Keep taking our policies, Tony
Issued 10 August 2010
The Liberal Democrats welcome Tony Abbott’s announcement that the Coalition will move toward implementing a flat tax with a high tax-free threshold.
“A flat tax and high tax-free threshold have been part of the Liberal Democrats policy for a long time now, and was part of our submission to the Henry Tax Review,” said Terje Petersen, Liberal Democrats candidate for Bennelong.
“We’re pleased to see the Liberals finally pick up some economic reform ideas. Of course, Tony is only talking about a watered down version of the Liberal Democrats policy, which calls for a 30% flat tax on income over $30,000, but it is a good start.”
Terje went on: ”The Liberal Democrats have a lot of other policies we will be happy for the major parties to steal. For starters, they have missed out the most radical part of our tax policy, replacing the welfare system with a negative income tax and living wage. But we think it is step in the right direction. If either Julia or Tony are stuck for more policy ideas, we’ll be pleased to help.”
LDP Reform 30/30
The Liberal Democrats tax policy does not argue for incremental tax and welfare reform. Instead it offers a new template from which to consider tax and welfare issues.
Reform 30/30 includes a tax-free threshold of $30,000 and a flat tax of 30% above that. All taxes (company, capital gains, fringe benefits) would be equal at 30%.
Welfare would be replaced by a sliding scale of payments (called a Negative Income Tax, or NIT) starting at 30% of $30,000 for those with no other income. As income was earned, NIT payments would be reduced until income reached $30,000.
For example, if you earned $0, you would receive 30% of $30,000. If you earned $10,000, you would receive 30% of $20,000. If you earned $25,000 you would receive 30% of $5,000. No tax would be paid at any of these levels.
One advantage of the NIT is that it removes the need for a minimum wage. Wages can be determined by demand and supply, with those on low incomes receiving the NIT as a supplement. This would result in a significant increase in the number of jobs available, especially benefiting the long term unemployed and those on disability support.
Probably the biggest advantage is that the effective marginal tax rate is always 30%. Under the current system the EMTR is variable and can be higher than 80%, creating a major disincentive to earn additional income.
30/30 solves the poverty trap which locks low income families into welfare. Under the policy, low income earners can climb the ‘ladder of prosperity’ to higher incomes and a better standard of living.
Only the Liberal Democrats offer a solution to the poverty trap whilst encouraging saving and investment in our future. The era of buying votes with welfare payments to those who have paid tax must come to an end.
The Liberal Democrat policies can be found here: www.ldp.org.au
LDP First Aid
Mum and Dad, with three kids, laid off thanks to the wonders of capitalism. Here, have $20,000 a year between you to raise the kids.
Have you guys maybe seen this?
@Chris
How much p/a would this laid off Mum and Dad get off Centrelink currently?
Not sure of the exact figures, not intimately familiar with the system, but a childless couple is eligible for almost 22k newstart. For singles it’s about 10% more per person.
Kids are more complex, but could add from $7500 to almost another $20k, depending on age.
Actually Chris the 30-30 figures are for childless people only. There is not one reference in the Liberal Democrats policy to children, but the topic is mentioned by the full Policy Monograph.
Options include raising the tax-free threshold for each child (which would result in the Negative Income Tax providing extra per child, as well) or providing additional payments for low-income families with children.
Also the intention of LDP policy is to increase employment, so there would be less people in the scenario you mentioned needing support. Additionally we support measures that lower the overall cost of living.
As a minor party the Liberal Democrats don’t have not been able to have our policies fully costed by Treasury. Our policies are meant to provide a general indication, but should we elected you can be assured that with the assistance of a full-time parliamentary team we’d be better able to detail our policies. Already our tax-welfare policy is more detail specific than other minor parties with parliamentary representation such as Family First and the Greens.
How exactly are you going to reduce the cost of living without regulations?
I’m also intrigued as to why you think this policy would remove the need for the minimum wage.
Chris, the minimum wage has long been accepted by economists as destroying jobs. By abolishing the minimum wage employment opportunities would increase.
This is offset by the fact that the 30-30 policy reduces EMTRs as well as providing a living allowance to those on lower incomes. Someone earning $20,000 per year of employment income would receive a $3000 top up under the 30-30 scheme and pay no tax. Currently EMTRs are as high as 70% for some welfare recipients, which penalises them for working and provides an incentive to stay welfare dependent.
http://en.wikipedia.org/wiki/Minimum_wage#Debate_over_consequences
The LDP falls firmly on the side of this debate that is opposed to the minimum wage. We believe the minimum wage is most harmful to the long-term unemployed and we seek to remedy that by shifting incentives.
As for the cost of living, a lot of the cost of living pressures are due to over-regulation, not under-regulation. By adopting unilateral free trade consumer goods would become cheaper. Additionally we support the abolition of zoning laws that keep large tracts of land locked up. By increasing the land available house prices and rent would both reduce in price. Free market societies trend towards having the purchasing power per capita and we believe that through our policies the purchasing power and standard of living for most Australians would increase.
You obviously saw the words ‘minimum wage’ and felt the urge to go off on some spiel unrelated to the question. The question was how will this flat tax/NIT policy remove the need for the minimum wage, as is claimed in the press release?
As it is, the minimum wage is about $30k a year. If that were to be removed, and people were being employed for only $20k pa, they’d only have $23k to live on. That doesn’t seem like a good deal for anyone – except the people earning hundreds of thousands at the other end of the scale.
I wonder if you noticed in that link the example of the minimum wage being introduced in the UK a decade ago with *drumroll* no increased unemployment associated. Not evidence of anything, just you might want to select your sources a bit better, cos that’s a bit embarrassing.
“However, prices in the minimum wage sector were found to have risen significantly faster than prices in non-minimum wage sectors, most notably in the four years following the implementation of the minimum wage.”
A bit embarrassing for you to miss this part?
Reduction of the minimum wage also reduces prices. That $23,000 is going to have a greater purchasing power than currently.
Additionally people currently on minimum wage are unlikely to have their wages reduced, the companies that employ them are employing them because it is cost effective to do so. $23,000 per year is a lot more than unemployment benefits and it is those people that our policy is targeted at helping.
Understanding the impact of the minimum wage is essential to understanding the broader impact of LDP policy. You could have a flat tax/ NIT without abolishing the minimum wage, but once you have a flat tax/ NIT a minimum wage becomes less crucial as the working poor are supported by the NIT. That’s the main point.
The policy as it stands was costed some time ago, so I’ll be the first to admit that the numbers may be out of whack for 2010. 30-30 is a catchy name but in reality 30-32.67 might be closer to the actual policy. Indexing the tax-free threshold to the CPI (or some other indicator) is something myself and many in the LDP would support. The main point of the policy is to start talking about things like flat taxes, NITs and abolition of the minimum wage that economists have been talking about for years. We’re not trying to screw people over here but improve the standard of living for people in a very real way.
I wasn’t making any statements about the economic impact of the minimum wage, you were. The statement you made was that it reduced employment. Thus I quoted the part that contradicted that. You said nothing about cost. So no, not embarrassing for me.
Back to the original point:
Less crucial? Didn’t the press release say *remove*? Are you changing your tune?
Our intention is to remove it. But a flat tax and NIT do not necessitate the removal of the minimum wage. That is just our policy. We want to remove it because under a flat-tax/ NIT set up the arguments for a minimum wage lose saliency.
I should stop letting myself get trolled, though. I’d have more luck promoting the LDP on 4chan.
I’m pretty sure that getting called on a contradiction only counts as being trolled if you don’t consider contradicting oneself/one’s party to be a bad thing.