This week will see the trifecta of the Melbourne Cup, the Reserve Bank's interest rate decision and the US election, so it seems timely to reflect on the contrasting economic positions of Australia and the US.

With American voters left contemplating emergency tax measures to prevent the country from falling off a fiscal cliff, it appears that Australian policymakers are wasting the opportunity for tax reform presented by our relatively healthy economy.

The US presidential candidates are canvassing an array of tax policies to shore up the nation's financial position. They include broadening the tax base and lowering the tax rate imposed on small business, cutting company tax and changing the individual tax regime.

With a rising budget deficit and government debt, the new US administration will need to raise a mountain of revenue to start paying down its $US5 trillion deficit. This significant budgetary challenge has led to the serious contemplation of tax policies that would in better times have been considered against the grain.

President Barack Obama's advocacy of the Warren Buffett rule designed to ensure a minimum tax rate for taxpayer's earnings over $US1 million is one striking example - even more so in a country founded on rewarding individual efforts.

In Australia, we have the opportunity to debate serious and long-term tax reform options in the context of relatively healthy financial circumstances. We can still create a sustainable tax system that supports growth while meeting current and future spending needs.

We hit our own tax reform roadblock last week, when the Business Tax Working Group, hamstrung by narrow terms of reference, failed to come to a consensus on how to fund a much-needed company tax cut. Instead of narrowly defined separate reform projects, what we should be having is an intelligent debate about company tax reform, the need to consider a flatter individual marginal tax rate scale, creating a more efficient state tax regime, and putting on the negotiating table the rate and base of the GST.

Real tax reform requires not mere tinkering but a true commitment to achieving that vision. The best time for Australia to make this commitment is now, while we still can afford responsible tax savings and avoid the sorts of rash, ill-advised cash grabs to which governments in more dire situations are resorting.

Robert Jeremenko

Robert Jeremenko CTA is Senior Tax Counsel of The Tax Institute.

The Tax Institute is Australia’s leading professional association in tax. Its 13,000 members include tax agents, accountants and lawyers as well as tax practitioners in corporations, government and academia.