On 2nd thoughts, the Liberal's tax cuts are moderate

On closer inspection, I'm a bit disappointed to read the fine print on yesterday's news story about the Liberal's proposed tax cuts.

To begin with, the LDP have correctly pointed out that the tax free threshold isn't actually being raised one cent. Instead, the Low Income Tax Offset is being raised so that people who will earn $14,000 will get a tax rebate to cover any tax debt, so they owe nothing.

And this is a form of churning, one of the biggest problems with the status quo, something which CIS researcher Peter Saunders has identified in several pieces. Churn is as simple as it sounds. .. .governments take more taxes than they should in the first place, churn it around, throw it in the air, and hand bits of it back to the people who paid it in the first place via welfare payments, baby bonuses, tax credits, co-contributions etc etc.

As the LDP describe it:

Churning exists when money is recycled from taxpayer to bureaucracy and then back to the same taxpayer. Not only does it waste significant amounts of money on administration and compliance costs but it contributes to high effective marginal tax rates and undermines the incentive to work.

"The Liberals have no plan to reform the welfare system. As a result, people on low incomes receiving welfare payments will continue to lose a substantial part of any money they earn. It is a terrible disincentive to join the workforce.

Still.. its better than anything Labor will offer.