Labor hits state tax plan as ‘pre-1942’ thinking

Labor says the government’s proposal to give states and territories income tax powers would take us back to World War II.

Labor has ridiculed Scott Morrison’s “idea of progress” and declared the Turnbull government’s proposal to give states and territories the power to set their own income tax rates would take Australia back to World War II.

As Malcolm Turnbull assured voters the move would not increase the total tax hike because it would be offset by a reduction in commonwealth grants to the states, Labor, the Greens and tax experts lashed the policy idea.

Opposition treasury spokesman Chris Bowen said the proposal for “double taxation” would lead to “higher and more complex taxes”.

“Since 1942, Australia has had a national income-tax system, and yet Malcolm Turnbull and Scott Morrison’s idea of progress is apparently to take us backwards to the arrangements that applied before World War II,” he said.

“The last thing our economy needs is a different tax rate in different states and territories. The last thing employers need, individuals need is the complexity of all these different tax systems when it comes to personal income tax. The Liberals are meant to believe in lower, simpler taxes.”

Greens leader Richard Di Natale criticised the plan as a “cop out” to divert attention from the government’s failure to curb federal tax breaks.

“Dumping your budget problems on the states and territories is political cowardice,” he said. “It shows a complete lack of vision for what shared goals might be achieved with a federal tax system that works for the whole country.”

Brett Hogan, director of innovation policy at the Institute of Public Affairs, a free-market think tank, insisted any increase in state taxes should be matched by federal tax and spending cuts.

“Competition between the states for investment and in the delivery of services is a good thing and should be encouraged. It is more important to let the market sort out the best price for goods and services, than it is for taxes throughout the country to be the same,” he said.

CPA Australia chief executive Alex Malley was stunned by the proposal, which he said would create more red tape, and predicted states would raise taxes without regard for the national interest.

Arthur Athanasiou, president of the Tax Institute, criticised the idea as “a retrograde and flawed concept” at a time when the government should be moving away from reliance on income tax and inefficient state charges.

The proposal received a mixed response from the powerful Senate crossbenchers.