Chatting about tax reform with Steven Hamilton

Matt's musings

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Chatting about tax reform with Steven Hamilton

Matt Nolan

Mar 29, 2025

Transcript

A week back I had the chance to sit down for a chat with Steven Hamilton. The focus of the conversation was should we have tax reform in Australia?

It was a free-form chat where we just went in to talk tax reform, and saw where we went.

I had a lot of fun chatting with an international public finance expert about tax policy - and was surprised at how few hot takes were had. Of course, this could be because I’ve spent a bit of time with tax economists in the past - so maybe the takes will sound a bit spicier to a general audience!

Structure

The podcast is close to 100 mins long, so I thought I’d list down some topics below in case you want to jump to certain parts. In order the topics covered are:

Are we ready for tax reform now in Australia?
Negative gearing (you can read what the “right view” mention is here).
Comparing “ideal” systems in New Zealand and Australia.
Standard deductions.
At about 20 mins we kick into frameworks and principles:
- Efficiency-equity trade-off (if you need a reader on this - I can recommend this post).
- A flawed focus on “amount of revenue” rather than distortions is problematic for good policy (but stems from political economy concerns about political tax expenditures).
- Do we sufficiently account for behavioural responses when looking at tax changes in Australasia (i.e. dynamic scoring).
- Accidentally had the relevant books sitting on my desk!

From about 32 mins in, we discuss systems thinking in tax, and the “one-instrument one-tool” rule to avoid everything bagel reforms. The key example discussed is our good from GST.
- One thing we didn’t note is that GST is much less regressive over a lifecycle than it is at a point in time - just didn’t have a chance to drop that in ;)
At about 40 mins we get into the communication of tax frameworks publicly - exploring the role of private sector and public service institutions to communicate these ideas.
- How much is a lack of communication coming from the difficulty communicating these ideas, versus the lack of time to invest in building coherent frameworks?
- Between around 50-60 minutes we find agreement on our view about the public sector - but I bet you won’t guess what we agree on! Well maybe you will. [Note: When I mention the US person it was supposed to be “they had to fly over the night before economy class while working on the flight over” - the business class was me mispeaking like normal]
An hour in we discuss that labour supply isn’t everything for thinking about behavioural responses to tax.
- Includes a spicy take about economists talking about tax.
Five minutes later, we finally define comprehensive income, talk about types of tax, and finally talk about capital gains taxes. Is the capital gains tax discount actually good policy?
At 1:17 we discuss corporate taxation in Australia - is it about withholding or the taxation of rents? And how do the international tax reforms fit in?
At 1:25 - summing up, and then including some points on transfer payments. Focusing on concerns about targeting and coherence.
- There was a fairly large discussion I cut out here as we were both discussing substantial details of unreleased work without adding too much to the framework discussion - and it would be more fun to save that until the work is finished and then have a full chat on transfer systems.

In order to facilitate the debate I ended up talking as a New Zealander - showing how much I’ve forgotten after three years such as the name of the bright-line rules for capital gains on housing.