Bigger government or less government? Suddenly there’s a choice in Australia. By Greg Sheridan in The Australian.

Bigger government:

Anthony Albanese and Jim Chalmers delivered a nation-changing budget that decisively cast off the milquetoast centrism they’d affected … It embraced instead the wild big ­government, massive spending, hyper-regulating approach of Gough Whitlam and Jim Cairns in the disastrous 1972 to 1975 Labor administration, which so savagely damaged the Australian economy.

This is a budget of historic consequence, a nation-changing moment.

Less government:

Opposition Leader Angus Taylor’s speech in reply was equally historic. Just as Labor is proposing a European approach but worse than Europe, which no Australian government has attempted since Whitlam, Taylor is proposing a counter-revolution.

Taylor’s declaratory ambition is as great as that of Margaret Thatcher, Ronald Reagan and Malcolm Fraser, the big conservatives the dysfunctional 1970s threw up. …

Taylor has committed to specifics which the Liberals can’t now run away from. They would transform Australia if implemented. Taylor’s key promise is to index tax brackets. At the moment, inflation relentlessly pushes income earners into higher tax brackets — bracket creep. It’s confiscatory and guarantees ever bigger government. It’s dishonest. Government grows by stealth.

Chalmers claims Taylor’s policy would cost $250bn over a decade. That demonstrates bracket creep’s moral and economic infamy. For anything which tax indexation “costs” is the extra amount government will take from taxpayers through bracket creep.

Taylor isn’t promising tax cuts, just tax neutrality. Government has become addicted to relentless, ultimately ruinous, tax increases. Nonetheless, Taylor’s tax indexation would be hard to sustain.

If a government wanted to do new things it would need to explicitly raise new taxes or cut out something else.

CGT and net zero, strangely keeping quiet:

Taylor promised to reverse the weird, damaging increases in tax on capital gains. He explicitly, even fiercely, rejected net zero. That’s Coalition policy yet hardly any Liberal frontbencher talks about it. But you can’t win arguments by silence. Opposition Treasury spokesman Tim Wilson, in a generally good Press Club speech, didn’t mention net zero and only cited tax indexation once.

You can’t prosecute policy revolution from opposition by stealth. Every sinew of Coalition effort must proclaim the Taylor revolution for it to have any chance.

Given how cynical voters are about mainstream politicians, if the Coalition doesn’t follow through, voters will conclude that once more it’s not serious. …

Losing by copying the UK:

Australia is drifting into very dangerous 1970s-style stagnation. The US is leaving us in its dust on per capita living standards and productivity. Our economy is growing weaker and narrower.

Loser’s tax:

Australia’s tax arrangements are monumentally uncompetitive.

Consider four tax realities.

1. Our top marginal income tax rate of 47 per cent is one of the highest in the world. The US and Canada have top rates in the 30s (even with state taxes, lower overall rates than Australia). Most ­European nations have lower top rates than ours.

2. Our top rate cuts in at an absurdly low salary level, $190,000. In 2007, the top rate cut in at $180,000. This inertia is insane. In the US, the top rate cuts in at well over $US600,000, nearly $1m. In Europe’s biggest economy, Germany, the top rate cuts in at more than €270,000, which is well over $400,000.

3. Our corporate tax rate, of 30 per cent for sizeable companies, is one of the highest in the developed world.

4. Our tax on capital gains is now one of the highest in the world. Hardly a country taxes capital gains at the same rate as salary income. Capital gain involves greater risk and economies need capital formation. Some, such as Singapore and New Zealand, don’t tax capital gains at all.

Australia’s tax regime is neither internationally competitive nor pro-growth. …

Dr Jim Chalmers:

Only two Labor treasurers have had PhDs — Jim Cairns [Whitlam’s treasurer] and Jim Chalmers. Neither was in economics. They studied instead Labor history. Like all true tribalists they suffered acute sub-cultural myopia. They didn’t know the world, they knew Labor lore and legend. …

Abbott, Turnbull, Morrison:

The Liberals’ dismal nine years in office is evident in one detail. The top marginal tax rate — now recognised as grossly too high by NSW Labor Premier Chris Minns, among countless others — was unchanged in that whole time.

We’re going to get poorer before any improvements. Of course, if mass immigration continues, we will never recover.