ECONOMICS DIWA HOPKINS Economist LOOKS LIKE REFORM, SOUNDS LIKE REFORM... What do income tax cuts say about the wider political landscape and what hope is there for real tax reform? In the closing weeks of parliament’s winter that stacks up to this benchmark was the THIS CHANGE MAKES sitting, the government managed to pass introduction of GST 17 years ago. THE VERY BUSINESS OF into L-A-W- law a program of income tax So what hope is there for major, cuts (worth $144 billion) set to take effect meaningful reform – namely changing GOVERNING – PASSING over the course of seven years. the tax mix away from inefficient and/or LAWS THROUGH BOTH This is quite an achievement given the unnecessarily high taxes to broader-based HOUSES OF PARLIAMENT – . more efficient taxes? A LOT HARDER, WITH A 1990s the senate has been increasingly To our reckoning, much of the redefined as a chamber subject to small opportunity lies at a state level. While WHOLE LOT MORE COOKS parties with disparate philosophies. In fact, politics at the state level isn’t immune to IN THE KITCHEN the two major parties now receive fewer the corrosive and fragmenting effects of primary votes than any time since federation. social media (which ultimately undermines The reasons micro-parties have grown the ability of politicians to gather support for (namely a significant increase) in the way their representation are numerous: the hard reform), these appear to have greater general rates are levied on both residential effect of social media, the decline in party force at the national level. Moreover the and commercial properties. While the membership, an increasingly pluralistic view micro-party phenomenon that has changed transition of this reform is not without criticism of politics, and the commercial incentives of the very fabric of the Australian senate does (you can find detailed analysis and discussion running for office (since 1994 political parties not appear to be as great a factor in state at economics.hia.com.au) the point is that have been paid based on the number of parliaments. And finally state governments, the ACT has made substantial reform to the votes they win at elections). This change at least in recent years, appear to have been structure of their tax base to provide a more makes the very business of governing gaining stronger election mandates to enact efficient and stable tax system. – passing laws through both houses of their particular platforms. HIA is among a wide cross section of the parliament – a lot harder, with a whole lot We need only look back to 2012 to find an community that has long advocated for the more cooks in the kitchen. example of major reform at the state/territory abolition of stamp duties. While we would All of this is set against a backdrop level. In their 2012/13 budget the ACT expect to see the strongest leadership on of (and driven by) the ever-expanding government announced an ambitious 20-year such important issues of reform occurring at and increasingly pervasive role of social program to reform the territory’s property the national level, the new political paradigm media coupled with a 24-hour news taxation system. The focus of this program suggests that reform may best be tackled cycle with highly politicised and polemical was the abolition of stamp duty and a change from the bottom up. conversations. While the passage of the latest income tax cuts are a positive step – they can’t be considered as reform (despite some media hype suggesting otherwise). If we think about reform as entailing some kind of short-term or immediate clearly definable ‘pain’ or cost to the community or to part of the community in order to achieve long term, outweighing and widespread gain, then these income tax cuts don’t meet that criteria. This tax change is not a structural change, but an adjustment to rates of tax. In fact, the most recent national reform BUILDING NEWS ISSUE 3/2018P7