US tax guru Dan Mitchell criticises federal debt levy

DanMitchell2Cato Institute economist and former George H.W. Bush adviser Dan Mitchell gave a fantastic presentation tonight to the Queensland branch of the Economic Society on tax avoidance and tax competition. Dan is highly critical of OECD efforts to discourage member countries from competing on tax rates to attract capital investment, which he believes guarantees the perpetuation of fiscal laxity by spendthrift governments. Dan observed that the OECD’s efforts have been encouraged by the drop in tax rates around the world that has occurred since the 1980s as capital has become more footloose in a better connected and more globalised world.

To stimulate economic growth, Dan noted that one of the best policy moves Australia could make would be to cut our highest marginal tax rate, which, with the 2% debt levy, is close to or above 50%, depending on whether the taxpayer has private health insurance or not (see this PwC note). He was highly critical of the debt levy, which is supposed to be temporary. Dan noted, however, how temporary taxes have a habit of becoming permanent. I was pleased to hear Dan’s view on this issue, as I have previously criticised the debt levy:

ABC radio interview on the debt tax and paid parental leave

Incidentally, Dan Mitchell was interviewed on ABC radio by Steve Austin this morning:

Cato Institute’s Dan Mitchell

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2 Responses to US tax guru Dan Mitchell criticises federal debt levy

  1. Katrina Drake says:

    The highest marginal tax rate is well above 50.5%, as you have not allowed for the 10% GST that applies on the remainder of the disposable income.

    Many mature professional couples are doing the maths ….. earn 2 incomes and pay half in taxes… or reduce to one income, enjoy a better quality life, and a lower bracket.

    It really seems to be un-Australian to be expected to hand over more than 50% of your earnings to be wasted.

    The maternity leave scheme will achieve very little to enhance women’s place in the work-force, or productivity generally. As the current unproductive and wasteful high 50%+ tax-rate is stripping high paid professional women for the work-place.

    I am highly critical of the government’s high-tax, high-churn and ineffective policies of social engineering with the family.

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