Tax cuts? Yes.
Tax reform? No. We didn’t get that last night. Why does it matter? Because
major tax reform would lead to a more democratic Australia. Paul Keating told it like it is
when he turned up on the 7:30 Report on Monday:

Business income is taxed too lightly and personal income is taxed too
heavily. The 43% rate,
the second top rate drops in at $58,000. It’s shocking. If you take your income
as capital under Peter Costello’s changes, the tax rate’s 24.5%. All
these shares that are turning over now in the stock market are taxed at a
record level, records beyond anything we’ve ever seen in terms of value, at
24.5%. But if you take
your income as an ordinary wage plug, 48.5 for you… If you’re incorporated
you pay 30% company tax.
So all I’m saying is in the kind of country we now have where most people are
in the service economy and they’re either working for themselves, where there’s
no permanency of employment, what
we have to do is tax income more lightly, certainly not taxing business income
more lightly. It’s a disgrace that the capital gains tax is 24.5% and
it should be taxed the same as income.

There’s a
social democratic argument here. That was one of the driving forces behind the
tax reforms of the Hawke/Keating government. Labor knows it now. That’s why
they’re responding pretty intelligently to last night.

But there’s
also a general democratic argument here. When people can hang on to more of the
money they earn, they have greater control over their own destinies.

When people
are forced to rely on rebates, tax credits, family allowances – whatever – they
lose this control. But that’s not all. They lose control over their lives – and
end up at the mercy of politicians. They fall victim to political manipulation
– governments tossing largesse at the constituencies whose support they want.
Citizens either become dependent on governments – or miss out.

The tax
reform debate isn’t just for free market ideologues. There’s more at stake than
tax cuts for the rich. Of course we need a social safety net – but we should
give people as much control over their own lives as we can. Why? Because this
is the principle at the heart of the fundamental values of free societies and
the concepts of citizenship that shape our democracy.

In
democracies, the people are sovereign. Yet this government takes too much of
what they earn away from them then dangles treats before them as if they were
performing seals.

That’s an
insult – to all of us, to paraphrase a certain party’s slogan from the 1996
campaign.

Peter Fray

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