Labor's 49pc tax rate to hit middle-income earners "Taxpayers earning between $130,000 and $160,000 today could be hit by Labor’s budget repair levy and 49 per cent top tax rate within four years as income growth pushes them into the top tax bracket. The number of Australians earning more than $180,000 a year by 2022-23 and to be stung by Labor's 2 per cent budget levy will jump to 785,000, up from 540,000 people this year, based on estimates by the ANU PolicyMod using the federal budget's wage forecasts. Centre for Independent Studies researcher John Humphreys said: “Too often we look at how the tax changes impact on people’s incomes today, but tax rates apply to people’s future incomes which rise over time." Shadow treasurer Chris Bowen has said the budget repair levy will be temporary and expire after 2022-23 when he expects the budget to be in a healthy surplus under a Labor government. Wage inflation, employment promotions and investment returns will push more taxpayers into the highest $180,000 marginal tax bracket that Labor is targeting to raise an estimated extra $4.6 billion over four years. Applying the average historic growth in taxable income - not just wages - of 4 per cent, a person earning $160,000 today will receive $187,000 by 2022-23. But that is a conservative assumption because people earning six-figure incomes usually enjoy substantially higher income growth. The average annual taxable income growth for people earning $150,000 to $180,000 was about 10 per cent according to the most recent four years of Australian Taxation Office data analysed by the CIS's Mr Humphreys. Taxpayers earning between $100,000 and $150,000 experienced 8 per cent average annual income growth in the four years to the end of 2015-16, a period which included strong share market gains and property price rises. Based on these historic income trends continuing, a typical upper-middle income taxpayer on $130,000 today would earn about $183,000 by 2022-23. Under Labor taxpayers would pay an effective marginal tax rate of 49 per cent on the share of their taxable incomes above $180,000, including the top marginal income tax rate of 45 per cent, 2 per cent budget repair levy and 2 per cent Medicare levy. Income tax has opened up a fight between the Coalition and Labor on the eve of the election. By 2024-25 the Morrison government proposes a flat 30 per cent marginal rate for incomes between $45,000 and $200,000. Under Labor, higher income earners reporting taxable incomes above $180,000 would pay a 45 per cent marginal rate - up to 15 percentage points higher than the Coalition's planned marginal rate for people earning up to $200,000. The independent Parliamentary Budget Office estimates the Coalition's tax cuts cost the budget $226 billion more over a decade than Labor's more modest and targeted income tax cuts for lower and middle income earners. Mr Bowen said on Wednesday that the Coalition's stage two and three income tax cuts for middle and higher income earners from 2022-23 and 2024-25 were "fiscal recklessness on an unprecedented scale". Mr Bowen signalled as treasurer he would be open to providing more income tax relief in the future if the budget could afford it. The Abbott government originally imposed a temporary budget deficit levy on high income earners after it inherited a $48 billion deficit from the Rudd-Gillard-Rudd Labor government in 2013. The Coalition's deficit levy ended in 2017, but Labor will revive it. Labor originally planned to apply the deficit levy until the budget was in a sustained surplus of 1 per cent of GDP – about $20 billion. But with the budget forecast by the Morrison government to return to surplus from next year onwards, Labor last year announced the budget repair levy would expire after 2022-23." AFR Quite a difference between labour and liberal tax policy.
What a weird article. Let's take some wage inflation, overestimate its effect, and then speculate years into the future. Second half of article - "more tax means less budget deficits". Cool story? Or is the writer just looking for a beat up from any angle they can get?
Look we do need tax relief from bracket creep, but I'm a little surprised the coalition is not being called out for creating a $226 billion problem in the budget. The coalition will never pay off debt with these budget settings. If Labor did that you'd never hear the end of it.
10% income growth!? So the average person on 150k now will be on 240k in 5 years time. Not buying that
Does seem high but the counter argument is if you are on 150k then your probably fairly specialized meaning you can typically demand more money OR easily enough switch to someone willing to pay more. I don’t think 90k is accurate but 200k would seem fairly reasonable which is a 6% increase. The other thing is high income earners are also more likely to receive bonus payments so not sure if that has been taken into account either?
It looks weird, but possible. Higher income means more savings —> more investments compared to the total income after tax before spendings, so they have higher income growth. And it’s average, there are many who have zero growth or 20-30% growth. Median is more useful here. That’s also true from my observations
No, they have higher expenditure and life-style costs too. Often they are just as broke (or moreso) than those on lower incomes.
Yeah makes sense didn’t account for investment returns growing. Majority of people I know earning at or around 150k are low end blue collar workers who are pretty much maxed wage income wise so that probably skews my view of it.
here we need to understand cause - effect relationship. People earn more not because they spend a lot, but vise versa - they spend more because they earn more (they can afford that). to support my statement here is some facts: "In the 20 years since, average household gross incomes have increased 66% from $66,196 to $109,668, today while over the same period, incomes of the top 1 in 5 households (highest quintile) have increased by 75% from $149,552 to $261,872." Considering simple fact that not all 'top 1 in 5 households' members are high earners, it's fair to assume individual income of highest quintile group grew much faster than 75%. If we consider also various 'tax optimisation tips' like companies & family trusts (it's more likely that high earners set it up rather than avg person), negative gearing (it's more effective for high earners), etc., that real individual income growth rate is even higher. Also it's incorrect to project last 4 years stats into the future. Each quintile has different growth rate for different periods. E.g. during GFC highest quintile experienced lowest income growth (it was negative), simply because large portion of their income origins from investment returns (affected by GFC).
