In addition to spurious claims about the burden of the top marginal tax rate, one of the standard complaints about taxation in Australia concerns the excessive length of the tax code. There’s a fairly typical example in this SMH piece (sent to me by Jack Strocchi). Let’s start with Phil Ruthven, who says that all federal taxes could be replaced with a simple 10 per cent tax on all revenues (I assume this refers to gross turnover of businesses). He might be right, but such a tax would be economically disastrous. It’s sometimes referred to as a cascade tax, since it applies to the same item each time it moves down the processing chain, creating massive distortions. It is in fact, the same as the Easytax, proposed by Pauline Hanson a few years back, though she proposed only a 2 per cent rate. I analysed it in this post a while back.
A more defensible, but still incorrect claim is that the complexity of the tax code is generated primarily by concessions. I’ll respond to this in a later post.
John Quiggin 
On the problem with the tax code, I would say that it shows up as one man, one ulcer – the stress and compliance cost associated with personal filling in and compliance.
As to easytax being economically disastrous, I would say that it can come in in two respects. One is the revenue shortfall from the avoidance mechanism outlined in JQ’s reference above, and the other from the distortions created by that.
However, this very much depends. Once equilibrium had been reached, the avoidance would be countered by a matching increase in the rate applied, and the reduction in all up transactions would actually reduce policing costs; so in that respect it is merely a transitional cost. As for the distortions imposed by the tax, well, that partly depends on the distortions in alternative taxes – what we care about is the increase in distortion, not the absolute distortion (and don’t forget that GST has its own compliance costs).
But over and above that, distortions are not linear in the revenue extracted (consider that – other things being equal – subsidies are also distortionary, and may be considered negative taxes). With small government, distortions are negligible and only the overhead – the one man one ulcer sort of thing – matters. It is a wider question than merely one of tax, it concerns the whole philosophy of government. I believe that the 2% easytax rate suggests that its original designer – not the One Nation lot – was thinking along these lines. Certainly a 2% easytax would be far less distortionary than 1/5 of a 10% gross revenue tax; if it’s a second order curve, it would only be 1/25 as distortionary.
So I would say there’s a lot here that is as yet unexplored, but it’s only of intellectual interest at the moment.
The temptation for businesses to produce all material inputs in-house would lead to a grotesque out break of gigantism in economic scale – a sort of private sector version of the Soviet command economy. Sometimes the purported friends of capitalism turn into its worst enemies.
That temptation would vary according to the level of revenue the government needed, that’s the point. And from the point of view of the government, its own interests don’t require economic efficiency and it would gain by simpler policing – until it ran out of tax base, which is what happened in France and Italy in the ’50s to make them favour VAT (their GST). The answer changes if governments want (a) to be big and (b) to be economically sound managers – but those are unstated assumptions here.
Tax reform? Did you say tax reform? If you get a moment Q I’d be interested to hear your thoughts…
“The speakers[The Committee for Economic Devt of Aust tax summit] said the central tenet of any reform must be to move away from the format of punishing wealth creation towards an approach of penalising spending.”
This statement goes pretty much to the heart of the criticism of the current state of trying to tax wealth creation, namely income, although it doesn’t address the question of taxing ‘unearned’ income, particularly economic rent gained by fortuitous means. The latter often provokes the strongest critique of capitalism, if not so much the former. Those critics would be much more comfortable with such economic rent returns accruing to wage and salary earners via say their compulsory super funds than the good fortune of a Lang Hancock stumbling across an iron ore mountain on his property.
It seems to me with rising resource prices, the problem of rising economic rents by the BHP Billitons, Rio Tintos, Woodsides, etc presents an opportunity to capture some of that rent by resource taxing, which can be used to alleviate wealth creation taxing problems(eg high marginal tax rates, negative gearing,etc). Personally, I would be in favour of total reliance on resource/carbon taxing and see the opportunity to move in that direction now with rising world demand creating windfall rents for their owners. Carbon taxing in particular also has environmentally desirable benefits by lowering the cost of alternative energy and labour, relatively speaking.
“In addition to spurious claims about the burden of the top marginal tax rate…”
… and thus speaks one who has almost certainly never been faced with a real choice of working harder only to have 48.5% confiscated and pissed up the wall by the government.
Sorry JQ, but until you stop accepting freebies from the government and actually go and generate your own income, I don’t credit your opinion on the “burden”or otherwise of the top marginal rate.
Ex-anon, you may not have noticed my articles in the AFR, but you can rest assured that I get paid for them, that I pay the full marginal rate on this income, and I have a real choice whether to do the work or not.
I anticipate your retraction with interest.
What percentage of your income do the AFR articles represent?
I just looked up Federation Fellowship salaries: $246, 290 per annum. That’s not including supporting grant money .
You’d have to be making a huge whack from the AFR articles for it to make much difference on top of that taxpayer largess. Hell, if the taxpayer was that generous with me I’d probably donate my speaking/writing fees to charity.
Sorry, no retraction from me: anyone receiving $246,290 salary guaranteed from the taxpayer hardly qualifies as “generating his own income”.
Tell you what Ex-anon – post your real name, profession and address and invite others to rake throguh your personal affairs looking for excuses to atatck you and maybe people will start to treat you marginally more seriously.
Back on topic, my favourite line on tax reform is that an act of Parliament should look as if it was intended to be that way. I believe our current act fails that test.
The really scary bit is that, according to the Acts Interpretation Act, we all understand the ITAA, and all other acts of Parliament, completely. An act that mandates of all what is an impossibility for any merely invites ridicule, not respect, for the law.
jquiggin: What percentage of your income do the AFR articles represent?
I just looked up Federation Fellowship salaries: $246, 290 per annum. That’s not including supporting grant money .
You’d have to be making a huge whack from the AFR articles for it to make much difference on top of that taxpayer largess. If the taxpayer was that generous with me I’d probably donate my speaking/writing fees to charity.
Sorry, no retraction from me: anyone receiving $246,290 salary guaranteed from the taxpayer hardly qualifies as “generating his own income”.
Ian Gould: if you’re happy taking advice on the burden or otherwise of the top marginal rate from someone in JQ’s position, that’s fine by me. Personally, I find it offensive to hear someone on a $250,000 govt salary telling me that it is not a burden to pay 48.5c of every extra dollar I earn in tax. I doubt I am alone in that view.
Sorry, Madam Minn and ex-anon, but playing the man, not the ball is the usual term for this sort of argument. I have disagreed with PrQ regularly and expect to do so in the future, and I do disagree with him on the top marginal rate, but his salary is not important. IMHO, the debate about tax reform is. Get back on the topic.
Minn,
I invite you to disclose your personal details as I did with ex-anon.
For my part, my name is on the public record. I left the Queensland Qublic Service about 18 motnhs ago.
I WAS making around $60,000 – which is a lot than I could be making in the private sector.
I currently make around $30,000 a year as a book-shop owner. I expect that to increase over the next few years until I once again pay tax at the top marginal rate.
I used to earn 20% more than I do now. I took a 20% pay cut and work only four days a week now.
There was a multitude of reasons why I did this. However one of the prime reasons is that my EMTR was 80%.
The way this came about is that I am in the top tax bracket so my marginal tax rate was 50%. Plus our household was entitled to Family Tax Benefit which was getting withdrawn at a rate of 30%.
For every dollar I was earning the government was effectively taking back 80 cents.
There were two ways to reduce this EMTR. One was to earn less (the path I took) and the other was to earn a lot more.
Having taken a 20% cut in nominal income I just got a tax refund that puts me on par with where I would have been anyway. And I got to work 20% less hours per annum for this privaledge. Sit down money plus a high marginal tax rate helped to ensure that I produced less. This year I will once again produce a lot less than my potential or natual inclination.
I should clarify that I have not really worked 20% less. The spare day each week has been employed insourcing certain household needs. The EMTR has reduced my households propensity to trade. Just like an internation trade tariff would. So in practice I have worked just as hard but at a significantly reduced level of productivity.
Leaving aside the issue of personal attacks, Minn/anon fails to understand the distinction between marginal and average tax rates here. It’s the rate on marginal income that has adverse incentive effects.
It’s fascinating, more generally, how right-wing denunciations of the politics of envy cease to be applicable in cases like this: I’ve lost count of the number of rightwing bloggers who’ve whinged about my income rather than going out and earning a bit more themselves.
For many on the right, wealth is both proof of virtue and its reward.
It’s an article of faith that if you work hard, you will become rich.
When members of this church notice that they are NOT rich rather than accepting it as proof of a failing of their own or of a fault in their doctrine, they accept the various scapegoats offered by populist politicians of the right.
“The reason you aren’t rich is…high taxes….unfair advancement of minorities….women taking men’s rightful jobs…excessive litigation.” (It used to be that scapegoating the Jews was a popular option but that’s out of fashion these days.)
When someone comes along who IS rich and who fails to adhere to the tenets of their faith they naturally take it badly.
You must have cheated somehow. Sure George Soros is a billionaire but that obviously doesn’t imply that he has any REAL understanding of how markets work.
(On a related note, it’s remarkable how people who would never dream of lecturing their doctor on medicine or arguing with their builder about the number of joists needed in a supporting wall feel fully competent to debate, for example, the impact of tax cuts on the marginal propensity to save, the details of Coasian analysis or Freidman’s work on expectation theory.)
In case my previous post seems overly partisan, I will ntoe that the political left is quite capable of being equally irrational in their economics – witness “antiglobalisation” and protectionism.
(I’ll also note that economics is by no means a precise science and that soem phenomena such as the resilience of the US economy over the past 5 years are still a mystery to economists.)
I’ll also note that there is a genuine and real problem with povery traps, welfare benefits and high effective rates of taxation in this country as Terje’s example illustrates.
Unfortunately, john Howard’s government’s attempt to solve this problem has been to extend to extend welfare benefits to the middle classes and reduce the phase-out rates for benefits. This is hugely expensive (and arguably gives the government the power to interfere further in people’s lives – but many on the right don’t seem to mind that when the interference is intended to promote the single wage-earner nuclear family model).
Ian,
I could be wrong but you seem to be building a right-wing straw man.
Personally I don’t much care if John Quiggin is 1,000,000 times richer than me. However if he votes for people or lobbies for a cause that involves taking from me, my family, my friends and neighbours through coercion an even bigger slice of what we produce then I have an issue with him. It would not be an issue of envy but rather an issue of natural justice.
In a similar vein it seems silly to me when people suggest that Malcom Turnbull should not be offering an opioion on taxation. His wealth is irrelevant to the strength of his argument.
Regards,
Terje.
P.S. Lots of “left-wing” people at http://www.insidepolitics.com.au whinge about how priveledged my life has been and how much I must earn by exploiting others. Which really shows that they are clueless.
fickle fickle
Ian’s last post is my cue to point out that the Howard Government’s “interference. . . intended to promote the single wage-earner nuclear family model” has had the following effects on the work-family choices of women in the 25-34 age group:
Working or seeking work: 67.7% of age cohort in June 1996, 73.35% in June 2005.
Mothers: 57.97% in June 1996, 49.27% in June 2005.
Working mothers: 29.89% in June 1996, 27.88% in June 2005.
Married full-time homemakers: 24.38% in June 1996, 18.86% in June 2005.
Full-time homemakers (including single mothers) with kids: 28.08% in June 1996, 21.39% in June 2005.
Married full-time homemakers with kids: 22.49% in June 1996, 17.06% in June 2005.
Working or jobseeking with no children: 37.74% in June 1996, 45.47% in June 2005.
No children: 41.96% in June 1996, 50.73% in June 2005.
(NB: There is a figure of 0.07% unaccounted for after the percentages for “mothers” and “no children” in June 1996 are summed. This is probably a rounding error in my spreadsheet and/or the ABS data I was using to compile it.)
The explanation is obvious. The Howard government has adopted policies forcing women to choose between the labour market and the labour ward, and women have made the choice that the government didn’t want them to make.
“However if he votes for people or lobbies for a cause that involves taking from me, my family, my friends and neighbours through coercion an even bigger slice of what we produce then I have an issue with him.”
But the money will: (a) only be taken if there is a democratic decision to do so as a result of the popular election of a parliament of a certain composition, and a decision made by or with the consent of the parliament; (b) be taken from JQ and others supporting the cause, who in the circumstances I have described would need to have been a majority of the population in order to elect a parliament of such a composition. The use of the word “coercion” to describe such a process is the libertarianism of fools.
(in case it wasn’t obvious, fickle minn is ex-anon – posting this way to circumvent moderation).
I was going to bow out, but this misinterprets my position:
Of course I understand the distinction. It is JQ who fails to understand that in addition to marginal rates, how the bulk of one’s income is earnt also matters, both in terms of incentive and in terms of natural justice as Terje puts it.
In my case, I have sweated for every dollar, building a business from the ground up working 80 hour weeks for several years on a subsistence wage and taking huge financial risk in the process (I have almost lost everything several times).
Now that my business is better established and I can afford to increase my salary, that 48.5c marginal rate seems grossly unfair (leaving aside the ridiculous distortions such a rate creates – I can now see the huge benefits from an efficiency perspective that a blanket 30% rate would have: 30% on capital gains; 30%, company tax; 30%, marginal income tax rate).
In JQ’s case he has not sweated every dollar he has earnt. He has been handed something like twice an ordinary full Professor’s salary for working his entire life in secure, taxpayer-funded academia. His salary is like a huge bonus that is quite divorced from his actual effort. So it makes total sense that someone in his circumstances would be less bothered about the top marginal rate (I know, I used to be an academic – promotions and the consequent pay rises were much more about academic status than about the money. It came as quite a shock to me how different it feels when you actually have to generate your entire income (and now the income of several other people too)).
And to those who accuse me of envy: I don’t begrudge JQ his salary one bit. I think the Federation Fellowships are a good experiment and if they achieve their desired goal then it will be a “good thing” for the country (although I may question individual appointments). My feelings are much more in line with Terje: keep your salary but don’t turn around and tell me that 48.5c is not a burden. You don’t speak for me.
PrQ,
Now we have a cogent argument from ex-anon, I, for one, would like to see a good answer. The current system could well be seen to be unfair to someone whose income is highly variable from year to year. If you sacrifice (in essence) a large amount of salary to make what you hope is a large gain in the future, the disincentives are quite large if (nearly) half the revenue gain from the future income is lost to taxation and there are also large EMTR losses on the way. If we accept that markets are reasonably efficient then the large salary gain should have only come from a large amount of effort and or a substantial innovation.
It is that effort and innovation that has continuously driven our economy (IMHO). Why do you believe that those who have worked hard and sacrificed much should give up half of their income to taxation? Is this not a strong disincentive to innovate and work hard?
Some of us are in the fortunate position where our incomes are high and stable. It is the category where incomes are highly variable that are effectively penalised by this system as it is.
Paul Norton says that tax is OK and not coercive because it has been democratically decided. He misunderstands democracy.
Democracy does not make something right or voluntary… what it does it determines a course of action of government when people disagree. It is perfectly possible for democratic countries to make mistakes and to be violent/coercive. Increasing tax would be such a mistake. And tax certainly isn’t voluntary.
All government action of significance is coercive. What happens if I refuse to pay tax? Or if I decide to walk through Pit st smoking a joint and carrying a gun? Or if I pay somebody $7 an hour to knit sweaters? Or if I cut down a tree in canberra without permission? Or if I attempt to give somebody a lift in my car in exchange for cash? Answer: I will be stopped by the government.
The denial of the fact that the government uses violence/coercion is the weird anti-libertarianism of fools, used to make people feel better about policies that are morally questionable.
Terje,
I’m not anti-right by any means – I’m anti-stupid.
Stupidity, like wisdom, is distributed across the whole spectrum of political and economic views.
“All government action of significance is coercive.”
You’ve missed the most basic example, JH. If I attempt to take and use something the government says is your property, I will be stopped by the government. Do you have a problem with this?
JQ,
If you try and directly take and use something that is my property then you will need to contend with me. And if you are big then perhaps I will need to invite my neighbours to assist in the defence of my property. Even if I get the entire community to assist then it is hardly a sin for us to work together to defend what is mine. Yes it is coersion. It is also legitamate.
I don’t think JH or any of the other liberals here are suggesting that force should never be used. That would be pacifism not liberalism. The liberals are just a little more particular about when force is right. Might does not make right. The democrats amoung us seem to think it does. And that a majority legitamises almost any use of force.
Regards,
Terje.
Terje,
I will concede that the argument I put in the earlier post runs the risk of being interpreted as justifying “vulgar majoritarianism”, and that I would prefer that Australia: (a) made more use of deliberative democratic mechanisms rather than relying narrowly on representative-majoritarian structures which are all too often subordinate to party and factional discipline and diktat; and (b) had a justiciable Bill of Rights which would include a reasonable form of property rights.
Having said that, it remains my view that a decision by a substantially democratic polity to require its members (who have taken part in making the decision and who have rights as members) to contribute collectively to a program from which the polity and its members can expect to benefit is only nominally coercion, and can more rationally be called civilisation, or even mutual obligation! There is a morally decisive difference between such a decision and the impositions which an undemocratic and unaccountable regime of the fascist, Stalinist or theocratic variety places on the bulk of its citizens for the purposes of the regime and the benefit of its elites.
Paul,
Obviously we agree on several things then.
If we are going to suffer a government using coersion then democracy is a better way to decide who should govern then most of the alternatives. However I would still like to see restrictions on such an executive. A bill of rights would only suit me if it was more specifically a set of limits that restrain government rather than a set of excuses to extend the power of government. The problem with many modern attempts at a bill of rights is that they amount to a list of entitlements that government is meant to provide for the citizens. Things like free ice cream and candy.
A bill of rights should restrain executive government, not empower it.
Regards,
Terje.
JQ — there is a semantic game here I want to avoid… and so I will add the important qualifying “initiation of…”
There is another part of the argument that is a bit more nuanced which you may be referring to… and that is the coercion involved in tax necessary to fund the police.
Yes, that tax is still coercive. But yes, I also think it is justified. Just because something is violent doesn’t make it necessarily wrong. Liberty is not the only moral good — there is also utility.
However, as you yourself have argued (with regards war), when it comes to acts of violence, the burden of proof should lie with the proponents of action to show that there is a likely and worthwhile utility benefit from the activity.
If you are referring to property as an invention of government — that is a misunderstanding of what property means. Property simply means the right to control use of something, and property rights exists in any political philosophy that has “things”. The question is who whould have the property rights and how they should be transfered.
Paul… let me respond again, but this time with guarded agreement.
I have never said, and did not mean to imply, that all types of violence/coercion are equal. If I steal an axe to open a door to a burning building I have commited theft. If I break into your house and steal your TV I have commited theft. But I certainly do not think these actions are morally equal!
The issue of violence v freedom is important, but it is not the sole determinent of what is good or moral. That would be ignoring the entire utilitarian tradition — which is certaintly not an accusation that can be leveled against the average libertarian (despite common misunderstandings to the contrary).
Further, I also would like to see more direct democracy — my preference is a Swiss-style CIR system that can overturn legislation if it is sufficiently unpopular. Like a third house of review made up of everybody.
Also JQ — from my experience the government probably wouldn’t successfully stop you from robbing me. 😦
John Humphreys,
Just to clarify – if you take an axe to break open a burning building it is not theft, unless you intend to keep the axe. The element of ‘intent to permanently deprive’ must be there for an offence of theft to be proven. The prosecution needs to prove this intent to prove theft except where it is either cash or (in WA at least) a motor vehicle that has been taken.
A better example in your case would, therefore, be that you have taken a car to break open the burning building. Trying to open one with cash would be difficult unless the door was coin operated – but that sort of door is not normally in the sort of establishment I would frequent…
Terje Petersen Says: September 5th, 2005 at 4:05 pm
Can you think of some more concrete examples?
SJ,
There are lots of concrete examples of “positive rights” that some people may attempt to codify within a bill of rights.
Some examples of positive rights:-
1. The right to universal free health care.
2. The right to universal free education.
3. The right to equal opportunity (as opposed to equal treatment).
An example of a positive rights within the UN declaration:-
Article 22: Everyone, as a member of society, has the right to social security and is entitled to realization, through national effort and international co-operation and in accordance with the organization and resources of each State, of the economic, social and cultural rights indispensable for his dignity and the free development of his personality.
And within that declaration a clear sign that some institutions are not at all limited by the declaration.
Article 29: (3) These rights and freedoms may in no case be exercised contrary to the purposes and principles of the United Nations.
If I was to write a bill of rights for Australia the first thing I would do would be to call it “The Limitations on Government” instead of calling it “The Bill of Rights”. The name should make it clear that the intent is to restrain government from acting in certain ways.
One of the more perverted twists on natural rights that I have seen recently is the notion that our “right to life” requires that the government can decide to dispense with our liberties in the fight against terrorism. This weird attempt at newspeak implies that our liberty is a threat to our life. So much for fighting terrorists in order to defend liberty!
Regards,
Terje.
Let me get this straight, Terje.
You’re against some future bill of rights, because it would give us things like:
1. The right to universal free health care. (Medicare, 1984)
2. The right to universal free education. (Education Act, 1872 (Vic))
3. The right to equal opportunity (as opposed to equal treatment) (Antidiscrimination Act, 1974 (NSW).
You’re worried that some future bill of rights is going to reaffirm these various acts of parliament passed in the last 150 or so years.
Andrew — my point was about non-voluntary violation of property rights… not about the legal definition of theft. I used “theft” because it is much shorter than “non-voluntary transfer of property rights” or “violation of absolute property rights”.
But sure, to save confusion lets use your example of using a car or coin to save people from a burning peep show. 🙂
SJ — if somebody disagreed with those policies, then it is unlikely they will see the virtue in giving them greater status or re-affirming them.
Also, anti-discrimination legislation does not give us equal opportunity. The kids of rich parents have the opportunity to go to a private school. Rich people have the opportunity to invest in financial products that aren’t available to poor people. Indeed — rich people have the opportunity to buy many things that aren’t available to poor people.
And we don’t have a right to all the medicine we like for free. And we don’t have the right to all the education we want for free.
Those sort of things shouldn’t be in a “bill of rights” — perhaps a “bill of things that are good and we would like”.
“Equal opportunity” was Terje’s term, not mine.
I’ll let you libertarian wankers fight it out over what you think “equal opportunity” means.
No, we don’t, do we.
All I see is a couple of libertarians whining that we shouldn’t have the things we already have.
SJ,
My view is that positive rights should be acts of parliament and that an appropriate set of negative rights should be enshrined in the constitution.
You asked a question, I answered as best I could, now you are calling me a wanker. What gives?
Regards,
Terje.
“Those sort of things shouldn’t be in a “bill of rightsâ€?—perhaps a “bill of things that are good and we would like.”
Um… why?
SJ — Why is the clueless left so scared of libertarians that all they can do is be abusive and create strawmen?
alpaca — just because something is good doesn’t make it a “right”. In my opinion, the concept of rights only makes sense in terms of deontology. Nobody has an inherent right to a good outcome — though of course that’s what we all want. Semantics perhaps… but that’s my preference.
What has a “bill of rights” got to do with taxation?
Anyway back to tax.
“spurious claims about the burden of the top marginal tax rate” = ‘revenue lobby’ disinformation.
I take issue with your assertion that marginal income tax rates are “progressive” and that they are not a burden to the middle and lower quartiles of tax payers.
Hidden behind progressive taxation is the rise in the effective tax rate of average earnings and the rise in income tax as a proportion of GDP (Australia ranks near the top in income tax as a proportion of GDP in OECD countries).
These deceptive rises in real tax rates occur over time and are a direct result of the scam called progressive taxation. As the government increases money supply and dilutes the currency, we need more of it to buy the same goods and services, we are no better off but they swipe a bigger proportion of our income in tax. What makes this process more criminal is that for every dollar the government spends effectively, it squirts one up against the wall. The government is a self regulating monopoly and they have legislated themselves a permanent pay rise- progressive taxation.
In the end, any sense of fairness in a progressive system of taxation can only be arbitrary. The scam of progressive taxation should be abolished and replaced with flat tax with a hefty tax free threshold.
Inflation is a big evil that economists seem to ignore, don’t understand or refuse to evaluate properly. It is the governments equivalent of a mandated increase in the real rate of taxation each year.
A cursory look will highlight what inflation does to marginal income tax scales. Inflation changes marginal income tax from a progressive tax to a regressive tax. Over time people on low incomes are taxed more proportionally and people on higher incomes are taxed less proportionally. This occurs because it is impossible to account or adjust for each individuals inflation rate, they are all different and governments always fail to adequately compensate for inflation. This flaw renders the marginal income tax system a regressive tax system.
+at the lower income quartile more low income earners are being taxed who previously were not. This is due to the tax threshold not being inflation adjusted. As inflation dilutes the value of currency, they need more dollars to buy the same good and services. They are no better of in real terms but they are being penalised by the tax system by being introduce to tax (going from under the tax free threshold to the lowest marginal rate). AN INCREASE IN PERCENTAGE OF TAX PAID BY PEOPLE ON LOW INCOMES.
+in the middle income quartiles the effective tax rate of Average Weekly Earnings has increased. Taxation of the average wage has increased from approximately $17 tax per $100 of wage in the early 1980s, to $23 tax per $100 in 2003- 17% TO 23% a 50% increase in the rate ( Approximate figures) AN INCREASE IN PERCENTAGE OF TAX PAID BY PEOPLE ON MODERATE INCOMES.
+at the top income quartile the reduction of the top marginal rates. As inflation slams “the majority”, middle class taxpayers into the top marginal rate it gets reduced. We have seen major reductions in the top marginal rates in recent years.- A DECREASE IN PERCENTAGE OF TAX PAID BY PEOPLE ON HIGH INCOMES.
The deceptive use of “progressive” tax scales and inflation is being used to increase the rate of stamp duties as well. The average Sydney home was the average Sydney home 5 years ago, but the rate of stamp duty on The average Sydney home has increased from approximately 2% to 3.85% in 5 years (a 90% increase in the rate). That massive increase in the rate of taxation equates to an extra $9250 of extra tax on the average Sydney home in todays dollars.
How is deceptively increasing the rates of taxation for average and poor people under the guise of a “progressive tax” not burdensome?
Kind regards,
Econwit
High tax rates for high wage earners is built on the assumption that these wage earners absorb the cost of taxation rather than passing it onto their employers in the way of higher wage prices.
If employees pass on their tax costs to their customers then the burden of these high taxes ultimately falls on all consumers.
I don’t know how you could test this assumption.
Whatever the case such high taxes remain a tariff on domestic inter-household trade.
Terje says:
“What gives?”
On reading back through this, I realise that I owe you an apology, Terje. You’ve stated your position reasonably (though I don’t agree with it), and I shouldn’t have labelled you as I did. Sorry.
Apology accepted.