent news, I’m easily convinced by your argument to drop tax deductions.

Someone sent me this story (http://www.theage.com.au/news/national/big-business-should-fork-out-for-liberals-pm/2005/06/25/1119321941354.html)

"A personal donation of, say, $10,000 to the Wilderness Society was fully tax deductible but a similar donation to the Liberal Party gets only a $100 tax deduction."

You know,income tax was first brought in to redistribute income from the wealthy to the needy.With the growth of tax has come the growth of socialism and the growth of Govt Depts.Now the shrinking middle class and the working class pay most of the tax and the wealthly pay very little.

Jobs in Govt Depts is just like middle class welfare.If you have a degree in Arts or the caring industry you will inevitibly find you niche in the public service finding new ways to get people hooked on social security.I heard recently that for every dollar in the cash economy,there is a dollar of social security fraud.So the cash economy and social security fraud are going hand in hand.

If more people worked in private enterprise real needs and wants would then be satisfied and many could not only get off the dole but also DSP benefits.There are 1.5 million people of working age being supported full time by the tax payer.There is only 10 million in the work force and many of these are casual positions.They should be quoting the under emloyed rate also.

Forty years ago we had a single bread winner,far less technoloy,far less tax and no one starved.We have seriously lost the plot.Nutters like ACOSS cry out for more tax to expand their empires and make real jobs even more scarce.

The prime function of Govt should be a referee and not a participant that inevitibily kills incentive of wealth creation.

Arjay,

Are we allowed to refer to ACOSS as nutters? If we are allowed then I shall be doing it a lot more.

ACOSS are nutters. They should not receive government funding.

Regards,
Terje

The author says: "unlike debate on tax reform in other developed nations, a flat tax is not even on the radar [in Australia]."
Not true! CIS published a discussion paper on flat tax by Lauchlan Chipman in November 2004 - anyone interested can go to: http://www.cis.org.au/Publications/policymonographs/pm66.pdf

Terje, thanks for your endorsement.To change the present status quo will take years.There are many on both sides of politics who know this reality and privately will agree.

There is however no votes in removing people off benefits and giving them real jobs.We now have so many people dependant upon Govt that it now has it's own momentum and huge political influence.We have the problem of a shrinking middle class that is being sandwiched between big Govt and big business.

To reach a stage of ordinary people not being able to achieve wealth from nothing,destroys the very ethos and foundation of our society.

Malcolm Turnbull is making the right noises about tax reform but our present Govt are too intrenched in their comfort zones and Labor hasn't a f-ing clue.