[LINK] Why so many of us think we're overtaxed

Chris Maltby chris@sw.oz.au
Tue, 25 Feb 2003 14:29:50 +1100

On Tue, Feb 25, 2003 at 12:52:50PM +1100, Craig Sanders wrote:
> the thing that really struck me during the debates that
> raged over the GST-fueled tax cuts a few years ago, was that the most
> obviously fair tax cut wasn't considered or discussed seriously by
> anyone - i.e. raising the tax-free threshold to a reasonable level (IMO,
> a "reasonable level" is around $15-$20,000, much higher than the current
> level of just under $6000).
> that would have given everyone a tax cut, not just the rich...and it
> would have really helped low-income workers, made a huge difference to
> their lives.

But it wasn't those people whose votes were needed to ensure the
re-election of LJH.

> it wasn't an option, though....which makes no sense at all to me.

See above.

> the other thing that needs to be done for "tax reform" is to adjust the
> tax brackets for inflation.  they haven't been adjusted since the early
> 1980s.  back then, $40,000 per year was a very high salary, but it's
> just average these days....for graduates, it's just above entry level.
> $40,000 in the early 1980s was a huge amount of money.  you could buy a
> fairly good house for around that.  now it's just enough for a deposit
> on the same house.
> IMO, the tax brackets should be immediately adjusted to account for
> inflation since the early 1980s, and they should be *automatically*
> indexed every year to CPI.

Back then, there was a 60% marginal rate too... I think you're right 
about the tax-free threshold, but to really be affordable you would have
to compress the other rates to claw back the difference from the higher
end of the scale. This isn't going to be popular. See above.

> the final thing i have to say is a question rather than a statement.
> every so often, someone proposes some variation of the Tobin Tax (in
> short, a very small 0.1% tax on foreign exchange transactions).  a large
> part of the idea is that it discourages short-term currency speculation
> while not affecting stable long-term investment.  some variants (e.g.
> the Debit Tax) propose the tax on ALL financial transactions, not just
> foreign exchange and claim that a level of approx 0.3% on all
> transactions would be more than enough to replace all other taxes in
> Australia.
> the Tobin Tax seems to be very credible, and has a fair amount of
> support from groups all around the world with social justice concerns
> (including the Australian Greens).  
> my question is, how credible is the Debit Tax?  it looks and sounds
> good, but a) it seems to be popular with the same kind of fringe
> nutcases who believe that Prince Philip is running a worldwide
> conspiracy to rule the world and steal everyone's bodily fluids, and b)
> my basic attitude is if something sounds too good to be true then it
> probably isn't true.
> so, is the Debit Tax credible?  or is it just lunacy?

I think it's probably a pipe dream. Tobin is more credible but more
because it dampens speculation rather than as a big source of revenue.

I heard a very interesting radio program a while back about income/wealth
distribution which claimed that on a population basis the number of
people at different wealth stratums was roughly constant across a large
number of societies: ie ratio of the numbers of people above/below any
given multiple of median income or wealth is more or less constant.

What varies is the spread of actual wealth levels. For example, the
proportional difference in wealth between the top 10% and the bottom
10% is much higher in the USA than it is in Sweden. The research also
claimed that the key factor for egalitarian wealth distribution
was transactions.

So if you wanted to even up the distribution of wealth overall, you should
reduce taxation on transactions (including employment) and increase it on
investment returns (including landholdings). By stimulating exchanges
within society you will benefit the poor. By improving investment returns
you benefit only the rich; ie the trickle down theory of Reagan/Thatcher/
Howard is not only untrue but counter productive.

Unfortunately, I have lost the reference to it now...