Imagine if everyone with a surname starting with the letter C didn’t have to pay income tax. For some arcane reason, back in the mists of time when the tax was introduced in Australia, those with a ‘C’ name were completely exempted, and the exemption remained on the books, stubbornly resistant to efforts to remove it.
A discussion of Australian political and economic issues and ideas, by Matt Cowgill.
Archives for posts with tag: tax
David Uren’s piece in the Australian today has some pretty eye-catching figures:
…nobody starts to pay tax until their earnings exceed $18,200, but the Australian Bureau of Statistics shows that 60 per cent of all households receive more in cash benefits than they pay in tax.
A household in the middle 20 per cent of the earnings distribution pays income tax of $143 a week but gets cash social benefits totalling $164. Subsidised health, education and childcare deliver that average household a further $346 a week.
I can understand why libertarians might favour a flat tax on superannuation contributions and on ordinary income. I disagree vehemently with that position, but it’s logically coherent to me. Personally, I favour a progressive tax on both of those things, and I think that position also makes sense. What isn’t coherent to me is the idea that we should tax ordinary income in a progressive way, with higher income earners paying a greater proportion of their income in tax, but we should tax super contributions with a flat tax. How does that make sense?
One of the more prominent entries into the public policy debate of late has been the Grattan Institute’s Game Changers report, which is an attempt to prioritise the various reform options that the federal government could pursue, and highlight those policies which would deliver the greatest economic dividend. It’s a worthy report, although I disagree with much of it, partly for the reasons set out by John Quiggin.
The OECD has released a new report on inequality. I haven’t had a chance to read it properly yet, but a few points that stand out are:
- From the mid-1980s to the late-2000s, the incomes of the top decile of Australian households grew by an average of 4.5% per year, by far the fastest income growth enjoyed by high income earners in any OECD country. The average annual growth for the top decile in OECD countries over the period was 1.9%.
- Low income Australians also saw relatively strong growth from the 80s to the 2000s, growing at an average of 3% per year. Interestingly, the only countries in which low income earners saw stronger gains were Portugal, Ireland, Greece and Spain.
- Overall inequality in Australia, measured by the Gini coefficient, is slightly higher than the OECD average, though I wouldn’t put too much stock in the small difference between us and the average.
- We achieve less of a reduction in inequality inequality via taxes and transfers than we did a decade ago.
- “Labour market trends have been a key driver of inequality in Australia.”
- The share of income going to the top 1% has roughly doubled since 1980 (which we already knew from Andrew Leigh’s work), while the taxes paid by high income earners have fallen.
I plan to post more detailed analysis when I’ve had a chance to read the full report.
Bob Carr wrote a strange post advancing the conservative canard that the Euro crisis is a crisis of the welfare state, caused by high taxes and/or welfare spending as a proportion of GDP. He’s wrong.
There’s an interesting piece by Ian Rogers at Inside Story regarding the profits of the big four Australian banks.
