2019 Budget-in-reply Address - Canberra

I am a strong advocate for a flat tax. Any comments for and against, that's what this thread is for.


Bill's reply to the coalition's budget delivery 2019:

" But we will not be signing-up to the Liberals’ radical, right-wing, flat-tax experiment, way off in the future. A scheme which would see a nurse on $50,000 paying the same tax rate as a surgeon on $200,000".


This is what I detest about the ALP. They don't take into account the extra time, money, effort, commitment, study, expertise etc one of those roles has over the other. Its irrelevant., Who cares. We don't value any of that. Just tax the 200k suckers a larger chunk than the 50k. Who cares how much extra time, money, study, commitment etc one has put over the over. They earn more. Must be greedy capitalists who don't deserve it. Tax em more!! And that's their approach to basically anyone in Australia who fights hard to get ahead. Push em down! and give their extra earnings to the others who don't have.



Any comments on a flat tax?

 

With a progressive tax system, as one earns more, the more one pays in tax (on every $ earnt) in percentage terms and a lot more in dollars terms (as the percentage rises). This becomes a disincentive to earning more (via more hours, overtime, second job, ...) and an incentive to maximise tax deductions (as the ‘tax man’ returns one more $).

With a flat tax system, as one earns more, one still pays more in tax, not in percentage terms but still more in dollars terms (if you earn double the income, you pay double the tax). This becomes an incentive to earning more (more hours, overtime, second job, ...) and less of an incentive to maximise tax deductions.

I am actually a big fan of consumption tax (like GST, VAT). The more you spend, the more you pay (in $ terms but not in percentage terms). Plus visitors to our country would contribute as well. I just don’t know whether I could trust politicians not to ever increase the rate as they seek more revenue. But that is a whole new discussion.

 

Anything that simplifies the current system is a good idea, but I'm sure there will be just as many twists & turns in whatever is put forward.

 

@kierank +1 for consumption tax. Also big fan of this' "With a flat tax system, as one earns more, one still pays more in tax, not in percentage terms but still more in dollars terms (if you earn double the income, you pay double the tax). This becomes an incentive to earning more (more hours, overtime, second job, ...) and less of an incentive to maximise tax deductions"

@skater I'm sure you're right about that!

 

They also don't talk about the absolute amounts. The nurse is now contributing 8K in tax compared to the surgeon who is contributing 63K. Under the new plan it might be more like 8K compared to 50K. The surgeon will still be paying over five times more tax. A true flat tax would be where everyone contributes the same absolute amount.

 

I think a flat tax system could only work with a really large tax free threshold and also an increase in GST as others have suggested.

Otherwise it would be absolutely ridiculous as lower income earners spend a higher proportion of their income on the basic necessities, increasing their tax burden would be crippling.

 

There is generally a lack of understanding of what a progressive tax scale actually means and how it works.

Not quite - the higher rate of tax applies to the amounts above each threshold not across the board. At extreme example: If a high income earner has earned $240k in the year ended 30/06/17 they will have paid PAYG at the appropriate rate over the year (about $81k tax excl Medicare). However, the following week one earns $12,000 in the first week of July and is underemployed for the rest of the year earning a total of $200/wk, they are taxed at the applicable rate for the week that they earned the $12,000 (about $5,100) & $0 tax on the $200/wk for the remaining part of the year and possibly eligible for around $4,000 tax refund as they sit just above the lowest tax bracket.

The same can be said of the person who earns $340/wk who sits below the threshold and pays on PAYG then gets an extra day per week, they pay tax on what lies above the threshold so they go from $0/wk to $14/wk not to a flat 19% across the whole of their income as many believe.

 

Growth begets growth because of compounding.

One premise to the flattening of the tax rates is that more disposable income will wash through the economy, helping to create growth and hence employment in the economy. Ultimately increase in tax receipts ( gst, company and personal income ) from growth in economic activity.

Me, personally. I would spend some of the additional disposable income. The rest I would invest in ASX companies that are growing, generating growth in economic activities that grow production, employment and revenues ( generating more tax receipts for the budget bottom line ). Quite sure many others would do the same.

 

One of the reasons we pay so much tax is we have too many levels of government. Abolish State Govts and we'd find our admin a lot cheaper and easier

 

Agree. We need larger council areas in Greater Sydney too. Brisbane should be model.

• Brisbane City Council = 1,343 square km, local government area population = 1.23M ( Data Tables: Estimated resident population by local government area (LGA), Queensland, 2008 to 2018p (OESR, Queensland Treasury) )
• Sydney City Council = 27 square km, local government area population = 240,229 ( Home | City of Sydney | Community profile )

Incredibly wasteful. We still have far too many local government areas in Sydney, even after the amalgamations that occurred.

 

Well NSW state government tried to amalgam the council from the tiny ones to a much larger councils. We know how it ended. From court cases to flat out lies.

Funny that some of the council that were the most vocal against amalgamation were the council found as corrupt or wasteful by ICAC

 

Oh yes. I was born in WA and I remember the constant fear of being ripped off by "the Eastern States" and Sir Charles Court and all his decendants referring to WA as WESTern Australia. I do understand the point of federation and why historically we have not been able to move away from it. I still think we are over governed. I suppose my back up position must be "abolish local government" then!

 

Abolish the ridiculous pensions paid to Politicians, ongoing for the rest of their lives. I don't see why they should be entitled to more than the rest of us.

 

Why would it? The flat tax rate would be charged on each incremental dollar above the tax free threshold.

In fact it would reduce tax minimisation. At the moment top threshold tax payers will lose $1 to get 50 cents in tax back, but if there was a flat tax rate they would get much less back.

 

Shouldn't we also be discussing about the effective marginal tax rates?

Can someone please explain the fairness of working twice as many hours and don't have much to show for it?

That's the thing not only do people with high income pay a lot more tax due to progressive tax system but they hardly ever get any other benefits from the government like low income people get.

To me fairness is you tax high income earners more (progressively) but then treat them equal with everyone else in terms of government benefits. Don't discriminate anymore. They have to pay for so many other services from their after tax dollars since they don't qualify.

Politicians should be honest and say it the high income earners are going to pay much more than the tax rates published on the ATO website.

Full article here

Cheers,
Oracle.