Tax reform: time for remedial maths lessons

It seems everyone needs to go back to school to re-learn their sums. Public debate over tax reform has shown a disturbing lack of maths knowledge.

Firstly, we had the Greens arguing that a carbon tax would raise as much revenue as a GST, but with only one third of the cost to households. But where else would the revenue from a carbon tax come from? Thin air? They can’t argue that the cost is borne by business – because then the same argument would apply to the GST. Either business bears the cost of both taxes, or households bear both costs. Either way, the total impact on households would be similar. And exports can’t fill the gap in the Green’s calculations, because Australia’s exports aren’t large enough.

The Coalition also needs remedial lessons. They have argued that tax reform must not increase the tax burden, and tax reform will include compensation for households that don’t pay tax, implying an increase in welfare spending. So taxes won’t increase, but spending will go up – meaning an increase in the budget deficit. But the Coalition has argued the deficit should be reduced. These calculations don’t add up.

Next on the remedial class list is the ALP, who have been arguing that taxes are currently too low compared to 2002, and there were too many tax cuts given in and around 2002. However, the ALP at the time, and more recently in 2011, argued that taxes were are at record highs. Taxes can’t be too low compared to a year when taxes were too high.

ACOSS is also on the list for extra maths lessons. They released modelling arguing the poorest households paid 13.4% of their income in GST. Working out the sums, this means that a household with income around $26,000 has consumption of around $71,000. This doesn’t make sense.

And finally, all tax commentators need to check their sums. The proceeds from a possible GST increase have already been spent multiple times on compensation; personal tax cuts; company tax cuts; reductions in stamp duties; funding for hospitals, education and infrastructure; and to reduce the deficit. This also doesn’t add up – everyone involved in the tax debate should also head back to class.