There’s a Facebook group out there called “A vote for Howard is a vote for communism”. A little extreme, perhaps – but it still seems certain that a vote for Howard is a vote for big taxing, big spending, big government conservatism.

Democrat Senator Andrew Murray greeted Monday’s tax announcement by saying :

The weakness in the Coalition’s taxation announcement is that it does little to simplify the tax system by broadening the base, and the tax system will still be subject to high rates of ‘churning’ – where tax already paid is then gifted back to taxpayers much later.

Hopefully the Coalition’s election announcement will in turn spur Labor on to announce increased income tax simplicity and equity.

He’s right on every front. And Labor can match it – and do better.

Andrew Norton picked apart the Howard Government’s tax record in Policy magazine last year:

Most analysis of government spending and taxation calculates their share of GDP. Using this method, Des Moore has shown that while total Commonwealth government outlays during the Howard years declined as a percentage of GDP from 26.1% to 25.2%, this was due to reduced interest repayments. Most of the savings from lower interest costs were spent, and Government outlays excluding interest increased from 23.3% to 24.2% of GDP.

Sinclair Davidson from the RMIT and Alex Robson from the ANU pick over Monday’s tax announcement in The Australian today:

Anton Hallam and Ernst Weber of the University of Western Australia recently examined the Australian experience. They estimated that a 1 per cent decline in effective marginal tax rates led to a 1.6 per cent increase in hours worked.

They talk about:

[A] growing body of international economic research that suggests lowering marginal tax rates gives individuals a greater incentive to work, earn higher taxable income, increase their work intensity and become more productive.

Because highly skilled workers tend to earn higher taxable incomes, lower marginal tax rates also increase the incentive for individuals and employers to invest in education, training and skills formation in the long run.

In other words, tax cuts increase the economy’s productive capacity and have positive effects on economic growth and living standards.

Kevin Rudd says he is a fiscal conservative. He’s also a social democrat. So he should cut taxes – more.

Peter Fray

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Editor-in-chief of Crikey

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