“expand the overall tax base by approximately 1 per cent of GDP…could be seen as a modest and necessary measure”

For what purpose “health and welfare reform”!

That is just an attempt to shelter the indolent and profligate from their folly whilst depriving the industrious of the right to discretionary income.

I will always be suspicious of a proposal which sees “virtue” in taxation.

“The tax free threshold could be raised,”

I think what Costello has proposed is more equitable than merely offering a free ride to some whilst penalizing the efforts of the astute.

“It is not only the most vulnerable of workers who have suffered”
Actually they suffered more due to the irresponsible and inflationary strategies of past socialist governments, than through the prudence of the incumbent federal government.

The price of full employment might well be industrial reform but at least people in jobs, being modestly paid, is far better than higher incomes for some with higher unemployment rates due to the socialist / union bully-boys threatening the commercial growth of employers.

As for “affordability have become an “impossible dream”.”

“Mortgage payments now account for 30.7 per cent of the average first home buyer's income”
Re http://www.abc.net.au/news/newsitems/200705/s1936346.htm

Affordability of housing varies generally within the range 27% and 33% of gross family income.

It is tied to the borrowing calculations done by mortgage lenders with variability depending upon the general present and predicted fluctuations in economic wellbeing (consumer confidence) (viz economic boom and prices increase, times of economic depression, prices collapse of the early 1990’s under Keating).

Housing affordability might seem different today than it was 30years ago but then, incomes have risen, availability of mortgages has risen, interest rates have fallen, the only thing which has not changed is land supply and that supply is pretty much the same as it was when the aborigines arrived and is not likely to alter anytime soon.

“It is to be hoped that this contribution will in some way inform a vital and much-needed debate.”

When all is said and done, it doesn’t.

A full critic of this piece would take much more than the 350 words available to me; but here goes.

Firstly: - areas where I am in agreement.

Raising the tax free threshold. Throughout the Hawke-Keating & Howard governments this has changed little and should be increased to between $10-12,000pa. This should result in a savings to the government in administration costs, somewhat offset by an increase budget to combat social security fraud. It would need to be implemented over time with changes to the bottom two tax scales to remain revenue neutral.

Care-giver allowance should be broadened to include a greater variety of circumstance. There are areas in the health portfolio that are deserving of extra funding and savings to be made.

I also support the public ownership of utility networks.

As for the rest of the article, most of what is put forward is simplistic, ill-conceived or socialist mantra.

The abolition of the Private Hospital Insurance rebate will not result in a $18 billion windfall to the government (over 3 years). The cost shifts would be complex, but the end game would be a public system that is unable to cope and a private system that performs below capacity. A lose-lose scenario. Not much difference in the cost to the public purse; but the real cost would be counted in lives.

The statistic from Ross Gittins comparing wage share of the economy as a percentage of GDP seems strange (until you read the article). The paragraphs which follow are truly bazaar. “…requiring businesses listed on the Australian Stock Exchange to issue shares every year to community-based funds valued at 7.5 per cent of total stock.”

Not all shares make 7.5% pa earning on their capital. Companies involved in research & development may not provide a dividend to investors for years, if at all. Why would a company stay listed on ASX? Surely this would decimate the government’s tax receipts.

Tristan must be gutted that Rudd has decided to plagiarize the government’s tax policy; as it has largely done in education, health, housing and defence.

Tristan,

I am unsure of what you mean by the danger of austerity if taxes are not raised as a percentage of GDP.

The money is still in the economy, it is just in the hands (or accounts) of those who earned it. They can spend it on whatever they want, and will probably do a much better job of it than some civil servant or government.

I am all for increased taxation of the rich, (or spending mandated by the government), as long as those who pay net taxes can tell the recipients of that welfare what they can spend the money on.

I for one would allocate 10% of all welfare towards investments, to allow those on welfare to eventually derive income from this.

Concupiscence,

To begin with - yes, it is very hard to discern what the end result of means testing the Private Health Insurance Rebate. It is very likely, though, that the wealthy would retain their private insurance regardless of any means test, and that the cost to the budget would not be as high as you suppose. On the other hand, the move would be a big 'win' for those on lower incomes who cannot afford private health insurance, and the cost structures of the entire industry would be reduced as the beed to factor in profit margins was largely removed.

re: wage earner funds - in Sweden such funds were introduced at a rate of 20% of all profits. Robin Blackburn has suggested a rate of 10%. I admit, here, that I've made a mistake: I said 'share value', while the proposal is meant to refer to profit share. With a rate of 7.5% we it would take many decades for the funds to establish themselves. But the move would, to a degree, compensate workers for a loss in the wage share of the economy.

Miner; as for austery - the point, here, is that as the progressively scaled tax share of the economy falls, spending on the social wage falls, and those on lower incomes face reduced services - combined with the burden of user-pays.