Australians are being told the only solution to our budget problems is a higher GST. But that's only because we've taken all the better and fairer options off the table, writes Ian Verrender.

Literary references are often lost upon Australian politicians. But most of them desperately cling to that oft-quoted line from Mark Twain about death, taxes and certainty.

It might be honourable politics, but promising a new tax is a sure pathway to political death. Just ask John Hewson. Then there was John Howard's near death experience when he barely scraped across the line when he took the Goods and Services Tax to the 1998 poll.

As for Kevin Rudd, he never even made it to the next election, after being rolled by a cashed-up resources industry scare campaign.

These days, the trick is to denounce any suggestion of new taxes forever more and then change your mind upon assuming office after discovering the dreaded BBH - the Budget Black Hole.

Despite all the pre-election promises, Treasurer Joe Hockey stumped up a raft of new taxes in his first budget, opting to instead label them excises and levies while reintroducing indexation on existing imposts.

With revenue under threat from diminishing resource prices, the focus this week has turned to raising the Goods and Services Tax.

It's easy to understand why. The GST raises more than $50 billion each year and the take is relatively stable, so lifting the rate is a simple way of siphoning more cash from the community.

In a political masterstroke, the impetus is coming not from the Federal Government but from the states, particularly the newly elected NSW Government. And like all good strategies, we are offered a choice: Would you prefer a wider GST base or a higher rate?

But what about a broader overhaul of the system? That's conveniently evaporated despite the Federal Government calling for submissions to a white paper on the tax system.

Exactly why a white paper is in the offing is difficult to fathom.

Tax changes to superannuation, property and almost everything else have been specifically ruled out. And let's not forget we've already had a wide-ranging tax inquiry - the 2010 Henry Review - that recommended radical changes, or that its centrepiece, the Resources Rent Tax, has been junked.

Taxes serve two very useful purposes. They provide the cash for government spending and they help redistribute wealth.

Depending on the tax, wealth can be redistributed either towards low-income earners or the well-off. Most economists favour a tax system that is progressive, where wealthier groups shoulder a greater proportion of the take.

The problem with the GST is that it is regressive; lower income earners pay a higher proportion of their income in tax.

To get around this, governments usually attempt to compensate lower income groups with exemptions and rebates. That sounds fine in theory. But the further you travel down that path, the less efficient the GST becomes, the more red tape is involved, and the less money is raised.

If the GST was lifted to 15 per cent without compensation, it should raise an extra $25 billion a year. Subtract the compensation, and the take is likely to be around half that.

To soothe a potentially angry electorate, the Treasurer has begun dropping hints about income tax cuts. That would ease the burden on middle income groups who face the prospect of being shifted into higher tax brackets through inflation, what's known as bracket creep. But again, it would reduce the overall amount raised, at least in the short-term, doing little to cut the deficit.

There is a solution, one that could make the tax system fairer, have little impact on economic activity, and help reduce the deficit. Rather than raise new taxes, the obvious choice for a government intent on real reform would be to eliminate or reduce tax incentives and concessions.

Unfortunately, all these measures have been ruled out.

According to Treasury estimates, tax concessions on superannuation - which are utilised predominantly by the wealthiest Australians - cost the federal budget around $36 billion in the past financial year.

These tax incentives were designed to encourage Australians to save for their retirement. But because the incentives are greatest for those who earn the most, they have been used as tax minimisation schemes, essentially redistributing wealth from low and middle incomes earners to those on higher salaries.

This is a hugely distorting incentive that, even if it was partly unwound, would substantially lift government revenues.

Then there is the capital gains tax discount. Anyone who holds shares, property or other investments for more than 12 months gets a 50 per cent discount on their capital gains tax. That costs more than $6 billion a year.

The idea behind the discount was sound. The government wanted to encourage investment. But again, it has an unwanted side-effect, redistributing income to those with money to invest. Income earned on investment is taxed at only half the rate of income earned from toil. That could be partially wound back with minimal effect on the economy and an easy boost to revenue.

Then there are the politically more difficult areas. Negative gearing - where investment losses can be deducted from personal income - costs the budget about $4 billion a year. But with so many Australians now exposed to the practice, unwinding it would unleash a savage backlash.

Even more difficult is the family home which is exempt from capital gains tax, which Treasury estimates costs around $46 billion. Any party attempting to introduce that measure would most likely never get the chance to contest another election.

But the greatest tragedy in our tax system was the ham-fisted manner in which the resources rent tax on mining was implemented.

As a nation now reliant upon resources, and with the industry 80 per cent owned by foreign investors, a tax on mineral exports now being dug up at record speed was a logical step.

But the industry exploited the national disdain for new taxes, helped oust a prime minister, helped rewrite the legislation to ensure it paid virtually nothing for four years, and convinced a new government to abolish it altogether just as payments would have begun flowing.

That's kept foreign investors happy. But it's now up to Australians to pick up the tab, to cover the budget shortfall. And the only solution being considered is a hike in the GST.

Ian Verrender is the ABC's business editor.