Families earning below-average incomes — singled out by Treasurer Peter
Costello as being in greatest need of tax relief — are losing more
income to tax than a decade ago, Misha Schubert reports in The Age today:

Modelling by the Federal Opposition shows that families
earning just under $40,000, or two-thirds of the average income, are
paying $949 more a year than they would have under 1996 tax rates.

They lose 19 per cent of their earnings to tax, up from 16.5 per cent in 1995-96.

But people earning twice the average income, or $112,000-a-year, are
paying $2800 less in tax than those in the same relative earnings
bracket 10 years ago.

Labor seized on the figures to accuse Mr Costello of hypocrisy in his fresh concern for middle-income families.

The Treasurer said at the weekend that families raising children on
average earnings were doing it “pretty tough” as he flagged more tax
relief and extra child-care places.

Tax tinkering won’t be enough in 2006, it appears.

In a New Year’s editorial, The Australian
harked back to Paul Keating’s “This is as good as it gets” comments. “A
decade on, after a period of unprecedented economic prosperity, some in
the Howard Government might be tempted to think things are again as
good as they’ll get,” its leader writers said. But the Oz has a
warning: “To consider, even for a moment, that economic reform can take
a breather this year would expose Mr Howard to the same charges of
complacency he levelled against his predecessor.”

The editorial spelt out how Peter Costello can cement his claim to the prime ministership very clearly:

If the Government rises to the challenge, history will
remember 2006 as being the year of tax and welfare reform. As Peter
Costello sits down with Treasury officials to plan for the May budget,
he should be mindful of the fact that hardworking Australians have
delivered to him a forecast surplus for 2005-06 of $11.5 billion. He
should heed the chorus of calls from local business and industry groups
as well as the OECD for a broader, flatter and simpler tax system. He
should also watch his back. It is not just newcomers such as Malcolm
Turnbull who are starting to call the shots on tax reform, but also
Labor thinkers such as Lindsay Tanner and Craig Emerson. Now is the
time for the long-overdue debate on tax reform to rise to the top of
the political agenda.

And so it should. Raising the threshold at which the 47 per cent rate
kicks in does not spell tax reform. Reducing the top rate to something
closer to the 30 per cent corporate rate does. So would ending the
taxation of superannuation savings and removing tax anomalies and
social security penalties that leave welfare recipients up to 60 per
cent out of pocket for any income they earn.

Eradicating incentive-destroying anomalies to get as many of these
people as possible back into work must go hand in hand with tax reform…

And there was also a message for Labor there: “2006 also brings the
challenge of reform, starting within the party’s own ranks. After four
election defeats and 10 years in the political wilderness Labor must
embrace internal reform and bridge the chasm between the party elite
and voters.”

Tax is a biggie. Tax and welfare is huge. The Australian is right. Tanner and Emerson do deserve commendation for their efforts and the way they are pushing the Government.

They’ll also be acutely aware, however, that the last time a major push
for change in these fields came from opposition the person behind it
was a bloke named Hewson.