Which is exactly what Henry did, a decade ago. Loading Henry’s recommendations are so enduring because they mapped out the most fundamental principles of tax reform. Perhaps chief among them was the simple observation that humans respond to the incentives they face. Change those incentives, and you change behaviour. And all taxes, by altering incentives, change behaviour. Impose a tax on labour income, for example, and you reduce the returns from working. Sit back and watch as people decide to work less. Reduce the after-tax return from making a profit, and watch as some businesses chose to invest less, or to relocate elsewhere where potential after-tax returns are higher. It's a key insight of economics that all taxes destroy economic activity, because they stop transactions from occurring that would otherwise have occurred. Economists label this destruction of value the "dead weight loss" of taxation.

Another insight, however, of both economics and Henry's review is that different types of human endeavour are more or less responsive to the imposition of taxes. Tax a loaf of bread and you still need to eat bread. Tax land owners and it’s very difficult – impossible, actually – for them to move offshore. Ken Henry with Kevin Rudd at a meeting of the Strategic Priority and Budget Committee in Parliament House during the GFC in 2008. Credit:Glen McCurtayne One crucial graph in Henry’s review provided the real punchline, ranking different taxes according to the losses they impose on society. State-levied stamp duties sat clearly at the top – discouraging property transactions and a more efficient use of housing. Taxes on company profits and labour income sat in the middle. Land tax sat at the very bottom, being the most efficient form of taxation, and taxes on "consumption" sat just above that (consumption being code for the goods and services tax, which Henry was forbidden from considering, but did anyway). In reality, it’s hard to quantify the exact size of losses created by taxation. But the direction is clear: it’s negative.

The act of taxation cannot add to growth. What you do with the money raised, of course, may well add to growth, if invested towards enhancing the human capital of your people, for example, or otherwise expanding the productive capacity of your economy. But such investments always come with an upfront cost – the losses created by taxation. The goal of good tax design, then, is to minimise that upfront cost. Make taxes simple. Make them transparent. Make them hard to avoid. To the extent that some efficient taxes may be unfair – such as the GST, which does not discriminate between a rich person buying bread and a poor person – you should address this unfairness with your transfer system. Don’t rely excessively on growth-destroying taxes just to achieve your goal of fairness. If a pensioner can’t afford groceries because of a higher GST, increase their pension. Deliver efficiency with your tax system and fairness with your transfer system.

Loading We’ve just experienced a watershed moment in this nation’s policy-making history. Things that were unimaginable mere weeks ago have come to pass. The very basis of our social contract has been torn up and rewritten – for the better. Now is no time to stop. The urgency to design a tax system to help us grow out of this crisis is of no less importance than the policies just unleashed to help us survive it. Tax reform is not about needing to raise more revenue to repay government debt faster. Interest rates are low. Debt will take care of itself if we can grow our economy fast enough. Tax reform is about how to raise the revenue we do need in the least distorting way. Reforms that shift the burden of tax away from highly mobile factors of production, such as labour and income, and towards more immoveable things, such as land and consumption, must, as Lowe says, form a key part of policy efforts to bring us out of this crisis.