Howard's Tax Cuts Fail the Fairness Test!
Thursday, 18 October 2007
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Howard's Tax Cuts Fail the Fairness Test!
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Fairfax has just released their income tax calculator so you can see what Howard's tax cuts would mean for your income.

Some very interesting numbers come out of this.

$40k pa: Save $20.19/wk by 2010/2011
$75k pa: Save $20.19/wk by 2010/2011
$100k pa: Save $41.35/wk by 2010/2011
$150k pa: Save $70.19/wk by 2010/2011
$200k pa: Save $127.88/wk by 2010/2011

Jesus. Looking at these numbers further - if this election calculator is right, then the tax cuts are truly terrible, no matter what way you look at them.

From an economist's perspective, if the tax cuts deliver the same cut as a proportion of income to the individual for varying pay scales then they are 'fair'. I would disagree with this view as lower income earners are doing it tough. However, just run with me on this. If we use the economist's definition, then these cuts are NOT fair.

Consider this:
If you earn $200k pa, then you are earning $2,507.69 per week in the 2007/2008 financial year.
According to this calculator, by 2010/2011 you will be earning $2,635.58 per week.

That's $127.88 more per week.

As a percentage of your income that's a 5.1% pay-rise.

Now, let's look at a lower income earner:

Say you earn $50kpa, then you are earning $776.92 per week in the 2007/2008 financial year.
According to this calculator, by 2010/2011 you will be earning $797.12 per week.

That's $20.19 more per week

By percentage of your income that's only 2.5%!


The disparity is obvious! From an economist's point of view this is NOT fair. Not only do these cuts favour the whole in dollar value, but - most importantly -
They favour the wealthy as a proportion of income!
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  Comments (51)
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1. Written by This e-mail address is being protected from spam bots, you need JavaScript enabled to view it , on 18-10-2007 06:42
Did you calculate it as a proportion of the tax paid? They'd be interesting too. 
 
I.e, $200K plus have their tax burden reduced by 3%, 30K have their tax burden reudced by 2.5% etc.
2. Written by This e-mail address is being protected from spam bots, you need JavaScript enabled to view it , on 18-10-2007 06:48
Great Stuff JJ, I picked up on you from Pollbludger.
3. Written by This e-mail address is being protected from spam bots, you need JavaScript enabled to view it , on 18-10-2007 07:02
Thanks Mark! 
 
Ratest Analyst: 
Actually, if you look at the cut as a proportion of tax paid it looks better. 
 
Someone on $200k pays 9.6% less as a proportion of their tax, while someone on $50k pays 10.9% less as a proportion of their tax. 
 
However, I must stress that the definition for a 'fair' tax cut is one where the proportion of the tax cut is compared to income, not total tax paid.
4. Written by This e-mail address is being protected from spam bots, you need JavaScript enabled to view it , on 19-10-2007 06:57
Rich people pay more tax so tax cuts are going to give them more. Pretty simple.
5. Written by JJ, on 19-10-2007 07:04
Matt, either you didn't read what I wrote, or you refuse to understand. 
 
The point is not that they will save more on taxes, the point is that as a proportion of income these cuts are skewed to the wealthy. 
 
The economists definition of a fair tax cut is one in which the cut is equal as a proportion of income. 
 
Howard's cuts are NOT.

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