Thursday, March 17, 2011

Suddenly tax cuts are back. Garnaut at the Press Club

The carbon tax on industry will fund big cuts in personal tax

Here are his answers to the two crucial questions:


Q: You recommend that the new carbon price be used to fund new personal income tax cuts, what proportion of the revenue from permit sales should be used for personal tax cuts? How much of Dr Henry’s reforms would that pay for? And how does that recommendation sit with your other recommendation that the CPRS compensation for trade exposed industries be kept for the first three years?

A: I have in mind about half of the revenue going to a package of tax and social security reform, an integrated package directed at reducing marginal effected tax rates and cutting taxes in the bottom half of the income distribution. You can do some simple arithmetic and see that could pay for an awful lot of Henry type recommendations. I don’t want to get too far into the detail, other people like the Treasurer no doubt will have views on those things but we can get a long way towards a large productivity-raising reform of tax and social security at the bottom of the income distribution, in the bottom half of the income distribution.

Q: There’s a lot of confusion about this in the community, diff side of politics have diff views on this, what is your message for the individual households who they are say they recycle at home, they curb their water use, they try to be energy efficient, but then they hear about a carbon tax with the money given back to them as a tax cut, do you understand why this is a confusing money go around and what is your message to them about why you think we need to do this?

A: Overall, low and middle income earners in Australia will be better off directly as a result of these arrangements. And in addition future generations of their family will be protected from dangerous climate change.



Address to the National Press Club 17 March 2011


Garnaut Review_Update Paper 6_Carbon Pricing and Reducing Australia's Emissions


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