In Canberra today, the Australian Greens announced a new tax fairness policy to remedy a design fault in the current system.
According to the Greens, it seems that it is only Australian public servants (local, state and Federal) who have been able to negotiate salary increases. As a consequence, because of their increased salaries, public servants are constantly pushed into higher tax brackets with the result that impost of bracket creep disproportionately falls on them.
Independent economic research has confirmed this phenomena. The Australia Institute economists have models showing that up to 80% of Commonwealth bracket creep tax receipts are paid by Australian public servants.
The Australian Greens believe that just because public servants earn more than private sector workers, they should not be required to pay more tax. Australian Greens’ Treasury spokesperson Adam Bandt said:
Australian public servants should not be forced to carry the brunt of government spending, including spending on other public sector salaries. This is a role for the private sector. It is manifestly unfair that just because public servants have been able to extract additional salaries that they should be forced into higher tax brackets.
In response, the Australia Greens have announced the Tax Equalisation and Redistribution Designation (TERD). Under the TERD, full-time, part-time and casual public sector workers will be subject to a separate tax schedule with a flat 15% rate for income above $500,000. Public servant income below $500,000 will be tax free.
Opposition leader Bill Shorten has indicated that the Labor Party would consider this policy, but he also acknowledged that he was personally positively predisposed. Shorten said:
As long as union members, particularly private sector union members are disadvantaged, I think the Labor Party would be able to support this policy.