Tim Dunlop has the best coverage of the Labor policy including a comparison with the Liberal announcement. Doing the same analysis with the Labor tax brackets as with the Liberal ones leads to this graph.

Again it is from the 2003-2004 Tax Statistics which is the most up to date publicly available data.

I have to say, I like this proposal. I am wary of it being in 2013 and six years in the future as most governments and treasurers tend to renege on their promises. However, knocking out a tax bracket entirely is good policy. By removing the 37c bracket they have negated bracket creep for the majority of Australian income earners for the foreseeable future. Bracket creep is an issue with the Liberal Tax Brackets as they are pretty much just adjusted for inflation - rather then being a tax break.

The other thing is that this is very close to a flat tax. Something that I like the simplicity of. It also becomes very affordable to remove the 15c and 40c brackets. As they are under the current 34B windfall that suddenly appeared this year.

Knocking out the 37c bracket gives future Australian governments all manner of flexibility in adapting the tax code to people's, government's and the economy's needs.

The other thing that needs to be compared is that the Liberal Party has been in government for over a decade and has not implemented any policy like this. Their income tax policy has just been to shuffle the brackets up with inflation when it has become embarrassing at how much money the government is making from income earners.

Update

I was intrigued by how many people (net) were in each bracket. Turns out they are nearly all in the 15c and 30c brackets.

There are 4.6 million income earners in the 15c bracket and 3.9 million in the 30c bracket. In comparison only 90,000 are in the 180+ bracket.

Now compare the amount of tax earnt from those 4.6 million in the 15c bracket which is 16B dollars (about the same as the yearly defence budget) with the 67 Billion from the 3.9 million in the 30c bracket.

I think it becomes good policy to remove the 15c bracket altogether and free 4.6 million Australians from having to deal with the hassle of income tax. It is very affordable too, only costing 16B.

When Australia was newly federated the Labor Party shared the most policy with the Deakinist Liberal Party. They formed alliances in the early days even. However, the first Labor Parliamentarians acted like the wheeling dealing politicians of old and were quickly wedged or maneuvered out of parliament by the other parties and politicians.

As a result the Labor Party developed the pledge whereby Labor politicians would vote the same way as the Labor party executive determined. This changed Australian politics entirely as Labor was now a voting bloc. Judith Brett writes:

The insurmountable barrier between the Deakinite Liberals and the Labor Party was not Labor's policies not its attitude toward the state, but the nature of the party's organization: the demands which it made on its members to subordinate their own views and judgements to the collective will of the party and the implications this had for parliamentary government.

The problems Labor's organisation posed for the Liberals was particularly apparent in Labor's hostility to alliances. Labor simply refused to play the parliamentary game as it had hitherto been played, and parliamentary leaders found themselves stalled at every turn as they tried to put together workable majorities in the usual way.

This voting as a bloc in the way the party executive requires is known as the pledge and has led to Australian politics being dominated by absolute party discipline. The conscience vote - which Labor does not allow - is the rarity and exception. The horse trading that the American Congress would do where party dissent was tolerated is unheard of in Australia. It is becoming rare in the United States too though. James Fallows commented that in an overhead conversation in Congress:

"GOP member: 'I'd like this in the bill.'

"Dem member response: 'If we put it in, will you vote for the bill?'

"GOP member: 'You know I can't vote for the bill.'

"Dem member: 'Then why should we put it in the bill?'

While the Republican Party only has enough votes for a filibuster in the Senate in order to stop bills coming up for debate, that is a more a convention than a constitutional or legislated rule. But it does seem to show that the Republican Party is able to maintain party discipline - I am not sure where from though; there is no Executive in power and I don't see the US party structures outside of Congress as that strong. The recent purity test was ignored for instance. So I am not sure where it is coming from.

More A speech by Petro Georgiou describes the history of the pledge.

More Cyclical link to John Barrdear who argues that it is fund raising enabling this.