Download This PaperPaying Back Australia's Covid-19 Debt
46 Pages Posted: 17 Mar 2023
Date Written: August 23, 2022
Abstract
The COVID-19 pandemic has seen a sudden and steep increase in Australia’s public debt, as in most other countries. This report investigates and assesses ways in which Australia can bring its debt down to fiscally sustainable levels through the tax and transfer system. Scenarios are modelled over time frames of 33, 20 and 10 years, and over historically representative variations in interest rates and economic growth. Individual revenue raising policies are considered in the areas of: personal income tax, corporate income tax, Goods and Services Tax (GST), Capital Gains Tax (CGT), the age pension means test, inheritance tax and federal land tax. Each policy is assessed on its ability to pay down the debt in a manner that is economically efficient, equitable and simple. Overall, we find that the best option is a federal land tax on unimproved land value, set at a rate of 0.1% over a 33-year period. Three other policy options are recommended as alternatives: including the principal residence in the pension assets test, introducing an inheritance tax, and reducing the CGT exemption for the principal residence.
Keywords: COVID-19 debt, fiscal sustainability, tax system design, land tax
Suggested Citation: Suggested Citation
Trevor Rose (Contact Author)
Australian National University (ANU) - Crawford School of Public Policy ( email )
ANU College of Asia and the Pacific
J.G. Crawford Building, #132, Lennox Crossing
Canberra, Australian Capital Territory 0200
Australia
Robert V. Breunig
Australian National University (ANU) - Crawford School of Public Policy ( email )
7 Liversidge Street
Lennox Crossing
Canberra, ACT 0200
Australia
61261252148 (Phone)
HOME PAGE: http://https://crawford.anu.edu.au/crawford_people/content/staff/rbreunig.php
