There is at least one "solution" to the tax problem that removes all inequities and will save the government at least 10 billion in administrative costs. It can have various "tuning" features that enables us to experiment with different incentives.

Here are the principles.

1. A basic income for everyone in society with no questions asked and given weekly and for which there is no tax.

2. Every dollar of income is taxed.

3. Income is taxed the moment it is earned. A bit like the GST.

4. When you pay someone some income then it is taxed and you can claim that tax back as in the GST.

5. If you want to claim income given to others then it must be paid to a registered income account.

6. The tax system be an "optin" system. That is you can continue to use the existing system or you and your family can optin to the new system.

What does this do? It eliminates most social security transfers. It makes it possible for anyone to employ someone else and still get a tax benefit instead of having to employ people through companies and other such devices. It removes all poverty traps.

If we now incorporate a regime where we do not get taxed on income that we put into savings then we eliminate the need for superannuation, we encourage savings and we give everyone the same incentive to work.

We can still have special payments for some people - such as extra income from old people and disabled. We can if we wish still have a graduated tax scale. What we do is to make the tax act about one page long and we eliminate an army of accountants, lawyers and public servants and we stop blatant bribery from all politicians at election time. Of course these are the reasons why it is unlikely to happen until "the people revolt".

The whole neo-liberal agenda of small government - cuts to Government service and welfare, cuts to employment in the government sector, outsourcing, deregulation, privatisation, low taxes, "competition policy", - rests largely on their assertion that the economic crisis of the 1970's was caused by Keynesian policies of Government intervention in the economy (e.g. p158 of "Australia's Welfare Habit"). In fact the crisis was caused largely by the sudden surge in oil prices following the Yom Kippur war, which Peter Saunders failed to mention. I wrote more about this here: http://forum.onlineopinion.com.au/thread.asp?article=3556.

To those of you who are adamant that higher taxes on the rich would result in the likes of PS packing their bags and going off to greener, lower taxing pastures, thereby ruining our economy, I suggest you read James Cumes' excellent article "John Howard's bottom line", also on onlinopinion, at http://www.onlineopinion.com.au/view.asp?article=3602

This shows that, with higher taxes on the rich and greater government intervention, our economy performed very well in the 1960's compared to any period since then. I would add that the average growth rate from 1960 to 1974 of 5.2% exceeds anything that has since been achieved since the commencement of the neo-liberal economic experiment since 1983.