Tax Reform

08 June 2021

Private Members' Statement

I speak on part five of my humble working‑class economist series of policy analysis and critique. It would be remiss of me not to quickly recap parts one to four, which clearly argued how the Treasurer's snake oil forever land tax on the family home based on some pagan voodoo economics does not improve housing affordability. I have not read any credible economist state that replacing a one‑off stamp duty with a forever tax on the family home that never ends helps make it easier for home ownership. This is nothing but a greedy tax cash grab that will only go up and up, particularly for people trying to buy their first home. But I also note that, since the fanfare around the Treasurer's glitterazi announcement of his visionary once‑in‑century tax reform agenda, he has been relatively quiet about his signature policy.

As recently as June 1 2021, in response to the NSW Productivity Commission's report, the Treasurer is quoted as saying, "Progress is never made by taking ideas off the table." It seems to me that some ideas have certainly been taken off the table, just like the Fire and Emergency Services Levy. This Treasurer is a puffed‑up policy peacock who fans his colours to attract a little attention, but never conceives to bring any policy to life. He is a policy lightweight who is all rhetoric and no reform. As the great economic reformer—I would say the greatest economic reformer this country has had—former Labor Prime Minister Keating would say, "He is all tip and no iceberg."

On the topic of tax reform, I also note the commentary from the Treasurer and at least some of his colleagues around distance‑based charging for electric vehicles. I will touch on that tonight too, because growth of electric vehicles is quite a complex area. It has repercussions for fiscal budgets all around the country. The decision to apply or not to apply a distance‑based charging on electric vehicles should be based on the policy problem to be addressed, whether that be congestion or revenue. All of that obviously would try to incentivise industry, but the fundamental underlying principle of this policy framework must also be based on two very important things: equity and the economics.

I make some commentary on the first issue of equity. Currently, fuel excise and GST produce net revenue of about $11.6 billion, which is used to fund road upgrades and build new ones. Anyone who owns an internal combustion engine—which is, I suspect, most of us—has to pay when they go to the bowser. The money is used to fund road upgrades. It also goes to build new ones, because we all use roads. But as the electric vehicle industry continues to grow—inevitably it will reach a critical mass—it will have an inverse financial relationship with fuel excise revenue, which means we will have less money to continue to build the roads that our community needs and deserves.

The important point is that, if electric vehicles continue to grow, that means consumers in many of our electorates in regional areas and particularly more moderate working-class areas will continue to buy internal combustion engines, because they are just a lot cheaper. I do not know too many people who own a high performance Tesla at $93,000 before on‑road costs. The application of distance‑based charging can be viewed as an equity issue because we do not want all road upgrades predominately lumped onto a smaller and shrinking number of road users who can afford only internal combustion engines. That is a real equity issue we have to examine to ensure that those electrical vehicle users—I welcome them all—have to pay to contribute to the road upgrades. Otherwise it is highly unfair that those on high incomes, who can afford very expensive electric cars, do not pay a fuel excise while those on lower incomes, who do not have mobility on what vehicles they can purchase given their income, do.

This is an important point to make, because electric vehicles are not DeLoreans. They do not fly into space. They still use roads. They still add to congestion. They might produce non-carbon emissions, but that is only at the point of use. We also have to think about the upstream and downstream of the technology. I know I do not have much time, but I will touch on the economics. One of the arguments has been that we should not have a dispatch price because it is going to kill the industry. I have to say, I think the economic debate is still out there. If you are paying 2½c or 5c per kilometre, I hardly think that that is going to persuade you whether you buy a $100,000 vehicle or not. I wish I had more time, but I will come back to it next time.