households the winner with carbon price

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    Households the biggest winner

    Households would receive an increasingly large share of the revenue raised from Labor's carbon tax at the same time as industry assistance declined under Mr Garnaut's plan.

    The 10-year proposal could boost the Gillard government's chances of selling the tax because it contradicts Opposition Leader Tony Abbott's claim that household compensation would be wound back as the carbon price was ratcheted up.

    But industry won't be happy as it gets less than was previously on the table.

    Prof Garnaut released the final update to his landmark 2008 climate change review today at the National Press Club in Canberra.

    He recommends that for three years after the carbon tax is introduced in mid-2012 some 55 per cent of the revenue should go to low and middle-income households to assist with price increases.

    But once an emissions trading scheme (ETS) is introduced in 2015 the economist argues 60 per cent of the revenue should go to the less well-off.

    That could then rise to 65 per cent by 2021/22.

    Most of the assistance would be in the form of tax cuts with the tax free threshold raised to $25,000.

    That would result in 1.2 million Australians paying no tax.

    Other rates would be rejigged to ensure people earning more than $80,000 a year wouldn't benefit.

    "Over time, as the transitional assistance to business declines, there will be a further opportunity to provide more assistance to households through a second round of tax cuts," Prof Garnaut said.

    Welfare benefits would be boosted as well to help those who don't gain from tax cuts.

    However, the update suggests the increase should be half the 2.5 per cent offered under Kevin Rudd's old carbon pollution reduction scheme, saving up to $1.5 billion a year.

    A further $400 million over four years would help the poor make their homes more energy efficient.

    The compensation for low and middle-income earners would be on top of a one-off cut to the fuel excise to limit petrol price rises.

    Prof Garnaut wants that to be paid for by reforming subsidies for company cars and, because the government has already proposed that in the May budget, additional cuts to fossil fuel tax concessions.

    Business Spectator
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