By David Collyer, cross-posted from Prosper Australia:
The calls for tax reform come thick and fast – like hammer blows upon the Turnbull government, on its knees praying for a recovery in public opinion.
The AFR yesterday gave Australian Institute of Company Directors CEO Elizabeth Proust the pulpit to call for an increase in the Goods and Services Tax to 15 per cent.
Proust is a staunch advocate of first class infrastructure, sound corporate governance and quality education. So why is she promoting a third class tax certain to impose real harm on the poorest?
Thinkers have not forgotten the damning assessment of the respected National Centre for Social and Economic Modelling that clearly shows the poor will pay the most:
And compensating the poor with much bigger government transfers would have consumed all the revenue gains – which just doesn’t make sense, even to Treasurer Scott Morrison. Increasing the GST is a mean and grubby shift of the tax burden from the richest to the poor. It is no better than Britain’s Corn Laws (1815-46) that taxed bread but not luxuries, and nearly caused a revolution. Proust’s advocacy of this very bad idea diminishes her and the company director elite she represents. Has she learned nothing from history?
Simply fighting by class for a greater share of the pie is a zero-sum game. The answer lies elsewhere – in tax bases that are fair, reflect people’s capacity to pay and promise to drive economic activity, not retard it.
Proust condemns conveyancing Stamp Duty for its propensity to ‘distort decision-making and contribute to the notorious immobility of our labour force’. Yet replacing it with more GST would simply boil off in another round of land price inflation. This is not the solution to Australia’s woes. If she really wants a dynamic and growing economy the answer lies elsewhere.
Dr Ken Henry and federal Treasury showed the way forward in Australia’s Future Tax System. It demonstrated land tax and resource rent taxes are best, while listing 125 bad taxes ready for the chop.
We can actually make a profit on land tax, an extraordinary quality that should excite state and federal Treasurers enough to stare down the ranks of carpet-baggers and vested interests – including Elizabeth Proust – deployed to resist real reform and the universal prosperity it would deliver.
