Show Me Then I’ll Believe

I’m in the process of re-writing my autobiography.  I initially wrote it back in the early nineties.  Until now it never seemed like the right time to publish it, but now I believe the time has arri...

Dr. Robert Owens - avatar Dr. Robert Owens

Five aspects of Pentecostalism that shed light on Scott Morrison's politics

Prime Minister Scott Morrison sings during a service at the Horizon Church in Sydney in April.Mick Tsikas/AAPPrime Minister Scott Morrison began his victory speech on Saturday with the words, “I...

Philip Almond, Emeritus Professor in the History of Religious Thought, The University of Queensland - avatar Philip Almond, Emeritus Professor in the History of Religious Thought, The University of Queensland

Why the 2019 election was more like 2004 than 1993 – and Labor has some reason to hope

I recently had cause to look at a large file of material I collected about Mark Latham during 2004. It is full of many of the same columnists who have just campaigned successfully for the return of th...

Frank Bongiorno, Professor of History, ANU College of Arts and Social Sciences, Australian National University - avatar Frank Bongiorno, Professor of History, ANU College of Arts and Social Sciences, Australian National University

Eastern China pinpointed as source of rogue ozone-depleting emissions

Sunset at Australia's Cape Grim observatory, one of the key global background monitoring sites for CFC-11. Paul Krummel/CSIRO, Author providedA mysterious rebound in the emissions of ozone-depleting c...

Paul Krummel, Research Group Leader, CSIRO - avatar Paul Krummel, Research Group Leader, CSIRO

Where to now for unions and 'change the rules'?

Very few people saw the Coalition’s win coming. If it was, as opposition leader Bill Shorten contended, “a referendum on wages” then it follows that Australians were content with slu...

Anthony Forsyth, Professor of Workplace Law, RMIT University - avatar Anthony Forsyth, Professor of Workplace Law, RMIT University

How we solved the mystery of Libyan desert glass

Shutterstock LinnasIn the remote desert of western Egypt, near the Libyan border, lie clues to an ancient cosmic cataclysm. Libyan desert glass is the name given to fragments of canary-yellow glass fo...

Aaron J. Cavosie, Senior research fellow, Curtin University - avatar Aaron J. Cavosie, Senior research fellow, Curtin University

Aboriginal Australians want care after brain injury. But it must consider their cultural needs

Australia's first Aboriginal Brain Injury Coordinator, Rebecca Clinch, with brain injury survivor Justin Kickett.Edith Cowan University, Author providedThis article is the fourth part in a series, Whe...

Beth Armstrong, Foundation Chair in Speech Pathology, Edith Cowan University - avatar Beth Armstrong, Foundation Chair in Speech Pathology, Edith Cowan University

Rethinking tourism so the locals actually benefit from hosting visitors

Tourism today has a problem and needs an entire rethink. Pundits are debating overtourism, peak tourism and tourismphobia. Cities such as Barcelona, Venice and Dubrovnik are witnessing a backlash agai...

Freya Higgins-Desbiolles, Senior Lecturer in Tourism Management, University of South Australia - avatar Freya Higgins-Desbiolles, Senior Lecturer in Tourism Management, University of South Australia

Wind in Albanese's sails as Chalmers weighs options

Shadow treasurer Chris Bowen has pulled out of Labor’s leadership race, increasing the pressure for an uncontested run for Anthony Albanese, which would prevent an extended limbo period for the ...

Michelle Grattan, Professorial Fellow, University of Canberra - avatar Michelle Grattan, Professorial Fellow, University of Canberra

With the LNP returned to power, is there anything left in Adani's way?

After months of “start” and “stop” Adani campaigning, the coalmine is poised to go ahead following the surprise success of the Coalition government at the federal election. So ...

Samantha Hepburn, Director of the Centre for Energy and Natural Resources Law, Deakin Law School, Deakin University - avatar Samantha Hepburn, Director of the Centre for Energy and Natural Resources Law, Deakin Law School, Deakin University

New data shows sex offenders in Victoria are going to prison for longer

There is a common perception in Victoria that courts are too lenient on offenders, but sentences for sex offences are actually increasing.ShutterstockSentences for most sex offences are getting harshe...

Paul McGorrery, PhD Candidate in Criminal Law, Deakin University - avatar Paul McGorrery, PhD Candidate in Criminal Law, Deakin University

Queensland to all those #Quexiteers: don't judge, try to understand us

Progressive voices have lit up social media with memes blaming Queensland for Labor's loss in the federal election. But characterising the state as regressive and redneck is misplaced. ...

Anne Tiernan, Professor of Politics. Dean (Engagement) Griffith Business School, Griffith University - avatar Anne Tiernan, Professor of Politics. Dean (Engagement) Griffith Business School, Griffith University

In a notoriously sexist art form, Australian women composers are making their voices heard

Performers in Speechless, a new opera by composer Cat Hope, co-commissioned by the Perth Festival and Tura New Music. The opera is a response to the Australian Human Rights Commission’s 2014 rep...

Karen Cummings, Lecturer in Singing, University of Wollongong - avatar Karen Cummings, Lecturer in Singing, University of Wollongong

Sex trafficking's tragic paradox: when victims become perpetrators

The victim-offender overlap is disturbingly common in the human trafficking trade, with women once trafficked becoming traffickers.www.shutterstock.comBorn in rural Thailand, Watcharaporn Nantahkhum ...

Alexandra Baxter, Researcher/PhD Candidate, criminology and human trafficking, Flinders University - avatar Alexandra Baxter, Researcher/PhD Candidate, criminology and human trafficking, Flinders University

This is part of a major series called Advancing Australia, in which leading academics examine the key issues facing Australia in the lead-up to the 2019 federal election and beyond. Read the other pieces in the series here.

Any discussion of the tax system requires a common understanding that its purpose goes beyond revenue.

To see this, ask whether we would be willing to raise as much revenue as we do now by simply requiring each resident and business to pay A$16,400 a year, with no further complications.

We could do this. It would generate the A$450 billion the Commonwealth raises now.

And it would be appealing in some ways. It would minimise tax evasion. There would be no exemptions, no tax returns, no loopholes. And payment would be easy to monitor. It would also save the taxpayer the cost of submitting tax returns and the government the cost of checking them.

We all want some fairness

People who earn more than A$76,000 would be delighted, because they would pay less tax than they do now.

Households with people who earn much less would be less happy. Each child, no matter how young, would have to pay A$16,400. A household with two parents (one working) and one child would have to pay twice as much as it does now.

Unemployed Australians would pay the same as mining tycoons. Mum-and-dad businesses would pay the same as large corporations.

But we wouldn’t accept such a system, because it wouldn’t be fair. And that’s not just because fairness is one of our core values.

Inequality has an economic cost. Modelling by staff of the Organisation for Economic Cooperation and Development (OECD) shows that a 1% increase in a nation’s inequality lowers its gross domestic product by between 0.6% and 1.1%.

The researchers find that beyond a certain point growing inequality can undermine the foundations of market economies and lead to inequalities of opportunity. They report:

This smothers social mobility, and weakens incentives to invest in knowledge. The result is a misallocation of skills, and even waste through more unemployment, ultimately undermining efficiency and growth potential.

Progressivity helps

Almost all developed countries use the tax system to fight inequality, by increasing the rate of personal income tax as taxable income grows. In a typical “progressive” personal income tax system the first $5000 earned might be taxed at ten cents in the dollar, while subsequent earnings might be taxed at 20 cents in the dollar. The result is that higher earners pay a greater proportion of their earnings in tax.

Australia has such a system. Our personal income tax system is more progressive than most of the 36 OECD members.

But it has been getting less progressive over time.

A standard measure is the difference in proportion of earnings devoted to tax (the “tax wedge”) for high earners on 167% of a nation’s average income and low earners on 67% of the average. The greater the difference, the more progressive the system.

The graph shows Australia’s system became less progressive throughout the first mining boom in the 2000s. It then became more progressive during the global financial crisis and probably as a result of the government’s response to it. Progressivity has been drifting down since. Unless we take action to make our personal income tax system more progressive, it is likely to become less progressive still. Tax cuts legislated in 2018 will accentuate the trend by dramatically flattening Australia’s personal income tax scales by 2024-25, unless reversed as Labor has promised should it win the election. Our company tax rate is high … Company taxes are almost always proportional, set at a flat rate. Debate is about how high that rate should be. Lower rates are said to encourage business investment, stimulating employment, wages and economic growth. But if company taxes are cut, government needs to find more revenue from somewhere else, or wind back spending. Read more: New figures put it beyond doubt. When it comes to company tax, we are a high-tax country, in part because it works well for us Australia’s standard rate is 30%, reduced to 26.5% (and soon enough 25%) for companies with turnovers of less than A$50 million. It is the second-highest rate in the OECD, behind only France. A broader measure of Australia’s “effective” company tax rate, taking into account tax breaks, still shows it is high compared to other countries. The high rate is little noticed at home. Most Australian shareholders are able to get a tax credit for the company tax paid on the profit that funds their dividend (a practice Labor has promised to wind back). This means the credit can cut the the income tax collected from a dividend recipient to zero, but not below it resulting in a payment from the Tax Office. … which may not be a problem There is no clear association between corporate tax cuts and economic growth. Rough calculations using OECD and International Monetary Fund data suggest that, if anything, higher economic growth is associated with smaller tax cuts. In part this is because foreign companies consider things other than the tax rate in deciding where to invest. In part it is because the revenue lost from corporate tax cuts has to be made up from somewhere else (most likely from extra income tax as incomes rise and push people into higher tax brackets). Since 2001, when Australia’s rate of company tax was cut to 30%, Australia’s annual economic growth rate has averaged 2.9%. In the 17 years before then, when the company tax rate averaged about 39%, annual economic growth averaged 3.5%. None of this implies causality. But it does show that lower company tax rates and better economic performance do not necessarily go together. International surveys show that Australia, despite its relatively high company tax rate, is regarded as one of the 20 countries in which doing business is easiest. What most works against Australia is the high costs of electricity. New taxes are waiting in the wings In summary, there appears to be scope for reducing personal income tax rates at the lower end of income distribution while increasing them at the top end. Our company tax rates are high, but this need not be a problem. If company taxes were to be cut, other taxes would have to increase. One option is to increase the goods and services tax. But this is not ideal as the GST is a regressive tax; that is, it tends to make income distribution more unequal. There are other options. We could impose an extra, much higher tax rate on very high incomes, as Democratic representative Alexandria Ocasio-Cortez has proposed for the US. It wouldn’t be a first. Australia’s top marginal rate was 75% in the early 1950s. Or we could reimpose an inheritance tax. A well-designed one would not only fund government spending but also work against intergenerational inequality. Read more: The workplace challenge facing Australia (spoiler alert – it’s not technology)

Authors: The Conversation

Read more http://theconversation.com/fairness-isnt-optional-how-to-design-a-tax-system-that-works-111493