WA’s economic mismanagement is not a reason to review how the GST is carved up

The questions in the terms of reference, that the Treasurer has given to the Productivity Commission, were answered almost five years ago by a similar inquiry, which found many of the concerns about the current system were overstated. And, contrary to the Treasurer’s insinuation that “the current approach of horizontal fiscal equalisation creates disincentives for reform”, the previous inquiry concluded there was not enough evidence of efficiency losses in the economy. Saul Easlake (University of Tasmania) explains.

More equal societies perform better

Australia is not the egalitarian nation that many people think it is. Rather, in terms of wealth inequalities, we’re mid-ranking on the international league table and we’re becoming more unequal. Frank Stilwell (University of Sydney) explains why that matters and the role that reintroduction of an inheritance tax might play.

Gonski model was corrupted, but Labor and Coalition are both to blame

The Gonski report was designed to clean up Australia’s opaque and complex system of school funding and address significant inequalities by establishing a new needs-based funding model, but then messy politics got in the way at the point of implementation. Glenn C. Savage (University of Melbourne) Steven Lewis (The University of Queensland) argue that the result was a perversion of the Gonski ideal – an inconsistent patchwork of approaches across the nation that protected the vested interests of non-government schools.

Lazy tax reform - increasing GST to cut income tax - would likely be a zero sum game

Flavio Menezes (University of Queensland) writes in The Conversation that tax reform will certainly be challenging, but we should go beyond lazy reform – increasing the GST as part of a tax mix switch strategy that is likely to have limited impact on growth – and instead be innovative and bold.

GST reform

John Freebairn (Professor of Economics, University of Melbourne), writing in The Conversation, considers what an equitable GST reform package should look like.

Why pensioners are cruising their way around budget changes

David Ingles and Miranda Stewart (both from the Crawford School of Public Policy at ANU) write in The Conversation that anecdotal evidence of pensioners significantly changing their lifestyle behaviour is a rational response to the recent Budget changes to the income and assets tests for the part pension. In contrast to the Budget changes, the Henry Tax Review and the Shepherd National Committee of Audit both recommended that the separate age pension asset test should be replaced by a comprehensive means test.

Expanding the GST would hit the ‘middle’ and women the hardest

Patricia Apps is a professor of Public Economics at the University of Sydney, and one of Australia's best tax policy analysts. This article on the redistributive effects of the GST (originally published in The Conversation) highlights the negative consequences for tax incidence and economic participation from broadening the GST.

While I don't disagree with her analysis, I have a relatively minor quibble about her policy conclusion—broadening the GST base (and not increasing the rate) to improve the efficiency of the tax is worth doing for its own sake. However, we need to acknowledge Professor Apps' analysis and accompany GST broadening with reforms to the income tax and transfers system which, not only address the redistributive problems of broadening the GST, but also improve the progressivity in the tax and transfer system and remove the distortionary effects of that system on workforce participation.

What Professor Apps' article does highlight, is how poor is the quality of taxation analysis and debate in this country. To the extent that she shines a light on simplistic (even sloganistic) notions of tax reform, her article is commended for your reading pleasure.

IMF: Redistribution, Inequality and Growth

In a staff paper published in February, the IMF examines the links between rising inequality and the fragility of economic growth. They note that conventional wisdom would suggest that redistribution would in itself be bad for growth but, conceivably, by engendering greater equality, might help growth.