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Speaker 1: Welcome to ask fear and greed when we answer questions

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Speaker 1: about business, investing, economics, politics, tax and more. Are Michael

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Speaker 1: Thompson and hello Sean, Aileen, you like what I did there?

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Speaker 2: I did a tax.

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Speaker 1: I gave a little hint as to what today's question

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Speaker 1: is all about, Sean. Is Australia's tax system too reliant

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Speaker 1: on income tax? And this is obviously a very topical

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Speaker 1: one considering what the Treasurer Jim Chalmers was talking about

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Speaker 1: yesterday and the potential for significant tax reform in coming years.

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Speaker 1: It comes back to that basic question of are we

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Speaker 1: too reliant on income tax? The tax that you're paying

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Speaker 1: that I'm paying arguably too much of.

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Speaker 2: Yes, So the answer is yes, but we kind of

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Speaker 2: have to take a step back on this. So what

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Speaker 2: is a good tax system? A tax system raises revenue

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Speaker 2: to finance the government. We get that without putting unnecessary

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Speaker 2: costs on the econ me. So tax reform is about

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Speaker 2: how revenue is raised, not just about how much you

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Speaker 2: can get. When you take that into account, the question

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Speaker 2: is is do we pay too much income tax? Income

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Speaker 2: tax as a percentage of total tax take in Australia

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Speaker 2: is relatively high. And if you look over the last five, six,

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Speaker 2: seven years, the personal income tax take has grown exponentially.

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Speaker 2: That's not right, more at a higher growth rate. How

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Speaker 2: about that, Michael, At a higher growth rate than GST,

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Speaker 2: which is another big component, probably higher growth rate than

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Speaker 2: company income tax. You had another income component and then

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Speaker 2: other taxes. So in the end go and gets money

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Speaker 2: through the GST, through company tax, through personal income taxes.

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Speaker 2: Simplifying it totally, then there's munch of other taxes. The

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Speaker 2: one that's growing most is personal income tax. What we

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Speaker 2: heard yesterday from the well next Jim Charmas didn't say it,

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Speaker 2: but it emerged from his discussion at the National Press

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Speaker 2: Club is that the income tax as a proportion of

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Speaker 2: all taxes will hit its highest level since the JST

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Speaker 2: in twenty twenty nine. And the reason we introduced the

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Speaker 2: GST in two thousand was so that we could lower

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Speaker 2: the income tax traits. And that's actually what happened. But

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Speaker 2: income tax is still providing a lot more revenue than

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Speaker 2: it should.

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Speaker 1: Okay, And is that because we are earning more money

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Speaker 1: and therefore paying more tax or is it because there

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Speaker 1: are more people of working age. We've got more people

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Speaker 1: coming into the country that are of working age and

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Speaker 1: paying income tax.

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Speaker 2: So all of the above. Now, having said all that,

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Speaker 2: remember we had a bunch of tax cuts which kicked

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Speaker 2: in earlier this year and there are more duty kick

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Speaker 2: in later. So the government and this was under Morrison

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Speaker 2: government and the Albanezi government has supported basically is reducing

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Speaker 2: income tax. But the fact that people sort of bracket

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Speaker 2: creep people have moved in higher tax brackets. That's one

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Speaker 2: of the big reasons why so much more income tax

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Speaker 2: is collected as a proportion of the title tax. Take

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Speaker 2: Donald Trump. If you said to Donald Trump, do you

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Speaker 2: like income tax, he'd say, no, we don't want any

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Speaker 2: income tax. The problem with the income tax is it

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Speaker 2: stops feel from working.

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Speaker 1: You know, I was going to ask you, what is

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Speaker 1: the downside here to the income tax percentage being too

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Speaker 1: high as an overall proportion.

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Speaker 2: Is it so once you earn one hundred and eighty

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Speaker 2: thousand dollars, every dollar after that you lose forty nine

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Speaker 2: cents in it. It really is a disincentive. Same with

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Speaker 2: a corporate tax rate. Australia's corporate tax rate is relatively well,

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Speaker 2: it's not the it's not the highest in the OECD,

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Speaker 2: but it's on the higher side of things. So Ireland,

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Speaker 2: for example, has a low corporate tax rate, so companies

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Speaker 2: move to Ireland. So what you want are people, businesses

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Speaker 2: to invest, people to spend money. High corporate tax rates,

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Speaker 2: income tax rates. Actually it's a incentive for that, okay.

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Speaker 1: Is it also setting us up to fail later on

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Speaker 1: if we are too dependent on income tax. We have

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Speaker 1: an aging population, so a greater percentage of people who

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Speaker 1: are no longer working but are still alive and there

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Speaker 1: are still there's still money needed for them, particularly for age,

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Speaker 1: pension and for health and things, and that if we

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Speaker 1: are too dependent on income tax, it just isn't going

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Speaker 1: to be enough of that to fund all.

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Speaker 2: Of it exactly right. I mean, that's a real problem.

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Speaker 2: Maybe not today, but we'll be in twenty years, thirty years,

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Speaker 2: forty years now. The answer everyone says is to rethink

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Speaker 2: the GST. Now, the gsts are used to pay tax,

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Speaker 2: so you only pay it if you're using that you're

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Speaker 2: buying stuffep Obviously there's issues around safety nets and essential

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Speaker 2: goods and stuff like that, but most people seem to think,

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Speaker 2: you know, lift the GST from ten to twelve percent

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Speaker 2: or something like that, and you could afford all sorts

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Speaker 2: of tax cuts and to help the budget. Remember, the

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Speaker 2: budget is indeficite for the next ten years on the

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Speaker 2: government's numbers, that's not really sustainable. You need to actually

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Speaker 2: improve the outlook there. So the short answer is income

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Speaker 2: tax is too big a proportion of the total tax take.

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Speaker 2: Something needs to be done about it. GST is the

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Speaker 2: obvious answer, but that is political dynamite. You know you're

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Speaker 2: going to increase ten to twelve per cent the GST.

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Speaker 2: You're not going to make any friends in the Electric Sean.

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Speaker 1: Something terrible has happened to me. Yes, in that as

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Speaker 1: you were talking, I found myself getting really excited, and

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Speaker 1: I thought, I thought of all of these things that

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Speaker 1: I wanted to ask you about this, and about kind

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Speaker 1: of changing a broad based tax like the GST. Whether

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Speaker 1: you can offset that then with tax cuts for lower

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Speaker 1: income earners because they will perhaps be affected more as

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Speaker 1: a proportion of what they're earning, if they're going to

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Speaker 1: the shops and paying more now for a life of bread.

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Speaker 1: I got all excited about all of these things, thought,

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Speaker 1: what has happened? Well, I have now become passionate about

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Speaker 1: tax REI and desperate to know more. But we are

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Speaker 1: out of time.

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Speaker 2: Oh but Michael, I've got so much more to tell

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Speaker 2: you about tax reform.

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Speaker 1: Would you like to squeeze something else in.

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Speaker 2: Or negative gearing? There's one right political dynamite. However, there's

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Speaker 2: a lot of good reason to think, why would you

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Speaker 2: actually allow that sort of tax breaks for people who

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Speaker 2: can afford it?

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Speaker 1: Okay, you know what we're going to do? Is I suspect?

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Speaker 1: And please don't view this as a turn off. We

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Speaker 1: are going to do over a long period of time.

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Speaker 1: It won't be in a run of consecutive days, so

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Speaker 1: do not worry. But we are going to look at

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Speaker 1: a few of these ideas for tax reform and assess

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Speaker 1: a few of them.

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Speaker 2: You know, to go. He'd love this. In fact, if

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Speaker 2: he actually knows we're doing it, he'll be here. He'll

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Speaker 2: just come straight.

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Speaker 1: In our fear and greed. Colleague Adam Lang, who is

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Speaker 1: the biggest tax reform enthusiast I think I've ever met.

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Speaker 2: I don't even know if that he knows what it means,

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Speaker 2: but he loves it.

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Speaker 1: Oh, it's extraordinary on it. It's just you've never seen

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Speaker 1: a more excited human. All Right, Sean, I think we've

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Speaker 1: answered this one adequately, but we are going to be

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Speaker 1: coming back it mark my words.

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Speaker 2: Thank you very much, Thank you, Michael.

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Speaker 1: If you've got your own question, it can be about

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Speaker 1: tax reform, Please make it be about tax reform, or

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Speaker 1: it can be about anything else. Send it on through

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Speaker 1: VI Fearangreed dot com dot au or any of the

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Speaker 1: social media platforms Instagram, LinkedIn Facebook, Send it through and

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Speaker 1: we will answer it asap. I'm Michael Thompson and this

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Speaker 1: is Ask Fear and Greet