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.
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A cheer for Beazley
I’ve repeatedly criticised Kim Beazley for adopting a small target strategy aimed at peeling off marginal voters from the government while not upsetting anrybody. But his response to the Budget has been as strong as you could hope for. Of course, the press gallery sports commentators are almost uniformly convinced that it’s a bad move, though, as far as I can see none of them denied the point that the tax cuts give a lot to the well-off and hardly anything to the great majority of Australians.
Anyway, well done Kim!
More from Tim Dunlop, Ken Parish and Mark Bahnisch
Request for help
Over the page, I’ve got some tables on tax rates, which I pasted from a Word document, saved as HTML. They look nice, but for some reason each one is preceded by a huge amount of blank space. Can anyone tell me how to get rid of this?
The tables are of some interest in themselves, so please take a look
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Flat taxes
During the leadup to the Budget, the term ‘flat tax system’ was bandied about in Australia and overseas. The Economist gave the idea a run pointing to Eastern European countries that tax personal and corporate income at a common[1] flat fate ranging from 13 per cent (Russia) to 26 per cent (Estonia) applied to all incomes with no deductions. A further nod to neatness (with no real basis in tax theory) is to set the rate of Value Added Tax (that is, GST) at the same rate as personal and corporate income tax (reader Joff Lolliot alerted me to this and some other points covered in this piece.)
Not surprisingly, I’m unimpressed by the concept and the arguments put forward in its support.
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The Budget, Part 3
Here’s my piece from today’s Fin, on the expenditure side of the budget
The Budget, Part 2
Following up on the Budget, I’ve been looking at the incidence of income tax over the Howard-Costello period. To start with, I’ve just looked at the tax scales, disregarding deductions, avoidance and evasion, and confining attention to single taxpayers. The results are perhaps not surprising, but certainly disturbing
Single taxpayers on average weekly ordinary time earnings faced an average income tax rate of 22.8 per cent in 1996, and that will be pretty much unchanged at 22.2 per cent when the second stage of the Budget tax cuts are phased in in 2006. Since the GST has come in in the meantime, raising more revenue than the indirect taxes it replaced, we can conclude the tax rate for this group has risen. Also, since the mean exceeds the median, this means most single wage- earners are paying more tax than they did in 1996.
The effect is stronger ot 0.6 times AWOTE, where the average income tax rate has risen from 15.4 per cent to 16.9 per cent. On the other hand, for those on 1.5 times AWOTE, the average rate has fallen from 29.4 per cent to 26.2 per cent, and for those on twice AWOTE, from 33.8 per cent to 30.1 per cent.
Since someone is bound to jump in and point out that this is still a progressive system, let’s remember that the income tax is just about the only progressive element of the system. Except for the bottom 20 per cent, the tax system as a whole was roughly proportional before the latest changes, and is likely to become increasingly regressive if policy continues along these lines.
Andrew Leigh has a different way of looking at the numbers, but reaches much the same conclusion.
The Budget
My AFR piece tomorrow will deal with the expenditure side of the Budget, but I also plan a piece on the tax side. My immediate reaction is the same as everyone else’s – these cuts are amazingly skewed towards upper-income earners, with no-one on less than $55 000 per year getting more than a $300 tax reduction. This is about 9 months worth of bracket creep for someone on $40 000/year, but it’s apparently supposed to last for the rest of this government’s term in office, given the allocation of future tax cuts to the top end.
I’ll try to have a more detailed analysis soon.
There’s more from Ken Parish, Andrew Norton and Flute
The realist case for electoral reform
Via Senator Andrew Bartlett, I see that The Independent is campaigning for electoral reform in the UK, following Labour’s re-election with only 36 per cent of the vote.
Leading opponents within the government are named as John Prescott and Ian McCartney and the story also mentions that Many union leaders also fear it will lead to coalition government with the Liberal Democrats, and prevent Labour from governing again with an absolute majority.
I imagine that the opponents regard themselves as hardheaded realists, but it would be more accurate to view them as reckless gamblers.
Great minds think alike, fools seldom differ
Peter Hartcher also thinks that Costello’s best option for becoming PM is to go to the backbench (thanks to Jack Strocchi for the link).
What I like about cultural studies
Nick Caldwell, who kindly helped me out yet again with the site design has asked me to write a post on what I like about cultural studies, following up similar posts on John Howard and postmodernism.
