I’ve now got the tax tables working reasonably well, with some useful assistance from “Down and Out in Sà i Gòn”. The first column of the table gives a multiple of average weekly earnings, the second the associated money income (for 1996 in the first table and 2006 in the second), the third is the tax paid and the fourth is the average rate. As you can see, the tax burden has risen for those below the average and fallen for those above.
1996
|
Multiple |
AWOTE |
Tax paid |
ave rate |
|
1 |
35620 |
8132.8 |
22.8% |
|
2 |
71240 |
24084.8 |
33.8% |
|
1.5 |
53430 |
15714.1 |
29.4% |
|
0.6 |
21372 |
3288.48 |
15.4% |
2006
|
Multiple |
AWOTE |
Tax paid |
ave rate |
|
1 |
52808 |
11702 |
22.2% |
|
2 |
105616 |
31819 |
30.1% |
|
1.5 |
79212 |
20729 |
26.2% |
|
0.6 |
31685 |
5365 |
16.9% |
John Quiggin 
Budget Commentary from Blogosphere Economists
We’ve mostly been talking about the politics of the budget here at LP, but there’s some extensive commentary on the Budget at Quiggin and on the tax cuts at Andrew Leigh’s place. Well worth a look for the economists’ perspective.
Update: John Qu…
I realise that you’re concentrating on single taxpayers, and on average tax rates. That’s quite OK, but, as you noted in your thread about flat tax,:
“I’ve saved the biggest objection until last. The discussion so far has been about income tax, but what matters for incentive is the tax and welfare system as a whole. Any given set of taxes and welfare rules creates an effective marginal tax rate, given by the combined impact of income, payroll and consumption taxes and clawbacks of means-tested welfare payments.”
These things don’t only change the marginal rates. They change the average rates as well. The picture being painted here about average tax rates, particularly the increase for low income earners, could well change if recipients of welfare payments (maybe) or family tax benefits (definitely) are included.
SJ, you’re right, but I haven’t had time to do the family tax benefit stuff yet.
This highlights what inflation does to marginal income tax scales. It seems to change them from a progressive tax to a regressive tax. People on low incomes are tax more proportionally and people on higher incomes are taxed less.
Government never seems to be able to get the adjustments right.
Could it be made simpler for government and taxpayers by having a single rate with no tax free threshold or 2 rates with no tax free threshold with the higher rate indexed at 3 times AWOTE. And then compensate back the low income earners through welfare.
I would have thought it was obvious that this highlights the effect of the government’s big shift in high rate thesholds. i.e. shifting the top threshold from $50,000 in 1996 to $60,000 in 2000, to $62,500 in 2003, to $70,000 in 2004, to $95000 in 2005 and then to $125000 in 2006, 2.5 times what is was in 1996.
On the other hand, the second lowest threshold was $20,700 in 1996 and shifted to $20,000 in 2000 and then to $21,600 in 2003, and it will stay there until further notice, 1.04 times what it was in 1996.
I would have thought it was obvious what the government is doing here, much more than any effect from inflation.