15 July 2011 Volume: 21 Issue: 13 North Korea's ... - Eureka Street

Volume 21 Issue: 1315 July 2011But the package goes beyond offsetting cost of living impacts. In addition to the increases inallowance and payments, the package provides significant reductions in personal tax forpeople on low and middle incomes. This raises revenue from a bad activity (the creation ofcarbon pollution) to fund good activity (progressive reform of the taxation system).This is a historic reform. It is clever policy. It is good policy. It’s a bit like spinning goldfrom straw. It’s exactly the kind of smart and gutsy approach we want to see from thisGovernment, and from every government.It also creates a virtuous circle. Analysis commissioned by the Garnaut Review Updatefound that combining a carbon price with this sort of targeted tax reduction could promoteemployment and halve the short economic impacts of reducing emissions. This meansAustralia could achieve a minus 15 emissions target for around the same impact as the minus5 target without these tax reductions. Clever, and good.For those who like detail: the tax changes triple the tax free threshold from $6000 to $18,200per year from July 2012 and rolls in most of the existing Low Income Tax Offset to make thepersonal tax system simpler and more transparent. This helps reduce barriers to employmentby lowering the excessive effective marginal tax rates that create poverty traps for low incomeearners.The most immediate benefit is that Australians moving from welfare to work will no longerhave to wait a year or more for their tax refund, and instead will receive that money in everypay packet.This is a significant first step towards the income tax reforms recommended in the HenryReview, although more needs to be done. (So we do not need to cancel the Tax Forum yet.)A final dimension is the comparison between this package and the Carbon PollutionReduction Scheme that failed to attract the support required before the last election. Usually,you would expect a controversial package to return in a weaker, watered down form. In thiscase, minority government and good negotiation skills seems to have delivered the opposite.The new package has a stronger long term target (an 80 per cent reduction from 2000 levelsby 2050), more transparent and independent advice (through the Climate Change Authority),a market based buy out of high polluting electricity generation, and more attention tocomplementary action on energy efficiency and land-based emissions reductions.All in a context where only one side of the Parliament, and the cross benches, seem to haveany interest in constructive debate about how to respond to the real and pressing challengesfacing our nation.The Government, the Greens, and the independent members of the MPCCC all deservecommendation for delivering leadership and a practical package of measures that hit severalimportant policy targets. This package positions Australia for the future.©2011 EurekaStreet.com.au 22