Does Treasurer Joe Hockey understand his portfolio?

 Hockey: income tax burden to an increase of Labor keeps blocking savings measures

“We have been warning about bracket creep and we want to deliver tax cuts” said the Treasurer.

Joe Hockey:  Finding people to blame is becoming increasingly difficult
Joe Hockey: Finding people to blame is becoming increasingly difficult

It’s understandable that Joe is feeling frustrated about his failure to get his budget through the Senate. But he’s got a stop blaming everybody else except himself. The budget was ill-conceived and inequitable and the Senate called him on it.

Linking the Labor opposition’s failure to pass the budget through the Senate to incremental bracket creep in the taxation system is just nonsense. They are two quite separate issues. And as Treasurer, Joe Hockey should know that.

Bracket creep is the way that Australians end up paying extra tax when their incomes are adjusted upwards for inflation and they move to a higher tax bracket.  It is an inevitability of a tax system where higher income earners pay a higher proportion of their income in tax. Eventually everybody’s tax rate is going to go up.

The benefits to the government are quite significant. Bracket creep increases the proportion of their income said Australians paying taxation. It is taxation increase by stealth. But it is gradual and it only comes at a time when people’s incomes are increasing either through inflation or through promotions and higher salaries.  Most people probably don’t notice it but now Joe has managed to make it an issue.

There are two ways to get around the problem o bracket creep.  The first is to have a flat tax rate and the second is to adjust the rates upwards as wages rise. Passing the budget through the Senate is not one of the ways of getting around this particular problem.

With the budget stalled in the Senate, Hockey may not be able to provide tax cuts  for Australians. It is becoming increasingly clear that tax revenue is not equalling expenditure and that Australia is poised at the top of a rather nasty slippery slope.

The difficulty that Hockey and Chris Pyne have had in the Senate indicates that the people’s representatives are not prepared to cut social service delivery particularly in the area of health and education.

But by now, most Australians have realised that if they wish to maintain their level of social services, they will have to pay more tax in some form or other, be it through increases in the GST or increases in taxation rates on both business and individuals.

What Hockey should be arguing is that in the light the position taken by the Senate, it will be necessary to increase revenue through taxation.

Or to look at the concessions that are provided to some favoured members of our society.

What we can have then is a debate on things like negative gearing, the concessions to the mining industry and superannuation concessions.

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