The tax cut that wasn’t

A few days ago I wrote an op-ed for the Business Spectator called Taxation Rhetoric and Reality, which discusses the real impact of an increase in low-income tax offset (LITO).

The LITO is a complex tax change which has its real impact hidden in the official tax rates. In effect, an increase in the LITO increases the tax-free threshold (a good thing) and increases the marginal tax rates for some working people (a bad thing).

The ALP has proposed an increase in LITO. The effect of this will be to cut the marginal tax rate for people earning $14,000 to $16,000… but it will also increase the marginal tax rates for people earning $60,000 to $67,500.

Instead of adjusting the deceptive LITO, it would be better if the government simply increased the tax-free threshold.

2 thoughts on “The tax cut that wasn’t

  1. I write agribusiness posts for Business Spectator two or three times a week. http://www.businessspectator.com.au/bs.nsf/fmISHome?OpenForm&is=agribusiness I try to slip in something about reduced regulation as much as possible.

    Unfortunately Alan Kohler is yet to be convinced of the benefits of tax cuts. http://www.businessspectator.com.au/bs.nsf/Article/MAKE-AUSTRALIA-WORKbrNation-building-not-hand-outs-$pd20090128-NPRKT?OpenDocument

    We both need to keep writing.

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