People don't have the capacity to pay tax on money that is needed for bare subsistence, and how much is needed for subsistence purposes depends on how many people have to live on the given income. That is why many countries tax on a family basis. We are treated as families for social welfare purposes but taxed as individuals. An unemployed man gets his pension cut if his wife is working, but she isn't allowed to split income with him at tax time. The government also sets the tax free threshold ridiculously low, even for an individual. It then makes up the difference between what is left after tax and what the family needs to survive with a welfare payment. If family income goes up a bit then tax and benefit withdrawal cut in with a vengeance, to the point where it isn't worth working.

Why not change taxation to a family basis, with the tax threshold set at the level of welfare that a family of that composition would receive? The actual tax rates when they do apply could be raised to make up for the loss of revenue due to the higher threshold. Then everyone who worked or took on more work would be better off. This arrangement would also be fairer to people with dependants other than minor children, such as people with disabled adult children or people supporting an unemployed or disabled spouse.

It doesn't surprise me that an article published in The Australian is in favour of cutting the top rate yet further, slashing tax for the wealthy and costing hundreds of millions in revenue that might have been used to reduce waiting lists in hospitals or provide teachers and infrastructure for struggle public schools. New Zealand went down this path in the 80s and it did nothing for their economy. Now the New Zealanders are increasing PAYE income taxation rates for upper income earners - and they're certainly no worse off as a consequence. Cutting tax for the rich may comprise 'incentive' for some - but for the rest of us it simply means lower and average income earners have to bear a greater burden in supporting essential services and other vital expenditure.

Tristan, You're a one-trick pony whose trick is running out of steam - Mate get over it - you lost in 1985 - let alone now. Go join the Greens.

Alex, arguments for income splitting don't take account of the obvious benefit that is derived from having a stay at home parent, I'm not sure the extent of the benefit but it is significant: I'm sure it can be worked out through. Even though the double tax free threshold is forgone, and higher tax rates are paid by a single income family - the benefit in the "choice" for one family to have a stay at home parent is still significant.

The family benefits may be best paid in my view as tax credits to families (larger at the low end and perhaps even based on family means testing - see a recent article by Andrew Leigh), or tax free threshold uplifts for families (including those on benefits) - thereby reducing any need for income splitting anyway.

I happen to agree that families should get tax relief and that tax credits would incentivise work and yet if paid on a family basis would still deliver many of the benefits you suggest.

I tend to think Keating's other views on the tax cuts - i.e. being better used as super contributions - was also timely. However Costello's reforms on super were a useful addition even if they did not raise the 9% contribution. A rise in the contribution whilst "illiberal" is probably the best means of forcing lower-middle income earners to save sufficiently for retirement.

However - where the Costello approach is perhaps superior is that it promotes individual emphasis on saving: being more liberal. I guess it's a question of whether you think the Treasurer should force people to save - I'm not sure I have a formed answer ...... PJK as usual has no such qualms.

Keating is still the best in my view. Oh Latham - why did he go down the road of the Whitlam brand.

Corin, I agree with the bulk of your approach and for what it's worth these design principles were adopted in Labor's last tax and family policy. The problem with the policy was that (a) we didn't allocate sufficient money to compensate losers (because resources were set aside for other announcements)and (b) we didn't complement the policy with any changes to thresholds.

The issue for Labor is the extent to which it is prepared to be known as the lower tax/lower spend party than the Coalition. This means we need to take all the Coalitions cuts to tax and then go further.

Tristan, take Corins advice. Join someone else. The days of tax and spend Labor are gone. We are now all self sufficient.

Alex Sanchez

Less tax hey …….. may be different tax if people want to get real radical.

If you were designing a fairer more efficient tax system from scratch (i.e. first principles) and an election was not an issue – not a real world scenario but go with me for one second – you would probably design something like:

GST at 15% (also including it on food)

TFT up to $15,000

$15,000 to 30,000 @ 10%

$30,000 to 75,000 @ 20%

$75,000 to 115,000 @ 30%

$115,000 + @ 40%

Benefits to rise by above the 5% uplift in GST

All indexed by an uplift in median real wages

Family tax payments paid as tax credits (up ended to help the working families in the lower tax brackets)

CGT @ 20% on housing but reducing by 5% every year of ownership of the asset

CGT on shares and managed funds to be @15% but reducing by 5% every year of ownership of the asset

Scrapping all State property taxes from 1 July 2008 – but stopping negative gearing applying on all investment property bought from 1 July 2008

Raising first home-owners grant by indexation and uplifting it further to low income earners by means testing and allowing it to be used for any “solid” investment purpose (so long as you don't have a house you can apply) (I mean why can’t you use it to buy BHP shares)

I think the last point is the best one – look that Charles Handy guy has been saying for years – the world is now about ownership of shares and managed funds – why not promote this as policy!

Unelectable I know - but first principles is a method of working out priorities - I think the first home owners grant can be used very efefctively in other ways.

It's-all-very-well-to-say-"go-join-another-party"-but-the-ALP-is supposed-to-be-the party of social democracy in this country - and the 'tax and spend' policies you lambast are the hallmarks of social democracy. With your complaining about 'tax and spend' policies you sound like a US Republican.

Are you content to see hundreds die every year while hospital waiting lists go unchecked? Are you content to see public schooling marginalised and equality of opportunity smashed with greater and greater reliance on full fees in the tertiary sector? Are you content to see the aged care sector understaffed in the hope that just because you're doing well for yourself you'll be able to afford something better when you grow old? (and stuff everyone else) Do you think that a massive tax cut for the wealthy is more important than a robust welfare state?

Just because the Right now commands more stacks than the Left does in the ALP - it doesn't make it right. Nor does it mean the fight is over. The politics that dominate the ALP today are rightist opportunist politics with no class content and no ideology. But, I dare say there are those in the Right who think differently also. Whitlam himself was in the Right and Gareth Evans has said that he supports a Tobin Tax in principle.

I see the task as being to reach out to dissenting figures in the Right who are not sold to the politics of sheer opportunism and careerism to build a movement for change in the ALP. There's only so many jobs going around - and for those of us who are not 'annointed' - we can better concern ourselves for politics rather than the opportunist, parasitical race for jobs.

I could, the same, ask proponents of a 'flat tax' system - or something damn near it through levelling of the PAYE system - what they are doing in the ALP. Apart from industrial relations, what's to differentiate these people from the Coalition? I'm not alone in this thinking - and so long as I'm not alone I see no reason to give up the fight.