Mike Baird has rebooted his pitch for an increase in the GST with a "consensus" plan that aims to plug billions of dollars in immediate health and education funding gaps for the states and satisfy Commonwealth calls for tax cuts to fuel economic growth.
As the states and the Commonwealth continue to debate tax reform before a meeting in March, the NSW Premier is proposing the GST be lifted from 10 to 15 per cent from July next year before reassessment in 2020 of how the extra revenue is used.
Mike Baird's GST proposal
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Mike Baird's GST proposal
NSW Premier Mike Baird reaches out on Twitter to explain his GST proposal to tackle the looming health and education funding crisis.
Mr Baird says an estimated $32.5 billion a year extra raised over the current forward estimates period could deliver the states $7 billion to cover the fiscal gap, including the unfunded two years of Gonski education reforms from 2018.
It could also compensate low income families (at an estimated annual cost of $8 billion) and allow the federal government to reduce the income tax pool by about 7 per cent ($8 billion) and company tax from 30 to 25 per cent ($16 billion).
The change would be assessed in 2020 to consider the success of the Gonski reforms at the end of their six-year funding cycle and the effect of the expected economic uplift from income and company tax cuts on future health funding shortfalls.
"It's trying to bring a consensus position forward," Mr Baird said on Sunday.
"We're at the part of the debate where there are a lot of ideas. How do we start to draw some of those threads together?"
The reworked proposal is a subtle but significant shift from the plan put forward by Mr Baird last year, when he led the call to lift the GST to 15 per cent - without broadening its base - and compensating families earning less than $100,000 a year.
Increasing the GST
It seems to come as a major shock to some that increasing tax revenue means... we pay more. Michael Pascoe comments.
It followed $80 billion in health and education funding cuts to the states over a decade from 2017 announced by the federal government in its 2014 budget.
NSW Treasury modelling shows that by 2030 the states face an annual $45 billion shortfall in health and education funding as a result of the cuts, $35 billion of which relates to health.
The new proposal responds to federal Treasurer Scott Morrison's declaration that any GST increase must be revenue neutral, fund tax cuts and that the states should find efficiencies in delivery of health services.
Mr Baird said he was still proposing no change to the goods and services to which GST is applied, but believed an increase in the rate to 15 per cent before reassessment in 2020 would satisfy the needs of both the states and Commonwealth.
"It undoes the cuts of 2014 and reopens the partnership," he said.
"It basically says, okay we do have a challenge. But we're going to do it together. If we undertake this tax reform now we have a capacity where there's more fiscal flexibility to deal with it at both a federal and state level."
Mr Baird said his plan would allow states and the Commonwealth to assess in 2020 how much the economy has grown and also "how successful the Gonski funding has been".
"Is it actually achieving the educational outcomes and if it is, that's something we're going to have to continue," he said. "The question is how and in what form?"
Asked how he thought Queensland and Victoria, which oppose any increase to the GST, could be brought on board, Mr Baird said it was a matter of the federal government seeking and achieving an election mandate.
"The federal government is taking ownership of the GST debate and saying they want a growth agenda," he said.
"I think [Queensland and Victoria] would accept that if a mandate was secured."