Monday, February 08, 2016

What tax debate? What white paper?

Of all the questionable claims in the tax debate, the biggest is that it's been a debate.

Instead we've had Bill Shorten standing in supermarkets wrongly asserting that the government is planning to increase the GST, and for the most part the government saying nothing.

Even the Treasurer Scott Morrison hasn't made the case, apart from to say that pushing up the GST would be a bit like turning back boats, and that if the proceeds were used to cut income tax, fewer people would suffer bracket creep.

Bracket creep is the lowest it has been in decades, because wage growth is the lowest it has been in decades. And in any event, if bracket creep was high, tax cuts funded by a higher GST would be only a temporary solution. As it continued there would be a need to lift the GST again.

These points haven't been made much in the debate because there hasn't been a debate. We were meant to have one after the Treasury released its green paper setting out options and the arguments for and against. After the government picked its preferred option it was going to produce a white paper setting it out in concrete terms before putting it to an election.

The Prime Minister has confirmed there will be neither a green paper nor a white paper, and by implication neither a green paper nor a white paper in the related federation review which was meant to be conducted in tandem with the tax review.

Without a comprehensive review of the kind that preceded the introduction of the GST or Labor's changes to mining tax, it'll be hard to sell a big change.

But not impossible. The biggest changes are likely to involve superannuation. The government will need to finalise its position quickly and start explaining it very carefully.

In The Age and Sydney Morning Herald