There are two principal answers to the question: How should tax be allocated, given a particular revenue requirement? One answer is the ability to pay principle. The other is the benefit theory, which says that those who benefit most from government should pay the most tax. The ability to pay principle has won out as the principle for allocating taxation. But what is the best practical measure of ability to pay? Income, consumption and wealth are all candidates. In this video, the presenter examines the Henry Review and its recommendations in the light of liberal principles. The article discusses proposals for reform of consumption taxes (the GST), state taxes and the federal system, the complexity of tax laws, the abolition of a range of levies and tax offsets, a standard deduction, and capital taxation. The video concludes with some remarks on the outlook for reform in Australia.
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