Where was your courage, Treasurer?

Since 2003, the income tax thresholds have been progressively increased. In July 2003, the top threshold was increased from $60,000 to $62,500, a year later to $70,000, then $95,000 a year later, and to $150,000 from July 1, 2006. But it only in this budget has the government acted on marginal tax rates, shaving 2 percentage points off the two top marginal tax rates. The changes announced in the budget are not personal income tax reform, and they are not courageous.

For low-income single people, it was a hamburger and milkshake, or $7.02 per week for a person on $20,000, and for middle-income singles on $50,000, it was worth $9.81 per week. The situation of single-income couples with no children is little different from that of a single person; and dual-income couples benefit similarly to two comparable single-income persons. The main beneficiaries in the low to middle-income groups are families with children, who gain from changes to the taxation of family tax benefits.

This pattern of budget results is not new, nor is it courageous: it is more of what we are used to.

The really big winners from this budget are the high-income earners and those soon to retire. But even here the government did not have the courage to fully address the issue of top marginal tax rates.

True, it increased the top threshold from its present $95,000 to $150,000 from July 1, 2006 (from the $125,000 announced in last year's budget), but it could not muster the courage to cut the top rate of 47 per cent by more than 2 percentage points. Although it reduced the 42 per cent rate to 40 per cent for incomes between $75,000 and $150,000 from July 1, 2006, there was an anticipation that the top rate would also be reduced to 40 per cent.

As the treasurer noted, only 2 per cent of taxpayers will be subject to the 45 per cent rate, but although we might have an academic argument about its associated disincentive effect, it is how such rates appear as a symbol of Australia's attitude to taxing high achievers that is important, especially as we attempt to attract back skilled Australians now living and working overseas.

Again, like the lion, courage was needed but it just could not be mustered when it counted. The key to courage is conviction, and with it a little passion. In The Wizard of Oz, the lion discovered the importance of courage: without it, honour and hard work can easily be impaired.

On tax reform, we need courage and confidence to push forth and take up challenges, and recognise that although we might make some mistakes, we can learn from these and move forward, leading Australia to a competitive future.