Tax reform a high priority: think tank THE next federal government should consider reducing income tax and scrapping the "distorting" mining tax, a think tank says. The Centre for Independent Studies (CIS) believes at a time when governments are facing stubborn budget deficits and community pressure to spend more, the taxation system needs attention. "Reducing, reforming and simplifying taxes should be a high priority for the next federal government post-election," CIS senior fellow Robert Carling said in a report published on Wednesday. But any reforms must be accompanied by a reduction in the rate of spending across all levels of federal, state and local government. Australian governments are overspending by more than $60 billion a year, the CIS says. As well, spending has been growing at an average rate of four per cent per year since 1972, to nearly 35 per cent of gross domestic product now. A better rate was less than 30 per cent of GDP. "It is clear that the size of government has become too large," Mr Carling said. Taxes could ultimately be reduced by the equivalent of $37 billion a year in 2011/12 terms. High on its list of taxes to be abolished is Labor's 30 per cent minerals resource rent tax on the super profits of coal and iron ore producers. Mr Carling describes it as a "distorting, complex tax that raises little revenue." The coalition plans to abolish it, if it wins government at the federal election on September 7. CIS also says company and personal income tax rates should be cut. This would generate savings of $28 billion a year and help Australian taxpayers and businesses. The federal government should also consider broadening the base of the GST to include food, or increase its rate to 12.5 per cent from 10 per cent - as a trade-off for the states to get rid of inefficient indirect taxes like stamp duty. "All the states agreed to remove a number of taxes in exchange for receiving GST proceeds, but some states like NSW and South Australia are still lagging on this," Mr Carling said. Rectifying this would provide $400 million in revenue savings.