Discussion in 'Accounting, Tax & Legal' started by Simon Hampel, 14th Apr, 2009.
Unleashed: Tax attacks
The whole article is talking about equity, but does not address the fact the people on higher income, have to pay an inequitable higher rate of tax. What about the "downside up effect" where a person on 45% who earns an additional $100 has to pay $45 tax. Which the same $100 earnt for a taxpayer on 30% only has to pay $30 dollar tax. Ie the higher tax pay has to pay 150% more tax.
I am of the opinion we should have a flat tax rate, of say 15-20% on all income and capital gains, with no discounts for low income earner, no discounts for capital gains (15-22.5% is what is normally paid for capital gains > 12 month).
That would be much fairer.
FWIW, I was going to make pretty much the same observations you just did.
The fact that people in a higher tax bracket get a larger tax break is a consequence of our tax system more than the negative gearing laws.
I also agree that a flat tax (perhaps 30%) is far more equitable and neatly sidesteps any complaints about negative gearing.
The article also dismisses the impact of negative gearing on housing availability - something I think is a critical aspect of the whole argument.
Tha article misses the fact the tax laws are used for a lot more than mere collection of revenue.
There are tax breaks to encourage certain types of behaviour, e.g. investment in Aussie films, R&D and of course the new carbon credit breaks.
And the laws are used for wealth redistribution via means tested rebates such as low income, dependant spouse, carer's etc.
You cannot just isolate one aspect and blame it for a whole raft of undesirable effects.
Equity comes with complexity. We have one of the fairest, and also one of the most complex taxation laws in the world.
As I keep mentioning, Paul Keating tried to abolish negative gearing only to reinstate it quickly as a torrent of landlords issued notices to vacate. The problem being such low yields on residential property and of course the States quickly stepped in with land taxes to grab any tax savings from gearing.
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