Friday, October 19, 2007

IT'S OUT: Labor's tax policy including a (tiny) education revolution

"A Tax Plan for Australia’s Future"

A Rudd Labor Government will reform Australia’s tax system and introduce a 50% Education Tax Refund for working families supporting their children’s education.

This $2.3 billion Education Tax Refund builds on Labor’s Education Revolution - a core part of Labor’s strategy to drive Australia’s long-term economic prosperity.

Labor’s plan includes the goal over 6 years, by 2013-14, of flattening Australia’s income tax system by reducing the number of personal income tax rates from four to three – with a personal income tax scale of 15 per cent, 30 per cent and 40 per cent.

This plan will deliver assistance to working families under financial pressure and help prepare Australia for its future economic challenges...

This is a course of action for Australia’s long-term national interest – rather than a short term political decision by a government that has had 11 and a half years to fundamentally reform the tax system.

Labor’s tax plan is designed to maximise individual incentive, enhance workforce participation, improve our international tax competitiveness and invest in Australia’s future.

Under our plan:

Labor confirms its decision in May 2007 to support the tax cuts outlined in the 2007-08 Budget.

Labor will provide tax cuts of equal value to those proposed by the government for individuals earning up to $180,000 per year. This is set out in the attached tables.

Labor will defer the Government’s proposed tax cuts for those individuals earning more than $180,000 per year - saving around $3 billion over the Forward Estimates.

Labor will direct $2.3 billion of this amount to an Education Tax Refund for all families receiving Family Tax Benefit A with children at school. This will benefit the education of around 2.3 million Australian school children.

Labor has a goal for a tax system with the explicit objective of maximising incentive in the future economy.

Labor has a goal over six years, by 2013-14, of flattening Australia’s income tax system by reducing the number of personal income tax rates from four to three – with a personal income tax scale of 15 per cent, 30 per cent and 40 per cent.

Labor will also direct a further $400 million to build on Labor’s National Health and Hospitals Reform Plan.

This money will be used to negotiate an agreement with the states and territories on a specific timetable for the significant reduction of elective surgery waiting lists.

The objective of this agreement will be to reduce to zero the number of people who wait for procedures for longer than the clinically recommended time.

The remaining $200 million will be retained in the budget surplus.

Labor’s Tax Plan for Australia’s Future is mindful of inflationary pressures in the economy; responsibly commits to a goal for tax reform that will boost productivity and workforce participation; targets investment in education and health to build future economic growth; and returns a further $200 million to the budget surplus.

Investing in the Education of our Children

A Rudd Labor Government will invest $2.3 billion in financial support for working families to help meet the growing costs of educating their children.

Federal Labor will provide a new 50% Education Tax Refund to help families of around 2.3 million school-age children meet the costs of education.

Under Labor’s Education Tax Refund, eligible parents will be able to claim:

A 50 per cent refund every year for up to $750 of education expenses for each child attending primary school (maximum $375 per child, per year).

A 50 per cent refund every year for up to $1,500 of education expenses for each child attending secondary school (maximum $750 per child, per year).

Therefore a typical family with a primary school aged child and a secondary school aged child would receive a tax refund of up to $1,125 per year.

All families who receive Family Tax Benefit (Part A) will be eligible for Labor’s new 50 per cent tax refund for education expenses. Families would submit their application for this refund as part of their annual tax return.

Eligible items will include laptops, home computers, printers, home internet connection, education software and school text books.

This measure is designed, together with other measures in Labor’s Education Revolution, to lift school retention rates long-term – where Labor’s target is to increase year 12 equivalent retention to 90 per cent by 2020.

According to research by the OECD, the growth rate of the economy would be up to 1 per cent higher if the average education level of the working-age population was increased by one year.

A tax cut for all Australian taxpayers by July 2008

Labor’s tax plan will build a stronger foundation for Australia’s future economic growth while delivering for working families

Labor will deliver tax cuts for all taxpayers from 1 July 2008. These tax cuts are part of a broader plan to reform the Australian taxation system.

Labor’s tax plan will provide tax cuts of equal value to those announced by the Howard Government for people earning up to $180,000.

Under Labor’s plan, for taxpayers earning over $180,000, the reduction in the top tax rate from 45 per cent will be deferred and form part of Labor’s six year goal to flatten the tax system.

Labor’s six year goal to reform Australia’s tax system

Australia needs a clear destination point for the future of its tax system – not just the incremental adjustment to thresholds which the current government has specialised in either at budget time or election time.

Real tax reform lies in flattening the system by reducing the number of rates and reducing rates themselves.

Labor’s Tax Plan for Australia’s Future sets a goal over six years, by 2013-14, for a personal income tax system with the following features:

A reduction to three rates from the current four.

A reduction of the current 45 per cent rate to 40 per cent.

A reduction of the current 40 per cent rate (which by 2010-11 would have been reduced to 37 per cent) to 30 per cent.

Consistent with the Government’s plan, the effective tax free threshold would increase from $11,000 to $16,000 through an increase in the Low Income Tax Offset by 2010-11 and then increase to $20,000 through an increase in the Low Income Tax Offset by 2012-13. Labor will adjust the Senior Australians Tax Offset (SATO) in line with the adjustments outlined by the Government.

Under Labor’s Tax Plan for Australia’s Future, reductions in the fringe benefits tax (FBT) will reflect reductions in the top marginal tax rate.

Middle-income earners would be the major beneficiaries of Labor’s six year tax goal – with only a 30 per cent marginal tax rate applying over the full income range from $37,000 to $180,000.

Achieving this six year goal will depend on national and international economic conditions and maintaining, as a general economic principle, budget surpluses of around 1 per cent of GDP.

Cutting waiting lists in our public hospitals

Labor will direct a further $400 million to build on Labor’s National Health and Hospitals Reform Plan in order to establish a $600 million Elective Surgery Waiting List Reduction Plan.

This $600 million Elective Surgery Waiting List Reduction Plan will enable the Commonwealth to drive down elective surgery waiting lists across Australia.

Labor will negotiate an agreement with the states and territories on a specific timetable for the reduction of elective surgery waiting lists and hold the states accountable.

Labor’s objective is to reduce the number of people who wait longer than the clinically recommended time for elective surgery in critical categories.

Labor will:

Invest $100 million in 2008 to conduct an immediate national blitz on elective surgery waiting lists – to help clear the backlog of people who have been waiting longer than the clinically recommended time for elective surgery such as hip replacements.

Invest $200 million over two years to make systemic improvements to Australia’s hospital system to improve elective surgery throughput in the long-term, including the construction of additional day surgery clinics.

Invest up to $300 million in dividend payments to those States and Territories that meet elective surgery waiting list reduction targets within the clinically recommended time by the end of Labor’s four year plan.

Fiscal responsibility

Federal Labor’s Tax Plan for Australia’s Future is underpinned by an economically conservative approach.

This proposal is mindful of inflationary pressures in the economy.

It responsibly commits to a goal for tax reform that will boost productivity.

It targets investment in education and health to build future economic growth, productivity and workforce participation.

And it returns a further $200 million to the budget surplus



RUDD: I’m pleased today to be able to announce our approach to long term tax reform in Australia. What Australia needs is a tax system and tax reform which extends a helping hand to working families but also helps build the nation. What we need also is tax reform which is about long term national interest, not short term political interest by a Government that makes an announcement about tax on the first day of an election campaign, having had eleven years in office to fundamentally reform the tax system if they were so inclined.

One of the reasons of course why we believe tax is important is because it is part of an overall reform plan for the future of the nation. One of the reasons I have argued why Australia needs new leadership, is because we need to advance the cause of building prosperity for Australia beyond the mining boom. And for those reasons we put out, of course, a plan for the nation’s future. We’ve argued extensively for an Education Revolution to boost productivity growth. We’ve argued also for the building of modern infrastructure, including high-speed broadband, so that future workers can rely upon the new technologies – the railways of the 21st century. We’ve also argued that we need to reform and fix the Federation - the last frontier, major frontier of microeconomic reform in Australia impeding business. We’ve argued that we need to roll back the red tape burden which is strangling so much of Australian business, and has got worse over the 11 years of this Government. And we’ve also argued that we need a tax system which rewards incentive, individual success, achievement and hard work. One which encourages workforce participation and one which on top of that, also enhances Australia’s international economic competitiveness.

That’s why we believe a tax system for the future needs to address Australia’s long term economic needs. And that’s why the proposal we put forward today, we believe is right for the nation’s future.

Labor today is announcing three core measures in its overall tax reform plan.

The first is this:

Labor will introduce a 50 per cent education tax refund for working families for their investment in their kids’ education. We believe this is important. This will be a $2.3 billion education tax refund. It will be structured in this way: if you have a child at primary school then each year, if you are eligible for Family Tax Benefit A, you’ll be able to submit, through your tax return, a claim for a 50 percent refund up to $750 worth of outlay by the parents, for their kids’ education needs. That’s in primary school. The second part of it deals with secondary schools. Where, the same parents would be eligible for a 50 percent education tax refund up to $1500 worth of education expenditure for your high school kids. Thirdly, as I’ve indicated already, the eligibility for this would extend to all those kids in Australia whose parents currently receive Tax Family Benefit A. That’s more than 2 million Australian kids. And I’m advised about two-thirds of the nation’s kids in total.

Of course, it comes now to the question of the scope of the proposed reform. What are we seeking to encourage Australia’s working families to do, and their parents? It dovetails with our approach for an Education Revolution. What we are saying is that if Mum and Dad are spending money on buying a lap top, spending money buying a home computer, spending money buying – or purchasing – internet connection, education software, printers and books, those expenditures will be eligible for claim for the 50 percent education tax refund that we’re putting forward.

Why have we so targeted this?

The reason we have targeted this is because it dovetails with Labor’s $4.7 billion plan for a broadband revolution. High speed broadband right across the nation. We need to equip our nation’s young people with the skills necessary to participate in the digital economy of the 21st century. And we believe an education tax refund, the first substantial such initiative of its type in the nation’s history, is the right way to go.

This step forward is a core part of our overall tax reform plan. To give you an example of what it would mean for working families: if they are eligible for Family Tax Benefit A, one kid at secondary school, you have a kid at primary school and you’re eligible therefore for 50 per cent of outlays up to $750 for the primary school kid, 50 per cent outlays up to $1500 for the secondary school kid. Each year then – potentially – you could claim back and get through the tax system, $1125. That is a significant annual additional benefit for working families under financial pressure. And a good measure when it comes to investing in our nation’s future.

Let me turn to the second measure.

The second measure is this.

We believe that when it comes to the funding of the future reforms that we need for our education system, we have to place priority on getting the education revolution right. The reform that I just referred to costs $2.3 billion. How will we fund this? In the proposals put forward by the Government earlier this week they indicated that there would be, in effect, $2.9 billion in tax cuts for income earners above $180,000. We propose to defer that, and not pay that within the forward estimates period. That would be the money from which we draw for the purposes of funding with education tax refund.

However, we also have a six year tax reform plan. A six year tax reform plan which has significant dimensions when it comes to Australia’s future tax structure. And it’s this. We propose a goal for the next six years, a six year tax reform plan if we are elected to Government to, by 2013, flatten Australia’s income tax system to the extent that we collapse the number of income tax rates from four to three. Our goal would be that we would have three rates. 40, 30 and 15. The top rate under this system would be 40. Of course, consistent with some remarks made by the Treasurer the other day, there are conditions attached. The first relates to the state of national and international economic circumstances. And the second is the maintenance of the general economic discipline of maintaining Budget surpluses of one percent of GDP. Our view is that this long term reform plan is in the best interests of the nation. Why? Because it provides us with an opportunity to provide real incentives right across working Australia, and we have a destination point around which we would then engineer tax reform measures into the future. Of course, that is contingent on us being elected and re-elected and we believe having a six year plan to do this is the right way forward. It provides appropriate incentive into the future.

Also the plan that I have just referred to if implemented, against the conditions which we just described, would overwhelmingly benefit those on middle incomes across Australia. Because you would have 37,000 to 180,000 people in terms of their annual income, paying the 30 per cent rate. Therefore, under those circumstances, we believe it is a good measure for middle Australia.

The third measure and then I’ll close and turn to Wayne to add to my remarks. I said before that we were obtaining from the savings we had proposed of $2.9 billion, in not following the Government’s proposal to bring in tax cuts to those above $180,000, that we will first of all fund $2.3 billion into education tax refunds.

In terms of the remaining $600 million, we propose to dedicate $400 million of that to Labor’s National Health Reform Plan. Specifically we intend through that Health Reform Plan to do the following: to establish through the use of other funds as well a plan which would create a National Elective Surgery Strategy to reduce elective surgery waiting times across the nation. We believe this is a necessary reform.

Right now across Australia I’m advised that we have a stock of some 25,000 Australians who are currently on waiting lists who have already passed what is deemed to be the clinically acceptable time for them to be on waiting lists awaiting elective surgery. That’s unacceptable. We’re told that each year some 100,000 Australians find themselves in that position.

So we propose the establishment of a dedicated fund for the purposes of negotiating with the States and Territories, payments which would be conditional on a timetable for reducing elective surgery waiting lists in critical categories including hips, knees and other areas which are detailed in the release I’ve put before you.

In summary, these three measure that I’ve just referred to, firstly the establishment of an education tax refund; secondly a goal over a six year period of time to ensure that we have a flatter, competitive tax system which enables Australia to compete in the world and provides incentive for individuals in Australia to work harder and to remain active participants in the workforce; and thirdly to use some of this money to also contribute to the critical needs which Australian working families now face seeking elective surgery assistance.

Before we take your questions, I’ll ask Wayne to add to my remarks.

SWAN: Thank you very much, Kevin. It’s good to be here and it’s good to be here talking about something that is as important as tax reform because tax reform is very important in keeping the economy strong. Labor has long argued for tax reform which enhances participation, putting incentives in the system to encourage people to get better skills, putting incentives in the system to reward enterprise.

And Labor has argued that this long before the current Government came to the table with any proposals at all. In the 2005 Budget Labor put forward proposals for a low income tax offset and we put forward proposals to lift the threshold where the 30 cent rate cuts in. And that’s why we can support in this package the Government’s proposals which are contained here because they follow what Labor has argued for over the past three years. Something like two thirds of all of the tax cuts in the package the Government brought down go towards the low income tax offset and go towards shifting the 30 rate. We think that is very, very important. Very important to encourage participation, very important to deal with the skills crisis in the Australian workforce, very important to lift the supply capacity of the Australian economy at this time. Very important indeed. So those tax proposals are ones that Labor has fought for, ones that Labor has put forward in the past and we’re certainly proud to be supporting them today in our package. Thank you.

RUDD: Over to you folks for some questions.

JOURNALIST: Mr Rudd, the Government has tax cuts of $34 billion. How much would you say your tax cuts are worth?

RUDD: Well, based on our calculations in terms of the cost of not proceeding with the tax changes for those north of $180,000 this would therefore come in at $31 billion within the forward estimates period.

JOURNALIST: Mr Rudd, Mr Howard talked a lot when launching the election campaign about balance. Do you believe that your tax reform proposal is more balanced than his?

RUDD: We do. We regard this as balanced because the function of tax policy is to help working families on the one hand but also to find creative ways of building the nation’s economic future. Wayne’s just referred to how we help working families, particularly those on incomes at the lower end.

When it comes to investing the nation’s future I can’t think of a better, more important way than to provide an education tax refund which helps mums and dads help their kids engage in a digital economy.

If you’re a kid today, let’s face it, if you’re not wired at home and if you don’t have access to laptops and computers and software, you start to fall behind. This is a critical issue in terms of future effective workforce participation, it’s also a critical future determinant of long term skill retention and there’s an OECD report about school retention. We set a target of reaching 90 per cent Year 12 equivalent retention by 2020. Programs such as this enhance the possibility of reaching targets like that because it makes it more possible for kids to work their way effectively through the school system. And on the economy, the OECD says that if you have something like that in terms of higher levels of year 12 equivalent retention and their argument is that one additional effective year of skills based retention, then you add considerably to overall economic growth by up to one per cent.

JOURNALIST: Mr Rudd, (inaudible) the Government’s tax cuts and they come in at 2010/11 - I assume (inaudible) Who did the numbers for you and would you submit these to Treasury for independent analysis?

RUDD: Firstly, we have modelled this extensively. Secondly you’ll be aware that new Budget surplus data was released earlier this week and we’ve been very busy over the last four days doing that. And thirdly, in terms of submitting it to Treasury, we’re more than happy to do so in the period ahead.

JOURNALIST: What does that mean, Mr Rudd?

RUDD: Well we would submit it in the appropriate, reasonable timeframe and it won’t be too long away.

JOURNALIST: (inaudible)

RUDD: Can I say I haven’t seen all the episodes of the West Wing that you’ve obviously seen because I obviously missed that one. I’m passionate about an education revolution. I’m passionate, as is Wayne. As we go around our communities, we see those kids who are getting ahead in life, and those we are not. And if you look at the bridge in between, what’s the missing bit? It’s this stuff here. That’s what really worries me because we’re widening the gap of opportunity for kids by not wiring them. Therefore, when you’ve got mums and dads already under financial pressure, working families under financial pressure, how can you creatively therefore use the tax system to encourage them to hook some money in and at the same time provide a helping hand in terms of the refund that I’ve spoken about. This is the pathway into the future and can I say that that stuff like this, sort of stuff, this is the tool box of the 21st century.

Ok. We want to make sure that every Australian kid in the future has the opportunity to get themselves wired and computer literate, information revolution literate because let me tell you, in the future, in the digital economy, this is going to be fundamental business.

JOURNALIST: (inaudible) Is that what you’ve done?

RUDD: Absolutely not! We’ve been working on an education tax refund for the better part of four, five months. First point. Second: it would be absolutely irresponsible to do this or on other fronts prior to the production of the MYEFO numbers because of the significant variations in the surplus to the tune of some $60 billion and therefore we believe we’ve acted in the right (inaudible). What we’ve spend the last there or four days doing is taking our thinking about the system, applying it to the new Budget surplus numbers and the result is as we’ve described it today.

JOURNALIST Mr Rudd, whether its $31 billion or $34 billion aren’t you pumping a lot of money into an economy already running at capacity and therefore risking putting pressure on interest rates?

RUDD: The key difference between our package and the Government’s is this: we believe that if you are investing in productive capacity which means in education, skills and training you are doing the right thing by the economy long term. We think that’s the responsible course of action for the future – that’s the first point. But the second is, in terms of the overall numbers that I presented, we actually deliver back a couple of hundred million dollars in to the surplus. So can I just say, I believe that we have been entirely responsible and very mindful of statements of the IMF and others (inaudible) mindful of the fact of what the IMF has said but we believe the core differential lies in investing in productive capacity and that’s what this package does.

JOURNALIST: Mr Rudd, you are (inaudible) tax refund if you don’t pay much tax to start with?

RUDD: Well, we believe that if you are looking at the way in which Family Tax Benefit A is structured and the number of families which this captures, which is 2.3 million kids, 66 per cent of Australian children - and remember we’re talking about Family Tax Benefit A families who have kids in school - as opposed to all kids, this is the best way of capturing all those who best need this targeted assistance. You want to add to that Wayne?

SWAN: Yes, there will be a payment to those who are paying tax with children (inaudible) at school. Absolutely.

JOURNALIST: (inaudible)?

SWAN: Well, they get the full value.

JOURNALIST: Mr Swan, the delay in the top marginal tax rate cuts is a timing gain, so it’s a one off timing gain. The cost of this rebate which is 2.3, presumably that’s across the forward estimates is it? Is an ongoing cost? How do you ensure that it’s sustainable?

SWAN: Well, we’ve made it very clear that these three rates will happen in the next term should we be successful in being elected in this election and we will take the advice of the Treasury in the design of that. We will be responsible and we won’t do what’s not affordable.

JOURNALIST: (inaudible)?

SWAN: Well the Treasury is not costing those for the Government and we don’t have access to the Treasury to cost them for ourselves. We’ve committed to them as a goal. That’s what we’ve done. We’ve committed to them as a goal. That’s our objective. We haven’t had a long term objective for tax reform in this country. We’ve put one on the table. We’re serious about it. But we’ll only do it if it’s affordable.

JOURNALIST: (inaudible) we’re talking about a (inaudible) 2009 (inaudible) annual tax saving (inaudible). When will people actually (inaudible)?

SWAN: They’d see it as a tax rebate. They’d see it as a tax rebate. In the year after they’ve incurred it.

JOURNALIST: (inaudible)?

SWAN: Well, they would apply for it in 08/09 and receive it in 09/10.

JOURNALIST: (inaudible) rebate for childcare (inaudible) not being able to have that money when you need it (inaudible). Why’ve you done it as a rebate rather than given (inaudible)?

RUDD: Well, you’ve got to be prudent and do what’s affordable and we believe we’ve made an excellent start with this. This is a $2.3 billion plan. That’s a lot of money and it extends to two thirds of Australian kids. This is a big investment in the future. Can you do everything that you want to do at once? No, you can’t. But this is a great start.

JOURNALIST: (inaudible)

RUDD: Well, we’ve actually had some discussions about that and we understand, and this is one of the things that we’d be working on in Government, is various arrangements with various Aussie computer manufacturing supply companies, who can make particular deals available to folk who don’t have the cash to cough upfront. This is, what we believe is a practical thing that we can do if we win government. We’re very mindful of that. There’s been a lot of time thinking about how it might be done in practice.

JOURNALIST: Mr Rudd, is this an issue of equality of opportunity for you? You’ve talked a lot about that in the past?

RUDD: I believe when it comes to kids being equipped for the twenty-first century economy, there’s no more fundamental investment in equality of opportunity than to give them the skills necessary to be in the digital revolution. That’s what we’re on about. It’s core business for the future. You know what I really fear most, Matthew, is our kids seriously being left behind. When I rock through Singapore and other parts of the world and see what’s happening there, I really worry about us being left behind. We’re too haphazard in our approach to this. We want to produce, remember part of Labor’s core vision is we want the best education system in the world. You can’t have that unless you’ve got some serious targets. One of which is to ensure that we’re properly wired, hence our $4.7 billion broadband proposal, which the Government has routinely described as irresponsible. On top of that, we have this proposal, this plan: to make sure that we’ve got our youngsters, our kids in an ability to participate in e-education, not just in our schools, but from the school to the home. The better-off schools in Australia, do this already, we know that. But let me tell you there’s a whole bunch of schools who don’t and we’re developing and unfolding a plan to equip kids with these skills for the physical capacity for the future.

JOURNALIST: Mr Rudd, on that (inaudible) and internet connections. How do you know that they’re going to be used for educational purposes? Given the multiplicity of uses involved in home computers, how do you know you’re not making downloading pornography tax deductible?

RUDD: Can I just say, there are a number of safeguards which apply to computers systems and to computer technologies. Those, I’m sure would be applied in these circumstances. But at the end of the day, what you can do through the tax system is to provide the incentives to ensure that homes are equipped with this technology. Homes are equipped with this hardware. Homes are equipped with this sort of software because the kids of the future are not going to have decent educational and employment opportunities unless this is available at home. We all know from our own life experiences that if you are brought up in an environment where books are normal and hanging around the house that you tend to have kids who are interested in reading and all that sort of stuff.

If you grow up in a household where computers are normal and you’ve got computers here and computers there and everything’s wired, then kids regard that as normal. But if you don’t let me tell you there is a real problem. And that is creating a massive gap between ‘haves’ and ‘have nots’ in this country into the future which I as an alternative Labor Prime Minister am deeply passionate about.

JOURNALIST: (inaudible)

RUDD: I said there are appropriate safeguards which exist through various internet safeguard systems and I’m sure they’d be applied in these circumstances. Over here.

JOURNALIST: (Inaudible) not at all reward parents who (inaudible) wouldn’t you have been better off spending this substantial amount of money on students who are actually at a disadvantage? It’s not going to help my children and I’ve already gone for this (inaudible)

RUDD: You know something, when you have a system which is called Family Tax Benefit A which is some would say, a blunt instrument, but it’s there and it makes a delineation in terms of those who need a bit of a helping hand. First point. Second is, you know working families are under real financial pressure? And what I fear most of all…

JOURNALIST: (inaudible)

RUDD: I’m not quite sure what universe you’re inhabiting. Where we come from, people who grew up in Queensland, let me tell you, it’s different. You know.

SWAN: There’s a digital divide out there.

RUDD: You know, there is a digital divide and it’s not just Queensland, it’s right across the country. We need to breach it and let me tell you, this takes bold measures to do so and $2.3 billion worth of investment is our step in the right direction.

SWAN: Why are you so confident that struggling Australians would prefer your policy rather than the cash in hand carrot which they’re offering?

RUDD: I believe that when we say that Australian needs new leadership, what the people of Australia are saying is they want leadership which helps working families under financial pressure and leadership which helps build the nation at the same time. This $2.3 billion plan of ours of education and tax refunds does both. It helps working families under financial pressure and helps equip them for the future economy. And in my experience the mums and dads of this country are a pretty practical bunch of people and they know what’s good for their kids. They also know what helps with the bottom line. So you ask how is that going to appeal to voters out there? Well they’ll make up their decision on voting day. I am confident this is a good policy and we’ve been working on it a long time Question back there.

JOURNALIST: Federal cost of the (inaudible) tax rate in the … You must have some kind of.. of the magnitude.. Treasury costing beyond the forward estimates, it’s quite easy to come up with

RUDD: Well we’ve been obviously doing some work on that, but as you’ve rightly said, those sorts of estimates are not possible from official sources. I also note that the Government when it spoke of its commitments beyond the forward estimates period provided no such number itself, I assume for similar reasons.

Why we’ve put forward this as a goal for the future? We’ve flipped and flopped around for years with no goal for national tax reform. If this Government was seriously committed to fundamental tax reform, what have they been doing for the past 11 years? We’ve had the GST - but on the personal income tax front what’s actually been done? The answer is not a lot. So we believe you set some goals these are concrete goals and I say it is a big prospective reform to begin flattening the personal income tax system, reducing the number of rates from four to three and making sure that you are maximising incentive, participation and critically international tax competitiveness in the future.

JOURNALIST: How is a person earning $200,000 a year, just roughly comparing, they’ll be paying about $10 a week more tax I think in 2010 and $8 in 2009. What’s your message to them? Do they have to make this sacrifice? Are you just scaring off these voters?

RUDD: Can I say politics is about making choices between conflicting priorities and if you’re on 180 grand and more, as people like myself are, I don’t think you really need it just now. What I say instead is that most people in that bracket wouldn’t mind an investment going into bridging the digital divide for the whole country. That’s our point.

If we were waging some sort of class warfare, let me tell you, we wouldn’t be in the business of outlining the long term goals that we’ve put forward: a flattening, prospectively, of the tax system down to three rates rather than four and a top marginal rate of 40. Let me tell you, that goes in the direction of maximising incentive but right now, with a Government which has paid scant regard to education for 11 years, no real regard to the state of our broadband network, and on top of that, frankly our universities are in an absolute state of disrepair vis-à-vis where comparable universities are around the world, it’s time that you exercised a decision about priorities and we’ve done so with this package.

JOURNALIST: (inaudible) prices of books and computers are coming down in real terms but school fees are not. Why haven’t you included school fees as a refundable (inaudible) and will the refunds be indexed going forward?

RUDD: We have debated very much this question of fees, as they apply for example to private tuition agencies. One of the concerns there is whether you simply have a flow-through effect; that is if you provide assistance through a scheme like this where you in fact fees by private tuition agencies simply grow by comparable amount of money. My first point. Second is, when it comes to the core education digital revolution focus of our reform plan, we are making this very specific. Remember, in our previous policies we’ve made no distinction between Government and non-Government schools. The trades training program for skills, that’s $2.5 billion, 2,650 trades training centres across Australia irrespective of whether the school is government or non-government. Similarly with this, we just want to make sure that kids are equipped with the skills necessary for the future economy and when you’ve got $2.3 billion to invest, we believe it should be targeted and defined in this critical set of skills because the expert advice is: here is a platform for the 21st century economy both in terms of small business formation, e-education, e-medicine and the rest. This is where it’s at and this is where we’re putting our resources.

JOURNALIST: When does the flattening of the tax system start and would that be effected by slow reductions in the top marginal tax rate?

SWAN: It would depend on the advice we receive from Treasury, it would depend on what sort of advice we receive.

JOURNALIST: And when would it start?

SWAN: It would start when it was affordable because we will not do anything that’s not affordable.

JOURNALIST: Mr Swan, could I just ask one question. You might recall (inaudible) last year, he wrote an article for The Australian claiming exactly this (inaudible) package (inaudible) When did this become an option again?

SWAN: I have always argued for an increase in the low income tax offset. I have always argued to lift the threshold for the 30 cent rate and I have always argued that we needed to flatten the system and keep it progressive and I’m delighted today we’re achieved that in this policy.

RUDD: And on that note

JOURNALIST: You might have noticed today there’s been a softening of the Labor vote in Tasmania, surely now the time is right to cut Tasmania out of the Federation and perhaps give it to Japan….save a lot of money in exporting woodchips from Australia..

RUDD: I’ve always been pro-Tassie it is dear to my heart and I as a Queenslander remember, I’m old enough to remember the 1982 Commonwealth Games when we left the map of Tassie off the bottom. And as Queenslander I’m never going to do that again.

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