Ideas@TheCentre brings you ammunition for conversations around the table.  3 short articles from CIS researchers emailed every Friday on the issues of the week.

The tax cut menu

Robert Carling

20 April 2018 | Ideas@TheCentre

With the Turnbull government raising expectations of personal income tax cuts in the forthcoming budget, the question is whether it can deliver a cut that does not disappoint in both size and quality.

Forward estimates prepared as recently as six months ago suggest any income tax cuts will be of the ‘hamburger and milkshake’ size, to coin a phrase made popular by a Howard government minister in referring to a small tax cut in 2003.

The budget outlook would need to have changed dramatically in a short time for the Treasurer to be in a position on budget night to add bacon to the menu. Personal income tax is by far the largest revenue-raiser and cutting it significantly can easily cost $10 billion a year or more.

Budget-night commentaries will no doubt dwell upon the quantum of tax cuts, but the form they take is equally important.

The most disappointing would be to do what governments have often done in the past — namely, make a few one-off adjustments to bracket thresholds. These cosmetic changes would merely hand back some of the proceeds of past bracket creep, yet ensuring bracket creep kept raising the tax burden by stealth in the future.

This is why the first priority of income tax reform should be to legislate for a system of automatic annual indexation of tax bracket thresholds. This would put an end to the insidious process of bracket creep and act as a new discipline on government spending growth.

The second priority should be to cut marginal rates of tax, which set the tax disincentives people face in choosing how much to work, save and invest. All marginal rates need to be cut, but in a budget-constrained setting priority should be given to cutting the 32.5% middle income rate as it was increased from 30% in 2012.

These issued are discussed in more detail in a CIS POLICY Paper issued this week, Cutting income tax: can we add the bacon to ‘hamburger and milkshake’ cuts?

Tax by stealth – the art of plucking the golden goose

Matthew O’Donnell

20 April 2018 | Ideas@TheCentre

The art of taxation consists of plucking the goose so as to obtain the most feathers with the least hissing. — Jean-Baptiste Colbert

Congratulations Australia, the tax collector has just finished plucking your financial feathers for another year! April 16 was this year’s Tax Freedom Day: the date on which the average Australian has paid their due to the government and begins working for themselves.

This year, all levels of government collected around $522 billion in taxes and fees — equivalent to 28.7% of the feathers produced by Australians each year. In dollar terms, this equates to each Australian paying $21,000 for government services.

Expect to lose a few more feathers in the future as Tax Freedom Day is forecast to fall on an even later date in the years ahead.

Using the federal and state governments’ most recent forecasts, projected Australian government tax collections for 2020-21 are an eye-watering $615 billion. This equates to 29.8% of our feathers and is equivalent to $23,000 per person.

And these projections don’t include the inevitable new revenue proposals that will be floated at the coming federal and state elections.

Over the past decade, our governments have steadily increased real expenditures; thereby requiring more taxes to pay for them. To acquire these new revenues, governments have surreptitiously plucked more from the taxpayer each year. A change in the tax law here, increased enforcement there, taxation by stealth everywhere… And to extract their bounty with only a modicum of hissing, government strokes the bird reassuringly while covertly stealing its feathers.

One of our most fundamental freedoms is the right to the fruits of our own labour. Ever-rising taxation slowly turns us into caged birds, working for the ends of others. Taxation by stealth is the slow death of individual liberty and we should hiss loudly in defiance or end up plucked completely bare.

Mandatory diversity

Jeremy Sammut

20 April 2018 | Ideas@TheCentre

The Israel Folau saga has reached an ending of sorts — but, unfortunately, with ominous implications for religious freedom.

Rugby Australia announced that Folau — its star player who is coming out of contract — would face no sanctions (this time at least) over his theologically-based comments on social media about homosexuality and hell.

However, to appease sponsors lead as Qantas, RA CEO Raleane Castles sent a memo to all Australian Super Rugby players warning of their contractual obligations under RA’s Inclusion Policy and to use social media in a respectful manner.

The implication is that any further expression of his religious views by Folau, or any other player, that contradicts the corporate inclusiveness mantras of RA and its sponsors will be treated as grounds for banishment from the code.

This is the same place that the National Rugby League seems to have landed on this issue — given CEO Todd Greenberg’s statement that Folau’s public statements about his religious beliefs would not be acceptable in rugby league.

The failure by both codes to respect the rights of players to express genuinely held religious beliefs is alarming, since religious freedom is meaningless without the right to affirm one’s religion in the public square.

As my colleague Peter Kurti has rightly argued, if ‘”corporate guardians of public morality” get their way, the real values of tolerance — tolerance of true diversity of opinion that is the bedrock of traditional freedoms of thought, speech, conscience and religion — looks set to disappear in Australia.

It is ironic, therefore, that Folou has offered the best defence of these values — and in the process disproved the ‘kindest’ criticism levelled at him, which was that his views should be ignored as those of someone “employed in a profession that values brawn over brains.”

Folau’s response to the storm over his comments is a thoughtful, measured, and eloquent meditation on freedom of religion and its intersection with contemporary politics — which any speech or article composed by the average MP would struggle to match for depth of meaning and insights into balancing the competing rights of different groups in society.

Falou’s response is worth reading because it traverses the key questions we face in these culturally polarised times.

Do we want to live in a country where our shared commitment to fundamental freedoms for all allows us to find ways to live together harmoniously despite our differences?

Or do we want to live in a country where sporting bodies and corporations mandate ideological conformity and force us all to think, speak, and act the same in the name of ‘diversity’?