Should we all be paying more tax? And is it time for tax reform?

Economists say our standard of living is at risk if Tony Abbott and Kevin Rudd continue to ignore 'root-and-branch' tax reform.

"The tax system is struggling to deliver what we expect," said Chris Richardson from Deloitte Access Economics.

"Spending has increased, there have been lots of tax cuts."

The deficit has blown out to $30 billion, due in part to enormous revenue write-downs, and both major parties want to spend tens of billions on school funding, a disability insurance scheme and (eventually) defence.

According to the Parliamentary Budget Office, the budget is in structural deficit.

"The bottom line is something needs to change and we really need political leadership," said Mr Richardson.

So how should the hole be plugged?

"This is an issue the next Government is going to have to deal with," said John Freebairn, an economics professor from the University of Melbourne.

"If we want to continue our current programs we're going to have to collect more tax from the public.

"We need to think seriously about what we are going to do, do we want to continue cutting [spending] for instance?"

Much of the Henry review put in too-hard basket

The most recent review of the tax system was headed by former Treasury secretary Ken Henry.

It recommended focusing on four tax bases: personal income, business income, private consumption and economic rents from resources and land.

The trade-off? Taxes on insurance, payroll, stamp duty, pensions and benefits would go.

But much of it was placed in the too-hard basket.

"The Henry Tax Review is a good starting point," said Robert Jeremenko from the Tax Institute.

"But it didn't look at the GST [Goods and Services Tax] and that's a tax that needs to be considered.

"Tax reform is one way Australia can become much more productive."

Economists see merit in GST changes

Many economists believe increasing the GST rate from 10 per cent and broadening the base to include health and education should be the first step.

But the process would have to involve the states and could expose the Government of the day to an enormous scare campaign.

"The problem isn't what needs to be done. The problem is getting Mr and Mrs Suburbs on board," says Mr Richardson.

"Economists would broadly agree on many of the recommendations.

"The trouble is a lot of this is electoral dynamite or tabloid terror."

So, does any politician have the courage?

"They have to," said Professor Freebairn.

"We have to seriously think about productivity if we want to maintain our standard of life.

"Maybe we have to go into a recession before we wake up?"