Economists Comment on Australian Budget Tax Proposals

Five economists interviewed by the ABC assessed the federal budget released two weeks ago and the opposition reply speech. They supported several tax changes but said larger reforms are still required.

Independent economist Chris Richardson said the tax debate had focused on small ideas for too many years. He welcomed discussion of bolder measures and said the capital gains tax discount should be replaced with income averaging rather than a 30 per cent minimum tax.

Richardson added that fixing the capital gains discount would reduce the need to alter negative gearing. Former Treasury secretary Ken Henry said the budget addressed long-ignored problems of intergenerational equity. He noted that personal income tax has been the only revenue source rising as a share of gross domestic product while other bases, including GST, have fallen.

Australia chief executive Amy Auster said the budget represented a step forward on tax reform. She cautioned that changes to the capital gains tax discount could affect owners of small and medium-sized businesses if applied universally. Independent economist Saul Eslake welcomed changes to negative gearing and capital gains tax.

He said the measures would reduce investor competition for established homes, which account for over 80 per cent of property investment lending. Eslake also supported reforms to discretionary trust taxation but urged separate treatment for start-ups.

Eslake said the Working Australians Tax Offset would provide up to $250 annually to wage earners. He noted the offset moves toward a dual income tax system used in several European countries.