Former Australian Prime Minister Paul Keating has criticized the high tax bracket in Australia, stating that anything over 39 percent is “confiscatory.” Keating believes that societies should consider how much of a person’s wealth should be delivered to the state. He argues that when the top tax rate exceeds 39 percent, it discourages individuals from making money and engaging in innovative endeavors.
Keating also advocates for the indexation of personal income tax scales to maintain incentives and hold governments accountable. He believes that fiscal drag, which occurs when inflation pushes individuals into higher tax brackets, is a detrimental tool.
Outgoing Tax Commissioner Chris Jordan supports Keating’s views, highlighting that New Zealand reduced its top personal tax rate to 33 percent over a decade ago. Jordan suggests that Australia should follow suit and abolish work-related deductions, as individuals often seek ways to minimize their taxes by shifting income to be taxed at the corporate rate.
Keating argues that his major tax reforms implemented during his tenure as treasurer, such as capital gains tax, fringe benefits tax, and dividend imputations, positively impacted economic growth. He also lowered the company tax rate from 49 to 39 percent and decreased the top personal income tax rate from 60 to 47 percent. However, in 2006, the highest income tax bracket was adjusted to 45 percent.
Saxon Rose, special counsel of taxation at Hopgood Ganim, criticizes Australia’s heavy reliance on personal taxes to support government revenue. He suggests that the country should shift towards taxing consumption, as recommended by the Tax Institute and Australian Tax Research Foundation. Rose believes that a broad-based consumption tax is efficient and sustainable compared to other revenue streams, such as stamp duties and insurance levies imposed at the state level.
Keating also calls for discipline in government spending and proposes a federal resources rent tax to capitalize on higher commodity prices. He emphasizes the need for spending discipline similar to that of the Hawke-Keating Labor government in the 1980s. Keating specifically highlights concerns about the National Disability Insurance Scheme (NDIS), which the government actuary estimates could cost $125 billion annually within a decade. He describes the scheme as “unsustainable” and warns that tough decisions need to be made to address the issue.
In conclusion, former Australian Prime Minister Paul Keating criticizes the high tax bracket in Australia, arguing that it hinders economic growth and discourages individuals from making money. He calls for a reduction in the top tax rate and indexation of personal income tax scales to maintain incentives. Keating also advocates for a shift towards taxing consumption and emphasizes the importance of discipline in government spending. He highlights concerns about the National Disability Insurance Scheme and warns that tough decisions need to be made to address its potential financial burden.
