One policy that drew me to the Liberal Democrats is their “30/30″ Negative Income tax, which they have formally released today:
“The Liberal Democrats offer a tax policy that goes beyond reform. Sometimes, revolution is better,” said Terje Petersen, Liberal Democrats candidate for Bennelong.
The Liberal Democratic Party 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.
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 of Reform 30/30 is that the effective marginal tax rate (EMTR) 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 our policy, low income earners can climb the ‘ladder of prosperity’ to higher incomes and a better standard of living,” said Mr Petersen.
Reform 30/30 is unambiguously beneficial to the economy. It offers 500,000 new jobs, less poverty, a $90 billion bigger economy, higher growth rates, lower tax levels and a simpler, fairer tax/welfare system and more money in the budget.
“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.
“Reform 30/30 would be a major step forward for Australia,” Mr Petersen said.
