Tax reform emerged out of the 2020 Summit but one guesses its seeds were planted well before. In today’s Age, Tim Colebatch asked 2020 participants what type of reforms the government might consider. I mentioned income-contingent loans and the idea of making the filing of an actual return optional. Then I said this:
Dirkis and Joshua Gans of the Melbourne Business School argue that it also needs to look at household welfare payments, because they are so interwoven with the tax system. Dirkis argues that when a household earning $100,000 a year is eligible for family welfare, a lot of revenue is coming in as taxes and going back to the same people as welfare.
Gans points out that many welfare payments such as child care and family benefit A are paid on the basis of household income, yet the tax system persists in treating us all as single people. And, he asks, instead of paying things such as the baby bonus or maternity leave, why doesn’t the Government use the tax system in effect to lend people money when they need it, such as when they stop working to have a baby. Instead of giving them the baby bonus, just give them tax credits that they can pay back when they’re in a job again.
If we are going to persist with policies related to the household, it is only fair and efficient to consider means of allowing households to become tax units — well, as opposed to resorting to ‘outside the system’ means such as trusts (something that is only accessible to the rich).