WHAT IS A FAIR TAX ?

The burning question is always “who pays”.

Australian society is riddled with taxes at Federal, State and Local government levels.

Two of the most visible taxes to an individual in Australia are Income Tax , and the Goods and Services Tax.

The GST is based on what you spend (10% of cost, or one eleventh of what you spend). The more you spend, the more the Government gets.

Personal Income Tax is based on what you earn. It is not a flat tax, but increments as your earning increase.

Basic examples (without levies or concessions) are:

2011/2012 Tax Year

Income            Tax
$ 6,000       no tax
$ 37,000     $ 4,650 tax
$ 80,000   $17,550 tax
$180,000    $54,550 tax

2015/2016 Tax Year

Income            Tax
$ 18,200     no tax
$ 37,000     $ 3,572 tax
$ 80,000   $17,547tax
$180,000    $54,547 tax

Even though you have the same entitlements and access to services, the more you earn the more you pay.

So … What's Fair ?

It's like beauty … in the eyes of the beholder!

Ideology and political expedience unfortunately the main drivers.

The main problem is those who always want more, but want someone else to pay for it!

Ponder This ....

Without clouding the argument with welfare issues, two positions can be considered to have a basis in fairness :

Pay the same $ dollar amount
Pay the same % percentage

Types of Taxes

There are variety of ways to raise taxes. Some are socially acceptable, some are not. Some are efficient to collect, others not. Some in the past such as the “window” tax, levied on the basis of how many windows you had, was simply idiotic and people bricked up their windows to avoid payment.

Taxes cover a wide range and include the likes of fixed amounts, fixed percentages, sliding scales, scales with exemptions and combinations of such.

Examples of Taxes are:

Poll Tax

This type of tax is levied at a flat rate per person.

The assumptions behind this type of tax is that all have access to the same services provided therefore should contribute the same in money terms.

This is not a politically supported tax.

Consumption Taxes

In their purest form, these include GST and Sales Tax. Generally levied as a percentage of the price of the goods or services the more goods you buy, or the more expensive those items are, the more you pay in dollar terms. There is no means testing applied. The “cash” economy is not captured by this type of tax.

Excise Duty

This is usually levied on the likes of fuel, alcohol and tobacco. Essentially the user pays.

Stamp Duty

This is usually levied by State Governments in Australia on financial transaction requiring some form of documentation. Its application varies from state to state and is too complicated to expouse further at this point.

Land Tax

Again a State Tax with similar complications to Stamp Duty.

Payroll Tax

A State tax levied on the cost of employing workers. Rates, exclusions, exemptions and the like vary from state to state.

Levies

A tax by any other name, but usually for a specific purpose eg, Emergency Services, Medicare, Queensland Flood, Guns Buyback. Used for a variety of purposes applied in different ways by the Commonwealth, States and Local Government.

Royalties

Mainly levied in the past by States on natural resources mining. Usually based tonnage, not profits from activity.

Licences

A great variety applicable across all levels of government.

Council Rates

In general these are based on the property values within each Local Government area. These vary from place to place, but in general, the greater the assessed value of your property, the more you pay.

Fees

Similar to licences, but can relate to usage, access or a form of penalty (eg expiation fees)

Capital Gains Tax

This is essentially a tax on investment (as opposed to trading). Essentially if you dispose of an asset, a portion of the difference between the acquisition cost of the asset and the value realised on disposal is taxed at your marginal rate of tax. There are exemptions, but the higher your marginal rate of tax, the more you pay.

Fringe Benefits Tax

FBT was introduced in an attempt to stop “perks” escaping the tax net. It is not universal, as politicians, governments and some not not for profit organisations either escape FBT or have levels of exemption.

Income Tax

Income Tax in Australia prior to World War II was a source of revenue for the States. The States agreed (in the national interest) to give it to the Commonwealth for the duration of the war. The States never got it back!

Company Tax

Australian company profits are currently taxed at 30% (year ending 30^th June 2012)

Personal Income Tax

The rates for Australian residents are based on what is often referred to as a progressive system.

Financial years 2010-11, 2011-12

Taxable income	Tax on this income	Effective tax rate
0 – $6,000	Nil	0%
$6,001 – $37,000	15c for each $1 over $6,000	0 – 12.6%
$37,001 – $80,000	$4,650 plus 30c for each $1 over $37,000	12.6 – 21.9%
$80,001 – $180,000	$17,550 plus 37c for each $1 over $80,000	21.9 – 30.3%
$180,001 and over	$54,550 plus 45c for each $1 over $180,000	30.3 – 45%

The above rates do not include the Medicare levy of 1.5%. or the Queensland Flood Levy

Financial year2016

Taxable income	Tax on this income
0 – $18,200	Nil
$18,201 – $37,000	19c for each $1 over $18,200
$37,001 – $80,000	$3,572plus 32.5c for each $1 over $37,000
$80,001 – $180,000	$17,547 plus 37c for each $1 over $80,000
$180,001 and over	$54,547 plus 45c for each $1 over $180,000

The above rates do not include the Medicare levy of 2.0% or Budget Repair Levy 2.0% (over $180,000).