Megalogenis' article on tax reform disappointing

Comments on George Megalogenis “The breakthrough”, 17/10/2009, http://blogs.theaustralian.news.com.au/meganomics/index.php/theaustralian/comments/the_breakthrough/

George, a few comments.

Firstly, your argument about equity of tax on superannuation means you would take Australia back many years and show no vision for the future.

It is a distorted and very biased and incomplete argument. For example, you used Bowen's line: “Tax concessions for low and middle-income earners to save through super are less than those for high-income earners,” Bowen said. “The fact that the top 5 per cent of contributors make around a quarter of all concessional contributions to superannuation - while 1.2 million people do not receive an income tax benefit on their concessional contributions - is a compelling one.”

What about the earnings of the same top 5% contributors? Is that less or more than the 25% that they take in the total of concessions? Have you attempted to examine that or do you have any figures on that? Unless you can demonstrate that their earnings are less than 25% of the total earnings, your argument and for that reason Bowen's line is nonsensical.

Even their earnings are less than 25%, the argument is not necessarily correct either. By encouraging more people to contribute more to their supers, the future burden to government and taxpayers will be lowered, that will make more public money available to provide aged pensions for those who have not contributed enough, whether they had the ability to contribute or not. This must be taken into account when talking about superannuation because super is a very long term social project; especially there is a coming potential crisis of population aging.

On this, Bowen has totally failed, so your argument based on his line is very problematic indeed.

Secondly, you don't have any comments on top personal tax rate and its relation with company tax rate, as indicated by "There is no appetite, either in the review or in the government, for a re-run of the argument on the top personal tax rate. Henry wants the company tax rate cut reduced, but the top personal tax rate will not be following it down. Any long-term changes to the income tax scales, and to the payments system, will focus on middle and lower-income earners."

It is disappointing for a review of tax reform not to consider this point in the age of increasing globalisation and tax competition not only in company tax but also in personal tax, and the fact that many countries have lower personal tax or introducing a personal flat tax.

What tax reform is that? Why should you concur with it by endorsing it or not commenting on it?

Thirdly, the argument on federal financial relations is incorrect at the best or wrong completely. You simply take the federal government's line. You need at least to present any simple fact to demonstrate that the share of state's growing tax was falling to support that the states was push tax responsibility to the federal government. Unless you do that, one cannot take your argument seriously.

On the other hand, what about the share of state expenditure on services relative to all government services? Was that falling or increasing?

So when one talks about federal financial relations, one cannot take side and simply follow the line of one side against the other. Unfortunately, you just did that.

I am afraid to say that I started with some issues, but by now I have realised your understanding of a good tax system is problematic and your article is disturbing.