Socialist Party Australia - Are Australians over-taxed or under taxed?

Editorial from the May edition of 'The Socialist'
Paper of the Socialist Party (CWI Australia)
A socialist explanation of our tax system.

The cry is often heard that Australians are paying too much tax and that the tax burden has to be reduced. Usually those putting forward such a cry have in mind exactly where any tax cuts should go to and they are not to the least well off. Whenever you hear talk of Australia or Australians you need to ask which or who’s Australia- the Australia of the wealthy or the Australia of the working class and less well off.

Recently released taxation statistics showed that one in five people putting in tax returns in 2002/2003 ended up paying no tax at all, a rise of 250,000 or about 15% in 3 years. A third of these were seniors (due to increase in tax free threshold to $20000 for seniors) or teenagers (due to low paid part time casual work). Yet there were also a whole lot of people who declared farm income paying no tax- 30% -probably partly due to drought. And 20% of people with income from unincorporated small business also paid no tax.

The tax take for 2002/2003 is provisionally $87.8 billion with final collections for 2002/2003 estimated to be $91.5 billion. This is despite the cost of negative gearing - 60% of all rental property owners were declaring losses on their tax returns, with about half of the negatively geared investors in the top two tax brackets. Based on the provisional figures the number of people paying tax has decreased by about 185,000 in the last three years. Whereas the average amount paid has increased by 5.2% to more than $10,000. In other words fewer people are paying more in taxes.

More than 2 million people pay no tax despite earning $13.4 billion in income. Many of these would be the low income earners and seniors mentioned previously. However tax free Australians while earning 3.5 % of the taxable income claimed 10 % of all tax deductions. They claimed 43% of all tax losses in farming, 52% of all losses by people running incorporated business and claimed $2.5 billion in tax losses carried through from previous years.

Not content with these available rorts however the rich want to make it even easier for themselves so you have the Business Council of Australia wanting to cut the top rate of taxation (48.5 %) for those that earn over $80,000 pa (from July) and even consider that it cuts in at too low a figure. Liberal party politicians and the mass media are also jumping on the bandwagon with a blatant pitch for the reduction, which of course serves their own naked self-interest. (This is the kind of income these people get) The Business Council of Australia wants to eventually have the top threshold lowered to 30% and bring the corporate tax and personal tax into alignment.

If you cut taxes you have to find some way of cutting expenditure like for example on Health and Welfare and these cuts would affect the poor most.

There is no doubt that there has been a massive increase in the amount of personal income tax taken by the Howard government. Over the last six years the amount of tax taken in personal income tax has increased by 36%, whereas the rise in gross income during the same period as measured by the Australia Bureau of Statistics was only 33%. Perhaps part of this could be explained by bracket creep or by both people in a couple having to work and therefore pay a greater percentage in taxes.

GST revenues have increased by 36% over its 4 years of operation compared with only a 14 % increase in federal income taxes over the same period.

GST of course effects the most those who have to spend in order to survive - low and middle income earners, the Australian working class.

The Federal Treasurer has been demanding that state governments cut business tax because they get the funds from the GST and again this is just another example of the tax system taking from the less well off and giving to the wealthy.

The effects of the tax rip off are most felt with those on welfare not only are they hit with ordinary taxation but with the modest amounts they earn they also cop a massive drop in benefit rates which combined with taxation can mean effective marginal tax rates of 60- 80%. This is especially so with plans to force people on Sole Parents Pension and Disability Support pension back into the work force. And yet with members of a couple who have children and a single income the government is quite prepared to pay them Family Tax Part B regardless of how much that income may be- there are close to 30,000 families earning more than $100, 000 a year who receive it. (Maximum rate of Family Tax Benefit Part B is $114.66 pf for under 5 and $79.94 pf for over 5)

In summary the current tax system increasingly takes income from the working class in order to fund tax cuts for the wealthy through increase in personal income tax, through bracket creep and through the GST. All talks of cutting income tax are around the notion of cutting it for the higher tax brackets or cutting it for business, all the ways of paying for it are of cutting services to the workers of Australia.

What is needed is a political party, which is prepared to defend the interests of the working class in taxation and Health and Welfare and all other matters. No such party exists at the moment what is needed is for it to be created to provide the leadership that the working class needs in order to fight back.