After the 1961 election when Prime Minister Robert Menzies was chided by a Cabinet colleague for taking up some Opposition policies, he is reputed to have responded, “”Well, 50 per cent of the people voted for the Labor Party.”
Much the same could be said now if the Government borrowed a critical element of the tax plan that Labor took into the last election – the tax credits system. But the Government should borrow the policy not because 50 per cent of the people voted for Labor, but because it is a good policy.
The tax credit system was a way of dealing with effective marginal tax rates of up to 70 per cent faced by people going from welfare to work. Typically the income earned from work results in rapid reductions in child support, dole and other welfare in addition to the tax on the income earned. These people also have to meet transport and clothing costs of going to work. It is a major disincentive.
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