Income tax - should it be flat rate or progressive as is?

Question

Just wondering what you think of this. As income earners hence tax payers, what is your opinion? Should tax be calculated at a flat rate, would this be fair or should the system say as is i.e. progressive rate brackets (high income earners --> higher rate of tax on their income)?

What effect would flat rate income tax have on you? Would you benefit, would you prefer it or rather our current system?

Answer 1

Well the reason why there is a progressive tax rate is because income redistribution and equality of living.

They made the tax system like this because they also want to control inflation. If they made the tax system a flat rate, then the people in the higher tax bracket would have more disposable income and thus spend more in the economy which pressures on inflation.

65% of government revenue comes from personal income tax. Government spendning goes on roads, schools, education, defence etc. Everything that we dont think about and that we use, the Government pays for it with Australian taxation revenue.

A progressive tax system is definately a better system for the country although it is not a very fair system for individuals. Nevertheless, the Australian Government has done well to control an economy which is going through a massive boom period by the use of strong fiscal policy.

Answer 2

The progressive rate system is more ideal because it is meant to ensure that people on lower incomes are not bearing the greatest burden of the tax system in proportion to their incomes. People on lower incomes have to spend a greater proportion of their income on living necessities than people on higher incomes do.

It's all very well and good to hold the view that people of enterprise should not be discouraged under the tax system and that people may be discouraged from being enterprising in order to enjoy a lower rate of tax. But at the end of the day, we all still need nurses, teachers and police and their incomes are not going to increase greatly for their efforts to the extent that an entrepreneur's income for efforts might. We can't all be wealthy but at least our good social systems make Australia a nice place for wealthy people to live and for all to have opportunity.

That's why we still need to keep the tax system reasonably progressive. Despite its progressiveness, our tax system is heading towards more of a flat tax ideal with the 30% tax rate applying on a sliding scale to the broad and most common taxable incomes of between $34,000 and $80,000.

When you consider the broad based GST, Low Income Tax Offset, Family Tax Benefit, Child Care Benefit/Tax Offset and generous capital gains tax and negative gearing tax incentives for investors and a host of other concessions... our tax system has now become a strange hybrid of progressivism, flat taxedness, political point scoring and social engineering.

There's no sharp distinction between a progressive system and a flat tax system that could possibly exist now. Our tax system is far too complex and changing every year to suit the economic circumstances to be considered afresh from such simplistic polarities. The tax system might not "fair" from one individual's point of view, but at least it isn't arbitrary - it applies to everyone. One person's idea of fairness will never be everyone else's.

Answer 3

I support progressive rate since I believe that it would help in income distribution. It's pretty clear that the richer the people are, the more they spend and they should be able to contribute more. However, the problem with progressive tax is that it doesn't create incentive for people to work harder and it actually makes people trying to create unnecessary spending in their company's account in order to decrease the tax (especially companies that have earnings around the border-line of 35% and 25%)

I do not know where you are from but I support progressive tax. Flat rate income tax is a little too communist for me.

In Finland, speeding fine is so that it makes up a portion of your income. If you're to be fined from speeding, and you're rich you may have to pay up to EUR10,000.

Answer 4

well i think its ok now so keep it

Answer 5

Of course, a flat rate would be more fair.  But in reality, the politicians would make sure there were loop holes for their special interest groups, which means the overall rate would have to be higher for everyone else so that the desired amount of total dollars could be collected.  A pure flat rate, the way it's being presented, would probably have little affect on my total taxes.  My spouse and I bring home just under 6 figures and in any of the models I've seen, that would keep our taxes about the same, or lower them just a bit.  I think, in a "pipe dream" world, the flat rate is a great idea.  The crooks we have running this country would never let it happen, and if they did, the system would be so screwed up, we would be begging for the "good old days" within 5 years.