Queensland Senator James McGrath has called for a new modernised tax system that includes lower income taxes and a 15% GST on everything.
In a wide-ranging speech to the senate, Senator McGrath described Australia’s tax system as old-fashioned and over-reliant on the taxing of incomes, which accounted for 58% of government earnings – 39% from individuals.
“Personal income tax – especially one with high marginal rates like in Australia – is less than ideal economically,” Senator McGrath said.
“It discourages people from working and earning more, and has a greater effect on decision-making than a consumption tax.”
The senator added the answer to the problem was, in fact, an increased GST that applied to all items.
“It is not popular to say it, but consumption taxes like the GST are amongst the most efficient taxes at our disposal,” Senator McGrath said.
“We should follow the lead of our Kiwi cousins: broaden the GST to everything and increase its rate to 15%.
“Accompanying income tax cuts and increased income support for pensioners and others can more than cover concerns about equity for low income earners.”
Senator McGrath suggested the changes would “go some way to freeing state and territory budgets from federal meddling”.
“But we should go further and once again share the income tax base with the states and territories in exchange for a further reduction in Commonwealth income tax rates and the elimination of tied grants and other specific-purpose payments,” he explained.
“States should be able to set income taxes and should be accountable for the monies raised and the monies spent.”
Senator McGrath added Payroll Tax should also get “the chop” in any reforms.
“It is a key revenue stream for the State and Territories to be sure – representing 10% of their revenues… but the effect of payroll tax is less jobs, lower wages and higher prices – a disastrous troika for our economy,” he said.
He suggested the reforms should be taken to the next election.
“It’s important that the Liberal National Party takes to the next election a platform of reforms that deliver lower taxes,” Senator McGrath said.
“In keeping with the spirit of the Magna Carta, it is only with the peoples’ consent that governments have the right to impose tax, and so any change should have a mandate from the people.”
He finished his speech, saying: “Low taxes are good for you. The time has come for my party and my government to lower taxes, as lowering taxes never hurts anyone; a low tax economy will help Australia and will help Australians.”