15 May 2013

MELBOURNE:- Yesterday’s federal budget highlights again Australia’s unbalanced reliance on wage and salary taxation for government revenues, says Prosper Australia.

“Taxation discourages. That is why we tax gambling, alcohol and tobacco. Unfortunately, it has the same effect on work. We tax it so heavily it must also be a very bad economic element,” David Collyer Campaign Manager Prosper Australia said today.

“Discouragement begins at the effective rate of at least 20.5 per cent of further income as soon as individuals earn $20,542 a year (disregarding the major welfare traps in the withdrawal of income-tested benefits).

The Australian Government will take $175.4 billion from individual’s income taxation in its $387.7 billion, a very heavy 45 per cent of total revenue.

Treasury can proudly state: ‘…once social security contributions and payroll taxes are taken into account Australia’s direct taxation on individuals and payroll is relatively low.’ But this argument misses the point entirely – it simply means our peer countries are even more greedy and more addicted to stripping workers of their earnings than Australia is.

“Wage taxation remains a government vice. Somehow, individual taxpayers have been convinced government is more deserving of the fruits of their labor than they are.

“There are much better tax bases available to government that do not weigh on workers or upon business, and all sides of politics know it.

Australia’s Future Tax System recommended sweeping changes to what we tax and who pays it. It names Land Value Tax and a Resource Super Profits Tax as ideal tax bases that do not impact economic activity, merely capture some of the naturally-occurring economic rents.

The failure to embrace the urgent reforms Dr Ken Henry outlined deters us from realising our potential. Somehow, our political leaders prefer we underperform.

Media comment: David Collyer 0413 248 193

About Prosper: Prosper Australia is a tax reform lobby group and think tank that is now 120 years old. It seeks to move the base of government revenues from taxing individuals and enterprise to capturing the economic rents of the natural endowment, notably through Land Value Tax and Mining Tax.