Peter Costello Reminds Everyone What a Real Economic Reform Is

“My reform is bigger than yours” is the underlying message behind political debates according to Peter Costello. The former treasurer reminds us that the real reform should not be about spending more but taxing less.

“If there’s one word overused but under delivered in Australian politics it has got to be the word ‘‘reform’’. Everyone wants reform. There’s economic reform, welfare reform, education reform, tax reform. You name it, it has got to be reformed.

And every political reform has got to be dressed up in big and dramatic terms. When Joe Hockey announced, in the 2014 Budget that universities would be allowed to set their own fees, he described it as “once-in-a-generation reform”. When Wayne Swan announced the mining tax he said, “if you think about reforms of our economy and the economic system in our lifetime, this is more significant than any I can think of.

‘You think once-in-a-generation is big? Mine is bigger than anything in your lifetime!’

That’s why I am sick of hearing newspapers, industry lobbyists and professional conference-goers calling for reform. Reform means improving something. Yes, we are all in favour of improving things. That’s not the question. The question is, what problem do you want to fix?”

Instead of the ego-peddling vote-gaining kinds of “reform,” Costello points to a genuine improvement of the political system - what should have been the story of a lower income tax.

“What is the problem in our tax system? Here’s the main one — our top tax rates are too high and they cut in at income levels that are too low. In his farewell speech last week, Joe Hockey said the top tax rate should be 40 per cent. In the 2007 election campaign the Coalition laid out a plan to reduce it in stages to 40 per cent by 2012. Kevin Rudd adopted the plan, but said that rather than step down year by year he would do it in one hit in his second term (ending 2013). So the last three governments all agreed this was a problem to fix.

What actually happened? The top tax rate didn’t come down, it went up to 49 per cent. For the last seven years average wage earners have not had their tax thresholds adjusted, so they are facing higher average tax year by year. The problem is worse now than it was when people started promising to fix it!”

Lastly, Costello takes a firm stance against those who say they “don’t mind paying more taxes.”

“I am sick of hearing well-off people say they would like to pay more tax. They can do that any time they like. They don’t need any change to the law. They can write out a cheque and send it to the government. They can bequeath money to the government in their wills. They can refuse to claim deductions, or franking credits, or whatever they like. But generally when you hear people say they would like to pay more tax, they are saying they would like other people to pay more tax as well. That doesn’t count as selfless behaviour.

So too with economic reform. Everyone wants economic ‘‘reform’’. We should all be happy and get on with it. But sorry to be a party pooper. Shouldn’t we ask the right question? Before we rush into reform shouldn’t we be clear about the economic problem we want to fix?”


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