Tax cuts for wealthy hidden in intergenerational report

Date
    March 22, 2015
    Sydney Morning Herald


The intergenerational report projects massive and hidden tax cuts that would add as much as $150 billion a year to the budget deficit by 2055, a new analysis claims.      

The Australia Institute has reverse engineered the tax projections in the report to find that by 2055 someone on the equivalent of $300,000 would be paying only 32.4 per cent of their income in tax, down from 37.7 per cent in 2021.

The tax cut, expressed in present dollars, would be worth $15,900. A low earner would receive a lower tax cut of about $4500.


The tax cuts come about because of a decision by the framers of the intergenerational report to hold the tax-to-GDP ratio constant at a time when real incomes are climbing.

Instead of being pushed into higher tax brackets with rising incomes as normally happens, wage earners would be kept on their initial tax rates even though their income had climbed.

The intergenerational report expects real incomes to climb 77 per cent over the next 40 years, pushing up the average wage from $58,700 to the present-day equivalent of $104,000.

In 2055 someone on the equivalent of $104,000 would be taxed as if they were earning $58,700. They would pay more dollars in tax, but they wouldn't be paying higher rates.

"It's not at all realistic to think that tax rate paid by high income Australians will fall, but that's what the report assumes," said Australia Institute executive director Richard Denniss.

"In fact it's entirely realistic to think that citizens whose incomes will rise rapidly will want world-class education, health and transport and will demand slightly higher rates of tax in order to get them.

"I think the purpose of the forecasts is to manage expectations, to make it look as if the government won't be able to afford things it'll be quite easily able to afford."

Quote:


Slavery down 5.3% in 40 years.

Woo hoo.  Party time....

A slave for 2.26 days instead of 2.63 days per week.  What progress.....

I have considered the idea that allowing 'bracket creep' to hold sway for a time - say five years - would lead to a reduction in the demand for higher and higher incomes (note - I do not say wages - I say incomes).

If indeed there are such severe structural deficiencies in budgeting as to engender a long-term decline in overall revenue, then that is one way of beginning the process of reducing the pressure on incomes and establishing a more solid base for the future.

Stabilising the current brackets, and then introducing slow and steady tax hikes to re-establish equilibrium could be the way to go.

The boom is over.... let the country come to grips with that reality and see that the future is increasingly dark in many way, not least of all the 'global market' concept which is rapidly winding down to disaster, and start to work on some real tax reviews rather than the same old taking from the poorest in the land in any way possible.

Time for the lifting to be shared around fairly... no more free rides.

longweekend58 wrote on Mar 22^nd, 2015 at 2:37pm:

This report isn't worth its weight in toilet paper. Among others, it makes the rather bold prediction that there will be no recession in Australia any time in the next 40 years. Really?

Grappler Deep State Feller wrote on Mar 22^nd, 2015 at 1:25pm:

Looking at the top tax rates in the seventies, around 70% even a person on an average income was paying 45% for most overtime earned, so the politicians are talking a lot of nonsense.
What is ignored, is the tax-free super for the over sixties, which since its introduction in 2007 has largely contributed to the budget deficit.
It is the elephant which no one is prepared to mention.