While it may be true, as Benjamin Franklin is reputed to have said, that nothing in life is certain but death and taxes, when it comes to discussing reforms to the latter it seems Australian politicians often get cold feet.
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This applies even to the contentious stage three tax cuts, created by the previous government and still supported by the current one. The clock is ticking, with the changes due to take effect from next year.
If cuts to income or business taxes are flagged, there are inevitably howls of outrage about both fairness and the likely impact on essential services. The UK over recent years is a prime example of life with a low taxing, underspending government.
Conversely, if tax increases are suggested, wage earners, unions and businesses are likely to revolt. The issue is made additionally complex at a time of moderately high inflation and steep price rises on a range of household essentials.
The reality is that the doing nothing option on tax is no longer viable, as was explained in two major reports released recently.
The 2023 Intergenerational Report (IGR) from the Australian Treasury notes that even today older people account for a high level of healthcare spending, and this will increase greatly in the future.
Further, there will be comparatively fewer wage-earning, tax-paying Australians to help fund costly medical, aged care and disability services.
The IGR issued a call for "an efficient, fair and sustainable tax system," saying this is "vital to ensuring Australia can pay for the essential public services that will need to be delivered over the decades ahead."
Currently, tax receipts are the largest source of government revenue, making up 92.5 per cent of total receipts in 2022-23. These include personal and company income tax, super profits and windfall taxes, and the GST, which is a regressive tax that impacts disproportionately on the less well off.
Launching the IGR at the National Press Club, Treasurer Jim Chalmers hinted strongly that future income tax rates may have to be raised. This will impact strongly on younger workers, many of whom will never be able to afford to enter the housing market and will continue to be renters.
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The second report, A Fairer Tax and Welfare System for Australia, was produced by the Australian National University for the St Vincent de Paul Society. It focuses on how various adjustments to existing tax, welfare and superannuation policy could greatly reduce inequality and lower the number of people living in poverty and financial stress.
This report discusses three models that are budget neutral, do not require a major overhaul of systems and which strengthen our progressive tax system. All are designed to assist low-income and low wealth households, single parents, isolated persons, renters, and those relying on working age welfare payments.
If implemented properly, the reforms would help lift up to 834,000 Australians out of poverty. This would provide many people with a necessary hand-up to recover their personal dignity, attain housing security, build their social and community networks and seek to participate in the workforce.
It is pleasing to see that tax policy and related topics are increasingly being raised in the public discourse. Talking is a good start, but the time for bold action is nigh.
- Mark Gaetani is the national president of St Vincent de Paul Society.
