Ken Henry Must Go

If it wasn’t obvious before now that the removal of Ken Henry should be a top priority, this should seal the deal:

A super-profits tax should be rolled out for all companies in Australia as a long-term reform.

Treasury secretary Ken Henry says the tax would be similar to the model proposed for mining groups.

Companies would be able to earn up to the government bond rate tax-free, but would then pay a heavier tax on “super-profits” above that level — although less than the 40 per cent mining tax.

UPDATE: More from Catallaxy on this doofus

Stand and Deliver

It’s tax time!  Just a reminder, that unless you’re using an agent, your Australian tax return is due the end of October.

In unrelated news, here is a music video from the early 80’s for your entertainment:

Penn & Teller On Taxes

Penn & Teller, the Las Vegas Headliner magicians/comedians with their own Showtime TV program (entitled Bullshit!), recently dedicated an episode to taxation. And it’s great! Not only is it ideologically very libertarian, but it was also, well, very funny! I know putting the words ‘funny’ and ‘tax’ in the same sentence is normally unheard of, but they managed to pull it off quite well.

Obviously it’s focused on the U.S, and designed for the layperson rather than political activist, but I think most of it applies equally to the Australian situation, and is well worth a watch.

You can download a copy at [removed] (where you have to sign up for some spam or some such first but it really is quite worth it – I just used a fake email).

So, enjoy! 🙂

(Warning: Contains extensive profanity and brief full frontal nudity. Which depending on your workplace might raise a few eyebrows.)

Update: Due to copyright restrictions, I’ve removed link from this post. Sorry. Feel free to debate intellectual property rights in the comments :p

Plan to increase marginal tax by 8.5%

Over at Catallaxy, Sinclair Davidson has mentioned that the government is considering an increase in income tax. Specifically, they have said that they want to increase the Medicare Levy (income tax with another name) from 1.5% up to 2.25%.

But Sinclair misses, along with all the media and public commentators, miss the biggest part of the story.

The proposed reform would mean that all people earning over $22,960 would have their marginal tax rate increased by 0.75%. But … and this is the part not well understood … people earning between $20,934 and $22,960 would have their marginal tax rate increased by 8.5%!

That is a significant increase in the marginal tax rate for people on low-incomes. It should also be noted that if we factor in normal income tax (15%) and loss of welfare benefits (60%), the effective marginal tax rates on somebody earning about $21,000 is about 85%. Poor people need a tax cut, not a tax rise.

The reason for this anomaly is that (contrary to popular perception) the Medicare Levy does not have a flat marginal tax rate. Instead, it is 0% for people earning up to $17,794 and then it is “phased in” at 10% for people up to $20,934, and then there is a marginal tax rate above that of 1.5%.

With the government’s proposed increase to the Medicare Levy, the “phase in” period (ie the 10% tax bracket) will need to be extended to people earning up to $22,960… so that people earning about $22,000 will see their marginal Medicare Levy payment increase from 1.5% up to 10%.

Suffice to say, this is very poor policy.

The sad news is that our tax system is so complex that the media and other commentators have totally missed this massive marginal tax rate increase. If the government directly announced a marginal tax rate increase of 8.5% for some of the poorest people in the country there would be a public outcry. But because they’ve announced it in a way that few people understand, they appear to be getting away with it.

Queensland Fuel Rebate

Queenslanders are about to lose their fuel rebate, and the spin is in full gear.  The most blatant spin I’ve seen is from this news article titled, “Fuel raiders force subsidy scrapping“.  It’s wrong on multiple levels.

Firstly, the scheme is not a subsidy but a rebate (since the levy is a federal tax, the rates cannot vary by state as they used to.)

Secondly, not only is Bligh no doubt overstating the number of “border-hoppers”, but the rebate is only eight cents a litre – which doesn’t even cover what they get back in GST.  In other words, the Queensland government makes profit for every NSW resident who hops the border to buy their petrol.  So, either the Bligh government is lying about their reasons, or they are seriously incompetent.

But then, we had this pearler (emphasis mine):

“But it will also save taxpayers more than $2.4 billion over four years as part of our strong plan to regain our Triple A credit rating and restore the budget surplus.”

Got that?  Making taxpayers fork over an extra $2.4b is saving them money!