With an election looming, all parties have a chance to put forward policies on regional development, yet we really hear little about this. Its potentially a vote winner for both country and city people - maybe its just that no-one has cottoned onto it yet. Reforming our tax system to promote business investment AND personal migration to regional areas benefits both those areas, and would help to lift population pressures on the large cities.

Personal tax reform could be easily implemented with few changes to the current system, and without significant compliance for businesses or employees. We already have things like zone rebates, which are personal tax offsets for workers living in defined zones. However, these zones could be expanded (eg to include central west NSW rather than just the far west), and the offset amount increased to accurately reflect the additional cost of living. Currently its $57/year for most of NSW, which is just a joke!

Additionally, things like capped FBT exemptions (available to health employees now) could be extended to people living in these zones. This would help employers provide an employment package that could compete on a monetary basis with those offered in our cities. Regional Australia is suffering from a terrible skills shortage, and tax incentives to help make potential incomes competitive would go a long way to attracting more people to a tree-change rather than a sea-change.

Postcodes could easily be used as the basis for determining eligibility, the same way that the zone rebates are currently administered (as well as current exemptions for remote housing FBT).

With more people attracted to work in businesses in regional areas, populations would grow (in many cases BACK to levels that were previously there, so not placing any greater strain on environments and infrastructure), allowing many centres to head back towards a self-sustaining population base, that is large enough to support more industry, more services (think hospitals re-opening, bank branches re-opening) and a better quality of life for all people living there, as well as for those in the cities for whom population pressures should be released.

I'm all for using taxes to achieve 'structural changes,' for example carbon taxes, which could help achieve what you describe, if the lifestyle lead to fewer emissions:

http://www.ozpolitic.com/green-tax-shift/green-tax-shift.html

However I don't see the point behind your goal of shifting people to the country against their will. People in the city already pay higher rent and put up with a lot of other things like traffic, smaller backyards, water restrictions etc. Why is it a good idea to make them pay, on top of this, more than their fair share of the tax burden? Country people already get far more spent on them than city people per person from public coffers.

There are some things about modern economies that simply work better when people live close together. That's why there are more higher paying jobs in the cities. It is not some kind of unfortunate accident that can be fixed by getting people out of there. Your scheme would cost society in the form of lost government revenue and a less efficient economy, while achieving very little. People already have a choice to live in rural areas. They choose not to. There is nothing inherently bad in this choice. It is not a choice that the government needs to interfere with.

If you are lonely, move to a bigger town. There are plenty of people in the country who live there because they don't like lots of people. Don't ruin it for them.

You misunderstand my point freediver. There is actually a skills shortage in various regional areas at the moment. Business cannot attract the type of employees that they need. The main reason is that there is a perceived income disadvantage, and a perceived career disadvantage. Country employers at the moment cannot afford to compete wages-wise with the cities, but the suggested reforms would help make that possible. What I propose is only that the overall discretionary income discrepany be addressed, not to actually give a higher income to country people than city people. Overtime as an inflow of people helps to build economies of scale in regional areas, that assistance wont be needed, and it can be scaled back appropriately. Using a postcode basis, the tax system would be able to tailor assistance to areas more in need of assistance than others. There would be some impact to general revenue, but if you consider that providing businesses with the employees that they need will boost productivity and therefore profits, thereby adding more tax revenue back into the system, I suggest that the reform could be tailored to eventually pay for itself. Moving people out of the cities (not forcefully of course, but where they see it beneficial with the wide open spaces, fresh air, lack of peak hour traffic AND a decent wage) will help ease current pressures on housing (think no more rental crisis), the public transport system (imagine trains running on time) and the roads network (dont worry about new roads spending in the likes of Sydney as it wont be required). There are a lot of potential benefits for both city and country people, as well as the economy as a whole.

No, you miss the point. The fact that you only want to throw a small amount of money (a few billion $?) at this scheme and only increase wages a bit does not mean it needs no justification.

"There is actually a skills shortage in various regional areas at the moment.

No kidding? There is a skills shortage everywhere. If the skills shortage were localised there would be no mandate for government interference. The higher salaries and lower living costs would be enough to draw people out. Where the skills shortage is worst, wages are highest. You can get paid $100k for a job in a mining town that would only pay $50k in Sydney. Should the government prop up the wages there? Or should they prop up wages in backwater coastal surfing towns where the only job is at maccas serving burgers to the other locals who turn up to get their dole book signed?

"What I propose is only that the overall discretionary income discrepany be addressed

So you want some kind of skewed communism, where everyone gets paid the same amount, but ignoring the cost of living or the value of the work being done?

Maybe your family owns a farm and is having trouble getting people to come out and work for minimum wage doing back breaking work in the middle of nowhere. Is that it?

freediver,
You are rather insulting to Country people who work hard at primary employment to put bread, breakfast cereal, bacon and eggs, vegetables, milk and beef on your table.

I have lived in the City for 21 years - now retired - but I spent 36 years of my early life working in the country. I find people in the city create work for themselves - like washing car windows or selling Chinese imported gadgets. These are toy jobs compared to growing grain or vegetables essential to every persons survival.

freediver, Try surviving on products not originaly gathered from the country people who produce our raw products. They are essential for our very survival. We do not need gadgets, but we do need food, so let us give better planning and development for services to country people. City people merely move money around on books or computers, while country people feed us all.

You drive the latest lambourgini on world class expressways while country people drive a 6 year old holden ute on 40 kilomerers of corrugated dirt to get their produce to a transport head or a local market. Let us give them essential assistance.

Nicely put Philo! Thanks!

Freediver, my family does own a farm, but hasnt employed any outside labour (apart from shearers) since 1947 (when my dad got pulled out of school at 9 and put to work full time).

But my argument is not for farmers. Its is for regional communities. These include your noted coastal backwaters. Just because they are on the coast doesnt mean that they are not capable of supporting communities and industry.

Mining is a different kettle of fish, and this is where I find an approach much harder. A postcode basis is a nice easy way of administering such changes - afterall we dont need to increase red-tape further. But that doesnt take the mining industry into account. One of the major issues in a mining town is that the mine can afford to offer $100,000 for a job that a local employer can only afford to offer $40,000 for (or less). This hits hardest where towns host start-up mines. Over a number of years there can be a flow-on effect to other local businesses, so that their profits increase and they can afford to offer more competitive wages. But this takes time.

My job is a great example. I could probably make an extra $20,000 a year if I moved to Sydney. Not to mention that the career opportunities would be much greater and I'd have more diversified options if I wanted to specialise. It would probably cost me another $15,000/year to live. Whilst I couldnt think of anything worse than moving to Sydney, if my employer was able to offer another effective $5000/year to at least make the earnings on par, then they might be able to find someone to come and fill some of our vacancies.

There are lots of other strategies that could be employed, but differentiating on personal taxation would be a quick and easy approach (something that appeals to all our political parties!).