Tax Threshold Reduced 65%

This week the Australian Tax Office released tax statistics for 2002/03. They contain a range of trivia including the top 10 and bottom 10 postcodes by average taxable income. We have added these to Lists in Resources. Top 10 are the predictable northshore (Pymble, Mosman, Northbridge), Toorak and eastern suburbs of Sydney (Point Piper, Woollahra, Vaucluse) plus the beach haven of the wealthy, Portsea in Victoria (interesting but statistically insignificant at 234 taxpayers).

The bottom 10 are much more interesting - ever heard of Mungallala, Koraliegh, Boobyalla, Leyburn, Archdale? Yes it's pretty hard for the bottom of the pack to get much press. What's interesting to FinDem is the average taxable income of the bottom 10 at around $24,500 and tax paid of about $4,200. If the tax free threshold had been maintained as it was in 1978 at 34% of average earnings, this average tax paid would be $1,460.

FinDem has added a List to Resources of the Tax Free Threshold as a multiple of annual AWE from 1978 to 2005. It has dropped non-stop from 34% in 1978 to 12% in 2005 ( a reduction of 65%). Tax policy has lost touch with reality. Rather than paying middle class welfare to bribe voters, tax scales should be designed to allow people to earn their basic subsistence requirements before having to pay any income tax. This is the key to simpler tax and welfare and higher workforce participation. The threshold should be somewhere between the Single Person Age Pension ($12,650pa) and the income level at which government age pension cuts out for a married couple ($57,000pa).

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