Ross Garnaut suggests that the tax free threshold be increased to $25,000. That is a good policy anyway – controversial I know. A few years ago when I looked at that idea, the cost to revenue was $1.5 billion for every $1,000 increase in the threshold. So a $19,000 increase would cost $28.5 billion in the first instance. Money well spent – I reckon the work incentives and reduced churning would be beneficial to the economy overall. But Garnaut’s carbon tax will only raise $11.5 billion and of that 55 percent will be paid to low and middle income households. So he’s a bit short. As a welfare policy it sucks too. That’s about $6 billion to supplement a welfare budget of over $121 billion already.
Update: Now that the details of the carbon tax are available it turns out it is not budget neutral as the government kept promising.
Mr Swan has defended the cost of implementing the government’s carbon price policy, saying there are always upfront costs when there is such a large reform.
“It is broadly budget neutral over the forward estimates … but over the forward estimates the costs are relatively modest,” Mr Swan told ABC radio on Monday.
But Mr Hockey points out that the cost of the scheme on the budget is $4.3 billion over the forward estimates.