If you can enact a tax reform that improves both equality and efficiency, you must be doing something right. And so it seems with the government’s mooted redesign of the former Coalition government’s stage 3 tax cuts, to be announced by Prime Minister Anthony Albanese on Thursday.

Arthur Okun, US president Lyndon B Johnson’s chief economic adviser, described the key challenge in tax policy as akin to a leaky bucket: seeking to reduce inequality by redistributing income is like carrying water from a well using a bucket with a big hole in it; the leakier the bucket, the more water we will waste in trying to share it around. Okun described equality and efficiency as “the big trade-off”.

If you can enact a tax reform that improves both equity and efficiency, you must be doing something right.Credit: SMH

But Albanese and Treasurer Jim Chalmers seem to have overcome it. This sounds like a free lunch, and indeed it is. Such was the misguidedness of one big part of the stage 3 tax cuts, as I’ve described in these pages for 18 months.

Cutting the 32.5 per cent marginal tax rate that applies to most workers to 30 per cent was justified on both efficiency and equality grounds. And raising the top 45 per cent threshold from $180,000 to $200,000........

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