Playing with LITO numbers

Wikipedia now shows the new income tax rates for 2008-09. The table shown in the article is the usual table used to show the neat simplicity of progressive income tax. For higher income bands you pay higher rates of tax. 

The article also mentions the Low Income Tax Offset (LITO). LITO is a rather simple overlay calculation which can actually be expressed by simply modifying the tax table. However instead of modifying the tax table they retain the overlay calculation called LITO for reasons only really fully known to our political masters.

Over the fold I have a table showing the tax scales before and after applying the LITO. I made this table just for fun. Working out how tax rules effect tax outcomes is fun. Of course overlaying Family Tax Benefits Part A and Family Tax Benefits Part B depends on multiple variables besides personal income so I can’t show that in such a simple table. I don’t think I could handle that much fun right at the moment. And once we start to include the effects caused by the other “benefits” of the tax/welfare system the simplicity tends to dissipate somewhat (even as the level of fun continues to increase).
Income Tax 2009 with LITO

Amusingly those that earn between $34000 and $48750 per annum pay a higher marginal rate of income tax once the effects of LITO are included than those earning $75000 per annum. So much for progressive simplicity. However it is fun.

12 thoughts on “Playing with LITO numbers

  1. Good work, Terje… you should put this into wikipedia – lots of people look to it as a reference. It’s good to bring the EMTR effect to people’s attention.

  2. A lot of libertarians, like me, talk about abolishing taxes, and getting rid of regulations- let people decide for thenselves if they want to shop in places that health inspectors, with their delicate sensibilities, would gag at. Can a businessman tell us how much of his/her/its time is consumed in complying with regulations at all levels? How much more productive would we be without them? (Of course, I also believe that people would take out insurance in place of all these regulations, but they would choose that, and companies would have an incentive to keep their forms as neat and comprehensible as possible, to attract customers.)

  3. I may be wrong but wasn’t LITO increased in the budget to $1200. Thus you pay no tax at $14,000 unless of course you are eligible for MAWTO as I (unfortuately) am. In which case no tax is paid until $15,760 (Not counting Medicare Levy which cuts in at $14603 if you are a part of a couple)

  4. Peter – I think you may be correct in which case my table is wrong. I took the reference to an increase in the Wikipedia article to mean that the increase was from the latest budget. In fact it would seem to be from the budget prior. If you can find a reference for the correct figures I’ll redo the table.

  5. … once we start to include the effects caused by the other “benefits” of the tax/welfare system the simplicity tends to dissipate somewhat (even as the level of fun continues to increase)

    Too right. A good slab of my career has been spent having just that sort of fun. It’s quite amazing how much fun it gets once you include things such as State public housing rebates, consumption taxes, etc.

  6. Pingback: LITO 2009-09 (take 2) « Thoughts on Freedom

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