Still too high

The government has reduced income taxes as at 1 July. But government inflation has eaten into our after tax spending power and they haven’t even handed back this bracket creep. Clearly our rate of tax is still way too high. If we removed the last three rows in the tax table below then we would have a half way respectable tax system. Ideally we would remove the last four rows from the table.

Income Tax 2009-2010

20 thoughts on “Still too high

  1. Still too high you say, that may be true, but your solution is still too … never gonna happen!

    If anything, we should aim to reduce our income taxation to levels employed by Canada which has a highest rate of 29% and is progressive.

    It would be nice to see tax brackets linked to inflation rather than simply adjusted to relieve bracket creep on an ad hoc basis.

  2. I think the LDP’s reform 30/30 is the best way to go, because progressive taxes unfairly discriminate against the property rights of the rich and successful. The working poor are also taxed far too much.

  3. What about the first 3 rows… In conjunction with scaling back welfare. Spending cuts have to be the first priority. And taxes to retained earnings.

  4. This is a difficult one. How much is a fair rate of tax?
    I see it as similar to rent. We rent the country and pay for it. The better the services we get the more we pay as rent/tax.
    If we all stopped asking for this and that we may put a stop to increases.
    Just my early morning Sunday thoughts.

  5. Go back to bed Mario Galteri.

    The rent analogy is ridiculous. We couldn’t rent the country because we already own it. The government that taxes us should be our servant, not our landlord. Unfortunately it also uses our own money to bribe us, which some people fail to recognise.

  6. Mario,

    How much is a fair rate of tax?

    The minimum amount necessary to uphold civil society.

    While that doesn’t answer the question specifically, it’s definitely less than what we pay now. I’d say the answer would be somewhere less than 30% of your gross income when all taxes and government charges (including things like land rates) are taken into account. We are currently way over this.

    Furthermore, a fair tax would be more evenly distributed across society – not the current 10% of income earners paying approximately 70% of the income tax. While social democracy has done a good job of getting money off the productive members of society without discouraging them from being productive in an overtly noticeable way, we are still harming ourselves when we penalise the high achievers, because the high achievers do make choices that are less beneficial to society than they otherwise would if the tax rates were lower.

    I see it as similar to rent. We rent the country and pay for it.

    With rent I negotiate a price and a timeframe with a landlord, and if we can’t agree I go somewhere else. With tax, I vote for the politician that is going to take the most money off other people and give it to me or spend it on things I like. Rent is a mutually-agreed, voluntary decision to mutual benefit. Tax isn’t anything like this. For some people, ones who aren’t very productive, tax is a chance to band together with similar people and get yourself a handout of other people’s money. For other people, productive hard-working ones, tax is a desperate attempt to try and keep as much of the money you’ve earned as you can.

    Like I said, the ‘right’ amount is the minimum amount necessary, not as much as you can take without being voted out.

    The better the services we get the more we pay as rent/tax. If we all stopped asking for this and that we may put a stop to increases.

    Fair comment. We get the tax system (and the nation) that we deserve.

    Just my early morning Sunday thoughts.

    Anytime. We enjoy hearing them.

  7. Re Comment by David Leyonhjelm
    Ok, rent may be a simple idea, but even if you own your own home there are expenses.
    If you want a flashy pool or car you pay for it.
    Same with the country, if you want all the latest like great roads, broadband, parks, etc etc we pay through taxes.
    The more we want the more we pay in taxes.
    I am not saying that every cent is spent wisely but on average we get what we can pay for!

  8. re Comment by Michael Sutcliffe
    Someone has to pay for what we want, and that is us!
    If we ask for too much we pay more taxes, local, state or federal.
    I know its a simple idea but to me its basic economics.
    The more we want the more we pay.

  9. Someone has to pay for what we want, and that is us!

    Mario, you are completely correct – we have to pay for what we want. What libertarians/capitalists/freemarketeers are saying is that it’s better for individuals to pay for the goods and services they want in a marketplace than pay for these things through government. Markets are efficient – they are run, for the most part, by hardworking people trying to make a living. Government bureaucracies are inefficient – they are run by politicians who are spending other people’s money. So if you want a flashy pool in your house, it’s going to be cheaper to buy it yourself because if the government gets into the pool business, pools are going to cost more. Same thing with broadband – it will be cheaper (and better) if it is supplied by private companies rather than the government.

  10. An article here, referring to the UK government, says that if they had limited their spending increases to inflation since 1997 they’d be able to abolish income tax, plus a number of other taxes. I wouldn’t mind betting that the same is true of Australia, or pretty close. Limiting spending growth to inflation doesn’t seem too much to ask, does it?

  11. Same with the country, if you want all the latest like great roads, broadband, parks, etc etc we pay through taxes.
    The more we want the more we pay in taxes.
    I am not saying that every cent is spent wisely but on average we get what we can pay for!

    Mario, this is a libertarian site. That means we don’t accept these things need to be provided by the government.

    Many roads can be built by the private sector and funded on a user-pays basis. Broadband is already private and should remain that way, costing taxpayers nothing. Parks might be publicly funded but the cost need not be high. They could also be privately owned and funded on a user pays basis.

    In my opinion the only truly essential things that should be funded through taxes are national defence and the criminal justice system (ie police, courts, etc).

    You do get what you pay for, but with taxes you pay for a lot that you don’t get and get a lot of what you don’t want.

  12. I’d go one further and say that we needn’t even pay taxes for those things. But then again, I’m always told I’m extreme

  13. The trouble with convincing people of our arguments about taxes are that pretty much everybody gets something heavily subsidised by the government – whether it’s the council pool, a local park, the maternal and child health service, Rudd’s cash bonanza, or the local library. It gives the impression of getting something for nothing, even if their taxes are funding about 100 other things that they get but don’t use, or don’t get at all.

    Try and convince people that they should pay full market price for these things, but that they would ultimately be better off in the hip pocket anyway, because taxes would be much lower. The numbers might stack up but numerical arguments don’t sut it with many people.

    The other trouble is that you don’t ever ‘see’ your taxes being taken if you are a PAYE employee. Imagine if, instead of it being automatically taken out of your paycheque, every fortnight you had to front up to the ATO and hand over the same amount in cash. Yes I know it would be massively inefficient and impractical, but it would make people question where all their hard-earned goes.

    Steve – that one further is getting close to the dividing line between libertarianism and anarchy. (well anarcho-capitalism at least) I would have the national defence, the police and the courts – both criminal and civil, insofar as its role is to enforce contracts that were voluntarily entered into.

  14. Graeme Bird,

    Yes removing the first three (or four) rows would work for me also. A reform that makes the system more progressive but which also means people pay less tax would still be a great reform. In fact increasing the tax free threshold is probably the most politically practical place to start.

    If we know any supportive MPs perhaps we should ask them to submit a modest private members bill which calls for the tax free income threshold to be raised by 10% in each year that growth in total government revenue is positive. It would seem modest enough in the short term so it just might get turned into law, however in the long term it could all but elliminate income tax.

  15. I can’t see why income tax couldn’t be abolished within a few years. I did the Australian newspaper’s budget thingy as advertised on this site, and after you wipe out education, infrastructure and health spending, you easily have enough revenue from sales taxes until voluntary systems can be instituted.

    Steve, extremism isn’t inherently bad.
    Would you say Satanism in moderation was good?
    Would you say an extremely healthy lifestyle was bad?
    If someone brands you an “extremist” this is lazy and generally meaningless.
    It’s a typical BS political term used on a society of people who never learnt to evaluate concepts properly.

    I’m with David at 16:
    Police, courts and military. That’s what a force wielding monopoly organisation (government) is for – and nothing more. My ideal political party.

    Mario at # 8, 50 million or so people of Soviet Russia paid with their lives. Assuming payment means results is ridiculous.
    Obviously your buck goes a lot further the more capitalist a country is.
    Roads, education, health services should properly be privatised like any other product/service.
    The most essential product of all – food – is largely privatised (although still regulated far too much). But notice how we don’t have food shortages, food waiting lists or other rationing, falling standards, etc.

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