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The federal government proposal to allow states and territories to levy income taxes has been met with fierce criticism from one industry expert.
Dr Michael Rafferty, an expert in taxation and Australian economic policy from the University of Sydney Business School, condemned the proposal.
“The tax and spending structure of Australia's national and state governments is in need of serious restructuring. But the proposal to allow states to levy income taxes is poor public policy and simply won’t work.”
According to Dr. Rafferty, state governments already have the constitutional power to levy income taxes, but choose not to.
“The Commonwealth ‘allowing’ them to levy income taxes is simply a fudge to push the burden of tax collection back on the states and territories.”
Dr. Rafferty added that even if the proposed changes went ahead, a realistic implementation would be unachievable.
“If one or more states decide not to do so, it is likely that many people will shift their residential address for tax purposes to those states with no local income tax. We saw this with the gradual disappearance of death taxes, where Queensland abolished death taxes and retirees in southern states flocked to the Gold Coast to avoid state death taxes in Victoria and New South Wales.
“Instead of rehashing tired states’ rights arguments or falling for appeals to narrow individual self-interest, Australians should be asking how our spending and taxing can make our society better. It’s hard to see how pushing states to raise their own income tax will help answer that question.”