As I predicted soon after last election – Howard government control of the Senate is likely to lead to more intra-Liberal Party activism than in previous parliaments (certainly any in the ’90s). One sign of that is the newly formed Backbench Tax/Welfare reform group co-chaired by Victorians Sophie Panopoulos and Mitch Fifield. But what does the group stand for?
In an article first published in The Australian and republished here in On Line Opinion Sophie Panopolous argues that we need to index taxation and increase the tax-free threshold. This would solve bracket creep, which she sees as a real problem, and ease the financial incentives against the welfare-to-work transition.
Yesterday, in The Australian another co-chair, Mitch Fifield argues that indexation is a waste of time and we should be reducing the top rates of tax while leaving the tax free threshold alone. Both Mitch and Sophie appear to agree that, whatever else, the government ought to be using some of its surplus to hand money back to taxpayers rather than spending it on programmes targetted at specific groups.
In the meantime, Treasurer Peter Costello, presumably not being keen to hand back any money directly to taxpayers, and having been in the business longer than the other two, is advancing his own taxation scheme – to simplify the provisions of the Tax Act and base them on principles rather than black letter law.
I’m not sure that I like the Treasurer’s approach. I suspect that all that will happen is that the complexities of the tax act will migrate from the act itself into myriads of court appeals and tax office rulings which will be even less accessible and more voluminous.
I can sympathise with Fifield (although he seems overly obsessed with people earning more than $80,000 per annum), but I’m right on board with Sophie. The “Uptown Girl” as she has been dubbed by Crikey! is looking after the down-trodden, and not only is that good social policy, it’s good economics. Turning welfare recipients into earners saves costs and increases income. I wouldn’t be surprised if the net result was that a few years after implementing Sophie’s policies there were enough additional tax revenue to cut top marginal rates as well.