The case against tax reform

caseagainsttaxreform

In 2015 discussion of taxation reform fills the policy air.

The Abbott government’s Re:think Tax Discussion Paper is the most recent example of this, canvassing a wide array of changes to the way in which governments taxes Australian businesses and individuals.

But why are ordinary taxpayers so imbibed with a sense of dread about the very prospect of reforming our taxation regime, which on any fair‑minded account is afflicted with numerous structural problems?

Australian taxpayers appear to have an inimitable talent for smelling a policy rat, and they fear that in fact taxation reform will not deliver good outcomes.

But why, then, are their fears well founded?

The Case Against Tax Reform, originally written by prominent Australian economist Geoffrey Brennan in 1987, answers this by making the persuasive case that an old tax is a good tax.

Without an explicit policy objective, upfront, that tax reform aims to reduce the overall size of the public sector, Brennan suggests what tax reform simply gives politicians and bureaucrats an easier capacity to collect revenues, raise spending, and grow government.

The danger is, if tax reformers get their way, we’ll end up, post‑reform, with a heavier GST load, a still heavy personal and corporate income tax, and continuous yet unsustainable increases in government spending.

The great value of Brennan’s forgotten classic warning against big‑government tax reform is that he encourages the reader to ask fundamental questions: In whose interests should tax reform serve? The taxpayer or the government?

The re‑publication of Geoffrey Brennan’s The Case Against Tax Reform by the Institute of Public Affairs is both a forceful and timely reminder of just whose interests tax reform is meant to serve.

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