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12 Jul 2019 Rebates are distorting the tax system

MEMBER 173 writes: 

The use of low-income rebates with various thresholds where they shade in and shade out is causing serious distortions to our so-called progressive tax system. 

I have done some number crunching and here are the actual tax scales when the Low Income Tax Offset and the Low and Medium Income Tax Offsets are incorporated:

Income Base Tax Marginal Rate
21,885 0.15    19%
37,000 2,872.00 27%
48,000 5,787.00 34%
66,666 12,133.45 32.5%
90,000 19,717.99 40%
126,000 34.117.00 37%
180,000   54,097.00   45%

 

Look at the people earning between $90,000 and $126,000. Their marginal rate is 40% plus 2% Medicare. That’s a real disincentive to most people who have to choose between working more or spending time with their families. 

A good tax system should meet 5 basic conditions: fairness, adequacy, simplicity, transparency, and administrative ease. The actions of these rebates violate at least three of these conditions. 

Has The Tax Institute ever brought this to the attention of the Government?

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