So Pete, is her intent to tran, or put em back on ebay for a higher price?
Opps I meant to say Training Pants (toilet training), Peter
Proposal for GST to rise yet cut income tax...what do you think?
- Thread starter Peter 14.7
- Start date
Opps I meant to say Training Pants (toilet training), Peter
I'm in substantial agreement with Mark, though the reasons may be different.
It does become very hard to compare chalk with cheese, but I'll try.
When tax is based on income under our present system, somebody on a lower income will pay very little as a percentage of their income. I'm not sure of the numbers- but somebody on $30K pa might lose perhaps 10% of their income on income tax. Somebody on a higher income (say $100K pa) might lose 25% of their income to ATO.
If the same income earners spent all their income on non taxable items bought in Australia, they would each be losing 9% (1/11th) of their income to GST.
Granted, the lower income earner would be spending a higher percentage of their income on non taxable items.
But, without the extensive knowledge only achieved by extensive research, it's my feeling that the lower income earner would be worse off under a GST than the middle/higher income earner.
(The really high income earners would probably have ways to pay substantially less tax, regardless of the system).
Ok, again I am no economist but here we go, however we need to have some givens we acknowledge that are:
Firstly, ignore tax either State or Federal Gov. In the end it is a tax we pay. The State verus Fed argument only comes in consideration that fed say the Stated spend it poorly (waste it) and the States say the Feds do the same. That is different thread altogether to this one.
Secondly, ignore the argument that whilst NSW may pay 40% of the overall GST but only gets 30% back That is also a different thread altogether to this one.
The point of the GST in simple terms is this….
Back on 1970 the age brackets may have been as so:
Children not paying income tax 20%,
Employees Paying Income tax 60%,
Aged Pensioner not working not paying income tax say 20%.
So we have 20% 60% 20%.
The 60% providing services for the other 40%,
But in 2007 as the population ages (that is we have more older people living as a % than in 1970) the mix is probably more like this.
Children not paying income tax 20%,
Employees Paying Income tax 50%,
Aged Pensioner not working not paying income tax say 30%.
So we have 20% 50% 30%.
So now 50% are provided services for 50%. So we are getting less tax because there are less to tax pro-rata and then aged section of 30% is growing each year.
So services have to be cut or income taxes raised. Then the 50% get sick of paying all the taxes and give up work all together to make it even worst.
GST is taxed on the all consumers including the End 30% as they buy cars, holidays, clubs, bowling fees, etc…
Some aged say it is not fair as they paid their income tax when working to enjoy their retirement tax free. But the same aged persons are getting more and more complex surgery to stay alive when back on 1970 the average death would have been say 65 years old and now it is say 73 so they are getting more benefits that their taxes ever paid for.
Some here may wish to comment that this is simple representation and I agree but it is the simple explanation of the benefit of the GST.
Lastly the GST abolished sales tax. This was a very complex tax to administer. My wife worked in lighting. The Cord might have been 21% tax, the light 11% tax and the light fitting 31% tax. But what if the fitting had a cord and light already attached?
A phone might be 21% tax and camera 31% tax but what if the phone is combined with a camera? It was silly and held back out Country competitiveness internationally.
I am tired now and will continue tomorrow. Hope it helps.
Peter 14.7
Actually, they're the same.
I say it again (for those who appear to have trouble comprehending social equity issues).
Reducing PAYE tax rates in favour of a higher GST will shift the tax burden in Australia from those who can most afford it, to those who least afford it.
Those on higher incomes in this country already have it pretty well off imho. Their tax rates were slashed substantially a couple of years back and they have far greater access to tax minimisation strategies such as negatively geared investments and superannuation top-ups.
I think it's greed.
M
I agree Pitt St. As a% of total income it will impact as it stands.
But they Gov could mititgate that by:
Raising the tax free threashold from say the present approx $5k to $15k but leave all other brackets and rates unchanged.
Yes it willbenefit the rich as well as the poor but the poor need the extra $2k saving more than the rich so using your logic they are better off % wise. Are they not?
What do you think?
The problem we have is we do subsidise the poor by giving back the tax saving I propose with Centrelink payment and Family Allowance. That way Gov don't give this saving to middle and higher income.
The problem is it puts most working poor in the welfare trap of if they increase thier wage by $100 they lose $120 in benefits.
My sister (a widow with two kids) in this exact situation. She could easily get more work ( she works 2-3 days a week) but she would be paying for more out in petrol and child care to get less money in her pocket after she loses some benefits. This is the area that needs serious attenton.
Peter 14.7
Hi
Although I am a wealthy man, I still hold simple, almost socialist views of sharing wealth. A legacy of my younger days, I guess. If I was a greedy man, I could easily have had a great deal more wealth than I presently hold.
I am not an economist and have only a very, very basic understanding of economics and so I openly admit that I may well be fighting out of weight class here…..Mark, you have my highest respect for your wisdom, intelligence and willingness to share and teach us all, so, please bear with my ignorance and help us all to understand the economics of this discussion.
However, what worries me about this argument is the strategy of adopting the lowest possible denominator to determine the greater good of the country.
Is this wise?
We will always have the rich, the middle classes and the poor. We always have had. Geez, even socialist countries built on a foundation of the State owning all assets has a class system when looked at properly and openly – again, whether morally or legally right in its making.
If we constantly tax the rich and wanna be rich at high rates of tax, what happens?
They find aggressive ways to reduce their taxes as we see in the media all too often. Wealth is taken off shore; fancy structures are used; the law is stretched or broken in attempts to find ways to reduce tax. Loopholes are sought and in doing so, our tax system spirals into an unfathomable mess that not even the judiciary can truly and honestly manage.
Does this help our economy? Does this bring a greater good to all Australians?
Sorry, Mark (and others) but, I just cannot see it at all.
If we give the rich a reason to make more money through lower income taxes; what will they do?
The money will not sit idle in a bank account that is for sure. It will be used to build more wealth and, in doing so, it will create jobs and a stronger economy. By taxing the spending, we will tax not just the income that people have, but the income they attempt to hide along with the cashflow they spend from debt and savings alike.
The tax take by the Government should be higher than it is through taxing declared income alone; or combining a low level of GST with a high rate of income tax.
By then using some of that increased tax takings to pay higher pensions and benefits to compensate the poorer people the “robin hood” balance and safeguards can be maintained, if we must do so anyway.
As an aside, I posted an interesting quote from the late 1700’s in another post (about 3 weeks ago now) on this very issue and although the author is not always socially accepted, the sentiment makes a great deal of sense to me now, as it no doubt did then, too.
And, will off shore corporations and countries not invest in Australia because of the perceived income tax savings?
Now, what is the alternative….
If we only make decisions based on how those decisions will affect the poorer class of people in Australia don’t we stymie the benefits of hard work and the incentive for people to get off their bum and earn more income?
I talk to a lot of people who do not want to earn more money because it will throw them into a higher a tax bracket and then the combined loss of taxes and social security benefits and concessions are enough to make the extra income unattractive.
Yes, the tax on their poorer people’s spending will increase but what proportion of our GDP does this spending account for anyway?
Will this belief that we must always come down to a lowest possible denominator kill the Australian economy and ensure that we are 2nd best? How many articles a year do we see in respected newspapers and professional journals lamenting the brain drain of our top talented people overseas to earn more money and pay less income tax?
Do we want a country of comfortable poor people with little leadership or talent? Or, do we want to be a smart country with a healthy attitude towards making this a better place not just a safe haven for the poor?
Again, I am happy to be educated in the subtleties of economics and I appreciate that the whole debate is a balancing act that would be incredibly difficult to maintain and even more so when the people making the decisions are more interested in their political success than in real reform for the good of all…..
For what it is worth, I would like to see no income tax at all but a tax on all spending, even though this does not benefit accountants at all.
Dale
Although I am a wealthy man, I still hold simple, almost socialist views of sharing wealth. A legacy of my younger days, I guess. If I was a greedy man, I could easily have had a great deal more wealth than I presently hold.
I am not an economist and have only a very, very basic understanding of economics and so I openly admit that I may well be fighting out of weight class here…..Mark, you have my highest respect for your wisdom, intelligence and willingness to share and teach us all, so, please bear with my ignorance and help us all to understand the economics of this discussion.
However, what worries me about this argument is the strategy of adopting the lowest possible denominator to determine the greater good of the country.
Is this wise?
We will always have the rich, the middle classes and the poor. We always have had. Geez, even socialist countries built on a foundation of the State owning all assets has a class system when looked at properly and openly – again, whether morally or legally right in its making.
If we constantly tax the rich and wanna be rich at high rates of tax, what happens?
They find aggressive ways to reduce their taxes as we see in the media all too often. Wealth is taken off shore; fancy structures are used; the law is stretched or broken in attempts to find ways to reduce tax. Loopholes are sought and in doing so, our tax system spirals into an unfathomable mess that not even the judiciary can truly and honestly manage.
Does this help our economy? Does this bring a greater good to all Australians?
Sorry, Mark (and others) but, I just cannot see it at all.
If we give the rich a reason to make more money through lower income taxes; what will they do?
The money will not sit idle in a bank account that is for sure. It will be used to build more wealth and, in doing so, it will create jobs and a stronger economy. By taxing the spending, we will tax not just the income that people have, but the income they attempt to hide along with the cashflow they spend from debt and savings alike.
The tax take by the Government should be higher than it is through taxing declared income alone; or combining a low level of GST with a high rate of income tax.
By then using some of that increased tax takings to pay higher pensions and benefits to compensate the poorer people the “robin hood” balance and safeguards can be maintained, if we must do so anyway.
As an aside, I posted an interesting quote from the late 1700’s in another post (about 3 weeks ago now) on this very issue and although the author is not always socially accepted, the sentiment makes a great deal of sense to me now, as it no doubt did then, too.
And, will off shore corporations and countries not invest in Australia because of the perceived income tax savings?
Now, what is the alternative….
If we only make decisions based on how those decisions will affect the poorer class of people in Australia don’t we stymie the benefits of hard work and the incentive for people to get off their bum and earn more income?
I talk to a lot of people who do not want to earn more money because it will throw them into a higher a tax bracket and then the combined loss of taxes and social security benefits and concessions are enough to make the extra income unattractive.
Yes, the tax on their poorer people’s spending will increase but what proportion of our GDP does this spending account for anyway?
Will this belief that we must always come down to a lowest possible denominator kill the Australian economy and ensure that we are 2nd best? How many articles a year do we see in respected newspapers and professional journals lamenting the brain drain of our top talented people overseas to earn more money and pay less income tax?
Do we want a country of comfortable poor people with little leadership or talent? Or, do we want to be a smart country with a healthy attitude towards making this a better place not just a safe haven for the poor?
Again, I am happy to be educated in the subtleties of economics and I appreciate that the whole debate is a balancing act that would be incredibly difficult to maintain and even more so when the people making the decisions are more interested in their political success than in real reform for the good of all…..
For what it is worth, I would like to see no income tax at all but a tax on all spending, even though this does not benefit accountants at all.
Dale
Peter
By the sounds of it your sister is stuck in a poverty-trap (sometimes also called a welfare trap) which exists when circumstances conspire such that economic agents on low incomes face negative incentives to earn more income (through a combination of tax, loss of welfare payments, and in your sister's case, child care payments).
Poverty traps are, imho, one of the most insidious and undesirable things to have in an economy and they are a sympton of poor tax / welfare design (sadly they are not uncommon). You want to be able to protect people at the lowest levels of income, but at the same time you want to encourage them and reward them for seeking to improve their lot in life.
In case your wondering, I'm still anti-regressive taxation.
I agree that the double handling is inefficient (tax on the one hand / give back on the other).
And yes, the undesirable social effects of increasing the GST, could be mitigated by use of increased tax-free thresholds (as an example).
Pleasingly, the more you talk like that (increasing thresholds, etc) the more you're moving towards the sort of GST proposed by John Hewson (which I would be in favour of). "Fightback!" (Hewson's GST package) was the GST this nation deserved to have. It was the complete package. Tax everything, no exclusions, but give low income earners suitable recompense so that the system retains horizonatal and vertical equity (see below).
The blame for the debacle of our current GST with this and that excluded lies squarely with the Democrats. But then that is the problem with minor parties - all care, but no responsibility.
This is an extract from something I had to write recently -
A note about taxation
Public finance economists who specialise in taxation and revenue will be familiar with such concepts as Adam Smith’s “Canons of Taxation” - in which he proposed the features of a desirable, or good, tax.
Modern scholars, such as Nobel Laureate and former Chief Economist at the World Bank Joseph Stiglitz, have pondered this question too. In the context of the Ministry for Agriculture and Forestry's consideration of a variety of carrots and sticks designed to reward good behaviour and punish bad behaviour, it is appropriate to consider a contemporary view of the features of a “good tax” :
Economic efficiency: the tax should not prevent efficient allocation of resources, that is, it should not, to the extent possible, distort behaviour.
Administrative simplicity: the tax should be easy and inexpensive to administer.
Flexibility: The tax system should respond easily to changes in economic conditions.
Transparency or political responsibility: individuals should be able to ascertain their tax burdens so that burdens can be politically tailored to what society considers desirable.
Fairness: the tax system should be fair in its treatment of different individuals. Horizontal equity deems that individuals who are the same in all relevant aspects should be treated equally, whilst vertical equity holds that individuals who are better able to pay higher taxes should bear a higher share of total taxes.
See: Stiglitz,J.E., 1988, Economics of the Public Sector, 2nd Edition, WW Norton and Co., New York., pp. 390-408
A GST scores pretty well on all of those - except for the last one - which is something Dr Hewson understood and sought to address.
M
By the sounds of it your sister is stuck in a poverty-trap (sometimes also called a welfare trap) which exists when circumstances conspire such that economic agents on low incomes face negative incentives to earn more income (through a combination of tax, loss of welfare payments, and in your sister's case, child care payments).
Poverty traps are, imho, one of the most insidious and undesirable things to have in an economy and they are a sympton of poor tax / welfare design (sadly they are not uncommon). You want to be able to protect people at the lowest levels of income, but at the same time you want to encourage them and reward them for seeking to improve their lot in life.
In case your wondering, I'm still anti-regressive taxation.
I agree that the double handling is inefficient (tax on the one hand / give back on the other).
And yes, the undesirable social effects of increasing the GST, could be mitigated by use of increased tax-free thresholds (as an example).
Pleasingly, the more you talk like that (increasing thresholds, etc) the more you're moving towards the sort of GST proposed by John Hewson (which I would be in favour of). "Fightback!" (Hewson's GST package) was the GST this nation deserved to have. It was the complete package. Tax everything, no exclusions, but give low income earners suitable recompense so that the system retains horizonatal and vertical equity (see below).
The blame for the debacle of our current GST with this and that excluded lies squarely with the Democrats. But then that is the problem with minor parties - all care, but no responsibility.
This is an extract from something I had to write recently -
* * *
A note about taxation
Public finance economists who specialise in taxation and revenue will be familiar with such concepts as Adam Smith’s “Canons of Taxation” - in which he proposed the features of a desirable, or good, tax.
Modern scholars, such as Nobel Laureate and former Chief Economist at the World Bank Joseph Stiglitz, have pondered this question too. In the context of the Ministry for Agriculture and Forestry's consideration of a variety of carrots and sticks designed to reward good behaviour and punish bad behaviour, it is appropriate to consider a contemporary view of the features of a “good tax” :
Economic efficiency: the tax should not prevent efficient allocation of resources, that is, it should not, to the extent possible, distort behaviour.
Administrative simplicity: the tax should be easy and inexpensive to administer.
Flexibility: The tax system should respond easily to changes in economic conditions.
Transparency or political responsibility: individuals should be able to ascertain their tax burdens so that burdens can be politically tailored to what society considers desirable.
Fairness: the tax system should be fair in its treatment of different individuals. Horizontal equity deems that individuals who are the same in all relevant aspects should be treated equally, whilst vertical equity holds that individuals who are better able to pay higher taxes should bear a higher share of total taxes.
See: Stiglitz,J.E., 1988, Economics of the Public Sector, 2nd Edition, WW Norton and Co., New York., pp. 390-408
* * *
A GST scores pretty well on all of those - except for the last one - which is something Dr Hewson understood and sought to address.
M
You may (or may not) be surprised to hear that it isn't a new idea (at least in terms of scrapping income tax).
Hi Mark
That comes as no surprise at all to me. I knew it was an old fashioned idea but the more I see of what I see, the more I like it.
Dale
That comes as no surprise at all to me. I knew it was an old fashioned idea but the more I see of what I see, the more I like it.
Dale
I have a book at home which discusses Henry George (Contraception and Common Sense, Dr Les Hemingway MBBS, 1997 ). Author resides in Victoria. Author's opinion only but is interesting.
In the late 19th century both Henry George and an Irish Clergyman, Bishop Thomas Nulty of Meadth, discovered what they felt was the root cause of poverty and offered their solution. They felt that poverty, unemployment and similar social 'evils' would disappear if the earth and its natural resources were equitable shared and that the equitable sharing would be facilitated adequately if taxes on productive activities were replaced with a uniform and substantial tax on land.
Such a tax would have a small impact on owners who were using all the land they held (as they would simply pay more land tax but less income tax), but would force land holders to sell or let any land for which they didn't have an immediate personal use. The supply of land would increase while demand fell and all forms of property would become cheaper, mortgages would be fairly small and little interest would be paid which would help all those who had to buy a home or business premises. They felt the tax would help small firms compete against larger ones and allow business on poor land compete against those on better sites. They felt that the land tax provided a simple solution to social problems.
However Henry George and Bishop Nulty weren't the only ones promoting a solution to poverty; at the same time the early promoters of birth control were also active and their suggestion was that the modest family income would stretch further if the procreation of children could be prevented at will....the rest is history.
It would have been interesting to see what may have happened if George and Nulty had been given a chance to implement their ideas, instead of what we ended up with.
In the late 19th century both Henry George and an Irish Clergyman, Bishop Thomas Nulty of Meadth, discovered what they felt was the root cause of poverty and offered their solution. They felt that poverty, unemployment and similar social 'evils' would disappear if the earth and its natural resources were equitable shared and that the equitable sharing would be facilitated adequately if taxes on productive activities were replaced with a uniform and substantial tax on land.
Such a tax would have a small impact on owners who were using all the land they held (as they would simply pay more land tax but less income tax), but would force land holders to sell or let any land for which they didn't have an immediate personal use. The supply of land would increase while demand fell and all forms of property would become cheaper, mortgages would be fairly small and little interest would be paid which would help all those who had to buy a home or business premises. They felt the tax would help small firms compete against larger ones and allow business on poor land compete against those on better sites. They felt that the land tax provided a simple solution to social problems.
However Henry George and Bishop Nulty weren't the only ones promoting a solution to poverty; at the same time the early promoters of birth control were also active and their suggestion was that the modest family income would stretch further if the procreation of children could be prevented at will....the rest is history.
It would have been interesting to see what may have happened if George and Nulty had been given a chance to implement their ideas, instead of what we ended up with.
Hey Pitt St
Your post is excellent. We agree on all those points.
I guess on the last I am being more practical and you more ideological.
I agree the Democrats stuffed it up but without them we would never had a GST at all. Surprisingly it was the beginning of their fall when they actually did something.
It was great shame Hewson did not win. But politic is about winning not what is right.
As for the tax on land argument it is old century thinking. When companies like Microsoft make $$$$ from essentially selling a series of instructions to computer how does this work. Sure they have offices but compared to a farmed forest it is nothing.
The land tax works when the only real value was land. Hence the still used terms Landlords. Up until the early 20th Century only land was valuable. Shares were virtually non-existent and those there were around were mining companies or agricultural using land.
Happy to proved wrong.
Peter 14.7
Your post is excellent. We agree on all those points.
I guess on the last I am being more practical and you more ideological.
I agree the Democrats stuffed it up but without them we would never had a GST at all. Surprisingly it was the beginning of their fall when they actually did something.
It was great shame Hewson did not win. But politic is about winning not what is right.
As for the tax on land argument it is old century thinking. When companies like Microsoft make $$$$ from essentially selling a series of instructions to computer how does this work. Sure they have offices but compared to a farmed forest it is nothing.
The land tax works when the only real value was land. Hence the still used terms Landlords. Up until the early 20th Century only land was valuable. Shares were virtually non-existent and those there were around were mining companies or agricultural using land.
Happy to proved wrong.
Peter 14.7
We did implement them. It is still around. It is called Land Tax.
Land Tax was specifically set up to force wealthy land owners to sell off thier holding to others to allow equity. It worked well.
BUT It is now a remanant tax used by States to hit up some investors. Ineffiecnet, messing with fundamentals.
Peter 14.7
GST should the same across ALL goods. The point of it was to remove sales taxes and put just one simple tax on everything. This keeps is simple. However, by deciding what has GST applied to it and what doesnt (and even at what temperature the chicken becomes GST exempt) it becomes just as confusing as it was before.
The labour government wants a higher GST while rolling back income tax because they know that bracket creep will get them later on anyway.
Personally I think they want to raise the GST because they know they'll need to pay back the Future Fund once they've stripped it bare, otherwise there'll be no retirement money left for govt employees. I think a raise in the GST is how they'll fund it.
The labour government wants a higher GST while rolling back income tax because they know that bracket creep will get them later on anyway.
Personally I think they want to raise the GST because they know they'll need to pay back the Future Fund once they've stripped it bare, otherwise there'll be no retirement money left for govt employees. I think a raise in the GST is how they'll fund it.
Hi Peter
I realize that we have a land tax now but I don't presume, or know for sure, if the model we have now is what those guys had in mind. There could have been many different ways to implement a tax on land and the other taxes they were trying to apply fairly (income for e.g) Like I said it was the authors opinion only. But I would also suggest that late 19th century theory would not have been able to predict the laws, technology and other drivers in todays economics. It therefore can't be said it wouldn't, or would have worked; as we will never know how that theory, in practice, and in the way they intended it be implemented, would have evolved to suit the changing needs/laws etc of the world over the next 100 years.
But is that not better than no lower income tax and bracket creep anyhow.
I think to be fair to Labour. And I am a Liberal
- they are admitting to suggesting some new idea/s about tax, that is thier job as opposition to be the alternative government
- the details of what the professors (and not labour at this stage) are proposing are not released yet, but hard to criticise
Lets what and see.
Many hated the GST but it was essential to this Country. Now it widely accepted.
My business pays a lot of GST and we are happy to do it. When I l eft school unemplyment was 10% and higher in the bush. Now is around 5%. Libs and Labour must be doing something right, macro economic wise. I see my GST as the sucess of my business and the economy it is in.
Peter
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OK, so in 1976 (when I started work), as a wage earner, I paid my taxes. I was a part of that 60% paying taxes.
I've spent 30 years paying my dues.
But now I have people much younger than me, telling me that they will have a huge burden paying for the likes of me in my retirement.
My parents spent their lifetime contributing to my education and future well being. They are now reaping the benefits of their sacrifices. And so am I.
Now, after contributing to to the education of the next generation through my taxes, I'm now being told that the system is unfair. The younger generation are telling me that it will be a huge burden to "support" my generation. There are so few of them, and so many of us "old" people. (I'm 53).
I'm being told that the only "fair" way is a consumption tax (GST).
So after many years of paying tax through my income, I'm now being told that I now need to pay a consumption tax on what I spend.
"It's only fair" I'm told.
No, it's not fair on me.
I've paid income taxes all my life. And when I get closer to retirement, my expenses are going to rise substantially.
I've even gone to the extent, over and ahead of a big majority of Australians, of contributing to my own retirement fund, through investment property and a business. I won't need to draw any pension, of any sort, from the government.
But I still will need to pay a consumtion tax- which is probably going to rise (perhaps substantially) before I am in any position to retire.
Double taxation is not dead.
fair call geoffw. the state of affairs in this country brings a tear to my eye. my neighbours moved from singapore to perth about 2 years ago, figuring their business would be closer to the end user. they have just shifted back - couldn't handle the high taxes, despite loving it here. This depresses me. So now the lefties can all be relieved that someone won't get away with only paying 10% or 20% or x% tax. the downside is that these people (and i suspect many many more) have said stuff it you wont get a cent. time to wake up and realise that whilst we are on an island we are also part of the world
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