This would leave $94 billion to abolish inefficient state taxes and fix state and federal budgets. Treasurer Joe Hockey last week called for state premiers to come to the table to argue in favour of GST reform to provide much-needed revenue for schools and hospitals. The head of advocacy at CAANZ, Rob Ward, told Fairfax Media the GST was an efficient and well-established tax that had growing community acceptance. "With interest rates at historically low levels, Australians with more cash in their pockets might be more accepting of a GST increase – providing the government takes the time to explain the reasons for the increase and what it will cost them personally." Fairfax/Ipsos polling released in April found 37 per cent of Australians would support an increase in the rate of the GST, up from 12 per cent in 2012.

According to the CAANZ modelling, about half the additional revenue would come from increasing the rate of the GST from 10 per cent to 15 per cent. The remaining half would come from expanding the GST to cover fresh food, health, education, water and sewerage and all other goods and services currently exempt. Presently only 47 per cent of total consumer spending on goods and services in Australia is subject to the GST. This would increase to 100 per cent under the proposal. At 10 per cent, Australia has one of the lowest consumption taxes among developed countries, at just over half the average, according to Mr Ward. Raising the GST would not be unfair, as critics argue, if low income households were fully compensated, he said: "For those who can least afford it, if they knew they were going to be compensated, then they'd be fine. For the rest who can afford it, they probably have a greater appetite to pay a GST than other punitive taxes, like income taxes." Without tax reform, Australians will end up paying higher income taxes through bracket creep. This would provide a disincentive to work at a time when the budget could least afford it, Mr Ward said.

"The intergenerational report made it clear there are going to be fewer people working to provide income taxes," Mr Ward said. The GST was easy to collect and less likely to distort people's behaviour than income tax. "People don't make buying decisions based on the GST," he said. While historically all GST revenue goes to the states, Mr Ward said this should be a matter for negotiation, given the importance of compensation for households in any GST reform. The GST is still on the table for review as part of the Abbott government's tax white paper, although the Prime Minister has ruled out any changes in this term of Parliament. "It takes political will and courage to take on the difficult issues," Mr Ward said. "But having a robust tax system where we all pay our share is fundamental to a vibrant and sustainable economy."

Under the CAANZ proposal, household compensation would comprise $96 billion over four years for personal income tax cuts, $62 billion for increased benefits and pensions and $13 billion for increased family payments. Low income households would be compensated in full, while middle and high income earners would also share some benefit from tax cuts. Of the $94 billion remaining revenue, $38 billion should be used to abolish inefficient state taxes, for example stamp duty on motor vehicles and insurance. The remaining $54 billion could be used to eliminate federal deficits or fund states' investments in health, education and infrastructure. States face a $80 billion black hole in their budgets for health and education under a government budget cut. State premiers will meet the Prime Minister on Wednesday and Thursday in Sydney.