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Should millionaires pay the same % of tax as middle income taxpayers?

Discussion in 'General Chat' started by basilio, May 12, 2012.

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  1. basilio

    basilio

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    Interesting idea from Warren Buffett/President Obama that proposes that if households earn $1m a year that have to pay tax at at least the rate that middle income earners are currently paying.

    What they are suggesting is to cut through the creative accounting, special tax breaks, whatever and ensure that the wealthiest people in our society contribute to the tax base at least proportionally the same as middle income tax payers.

    What do you think ?
    Read more: http://www.theage.com.au/victoria/u...onaires-tax-20120511-1yil5.html#ixzz1ubUZAaL5
     
  2. tech/a

    tech/a No Ordinary Duck

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    Re: Should millionaires pay the same percentage of tax as middle income taxpayer?

    Why?

    These people generally employ many and take the risks of few.
    Personally I generate massive taxes.

    Personal Tax
    Company Tax
    Payroll Tax
    GST.
    Land Tax


    Then each year I have to pay tax in advance.

    Encourage growth and get more people involved in entrepreneurial enterprise and increase those paying these taxes

    Personal Tax
    Company Tax
    Payroll Tax
    GST.
    Land Tax


    Support them.
    Dont tax them to death

    If you created 1 more potential millionaire you'd gain far more potential tax than increasing the tax on 1 existing Millionaire---think about it!!
     
  3. McLovin

    McLovin

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    Australia's tax system is not as skewed as America's. The middle class there do all the heavy lifting. There are so many holes in the system that if you have enough money for lawyers you can cut your tax bill to almost nothing.

    Having said that, my Mum will earn over $1m in fraked dividends this year and will pay zero in tax (obviously excluding tax paid by the company before the dividend). That came from her inheriting half my grandfather's estate, which again caused no tax to be paid on that transfer. By most definitions that would make her either wealthy or rich and yet she pays no tax. I think it's things like that that WB was talking about.
     
  4. drsmith

    drsmith

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    Her tax has been paid at the corporate level. To tax at the corporate level and then at the individual level is double taxation.

    As for the topic at hand, loopholes in income taxes should be removed and marginal rates lowered. The ideal would be a single rate of income tax the same as the corporate rate with a tax free threshold and a negative tax (welfare benefit) for incomes below the tax free threshold at the same rate.
     
  5. McLovin

    McLovin

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    I understand that. But in the end, if she was working and earning that money PAYG her tax rate would be significantly higher than the 30% already paid. There are plenty of arguments as to why dividends should be taxed at the individual's marginal rate, but that's probably for another thread.

    Not that I'm complaining.
     
  6. prawn_86

    prawn_86 Mod: Call me Dendrobranchiata

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    Personally i'm all for a flat (or severely flattened) tax. Say 2 or 3 brackets based on incomes, no other taxes, and no deductions. Would make things a lot easier and fairier, but put a whole ****e load of ATO staff and accountants out of jobs...

    IE 0 - 20k = 0% tax
    20 - 80 = 25% tax
    80k + = 35% tax

    Pure hypothetical figures but no creative accountancy, no other state (etc) taxes and thats that.

    A gov should figure what they NEED (not want for pork barrelling) and then charge that and stick within that budget or need a referendum to increase (and explain why the need more) taxes
     
  7. drsmith

    drsmith

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    If her marginal rate of income tax is higher than the corporate tax rate, she would still pay the difference on a franked dividend.

    This is after offsetting the inputation credits accumulated from the tax-free threshold and the marginal rate below 30% with the marginal rates above 30%.
     
  8. drsmith

    drsmith

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    The old DLP proposal was,
    0 - 30k = -30% tax (effectively a welfare benefit for incomes below $30k).
    30k+ = 30% tax (corporate tax rate).

    It's debatable where the tax free threshold should be set, but, that combined with no deductions on salary income would really put a lot of ATO staff and tax accountants out of work.
     
  9. McLovin

    McLovin

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    All the shares are held by a private company of which she is the largest shareholder. Essentially, she only pays tax if she draws a dividend over the 30% marginal tax rate (I don't think she ever does). In effect, she pays a reduced rate of tax on any amount she chooses to save, whereas a PAYG employee does not have that luxury, outside of the super system.
     
  10. McLovin

    McLovin

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    That last dollar from $29,999 to $30,000 will cost me $10k in tax.
     
  11. drsmith

    drsmith

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    Clever lady.

    Kerry Packer would be proud.

    The problem here is the tax system. If the highest marginal income tax rate was the same as the corporate tax rate, there would be no underlying need to corporatise passive income to minimise tax.
     
  12. medicowallet

    medicowallet

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    It should apply to wages/salary only, as it CURRENTLY does.

    Passive income is generated by investing money that was ALREADY subject to income tax.

    So, the tax on the capital has already been paid for and the tax on the income is done at marginal tax rates anyway (assuming they are working)


    What is all the fuss about? The current system is VERY fair for low-middle income people. Perhaps people should get out there, educate themselves or upskill and work insanely long hours to make the money the "lucky" have. Instead they invest their efforts into whining and wailing.

    Companies are another matter, and yes, some Mickey Mouse companies (such as tradies subcontracting and writing off their personal use items are crap, or trustees to limit tax may be targets for reform) I see NO problems in income splitting with trusts. There is no problem with using super at the current rules not the new rules that don't affect politicians, just everyone else.

    Smells of a broke labor to me.


    In all, only the "mega rich" can arrange their affairs, anyone without 10s of millions really is no better off than joe blogs.
     
  13. drsmith

    drsmith

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    No, the tax free threshold would operate as it does now.

    If you earn $30k, you pay no tax.
    If you earn $40k, you pat $3k tax (30% of $10k ($40k-$30k))
    If you earn $20k, you get a welfare benefit of $3k.

    Starting at a welfare benefit of $9k at no income, you effectively contribute 30% of every dollar you earn, but you don't start paying tax until you earn over $30k and then only on that portion of income over $30k.
     
  14. Calliope

    Calliope

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    Millionaires and their business corporations and the big banks should be hounded out of the country. They serve no purpose excect to fund the wealth to be re-distributed to "working families." They can be found living in luxury with their ill-gotten gains on the North Shore.:rolleyes:
     
  15. McLovin

    McLovin

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    I think clever lawyers and accountants is more apt.;)

    The company was set up in the 1950's and was designed to get around the death taxes that existed at the time (the famous case was by the Robertson choclate family), hence the structure is probably a little bit out of date (a trust would be somewhat cleaner) but it works well enough. Iirc, its historical state registration was in the ACT, which was again done for some tax benefit, don't ask me what though.

    I agree. That's often highlighted as a key issue, the spread between individual and company taxes. Personally, I think individual taxes are too high in Australia, not so much at the top but in the middle, but I doubt we are going to be seeing any tax cuts for the forseeable future. Australia has a high cost of living and wages have been rising fast, which has pushed a lot of people in to rates that are not equitable for what they are earning, given CoL pressure.
     
  16. McLovin

    McLovin

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    Oh ok, I understand. You had me worried for a bit there.:D
     
  17. Glen48

    Glen48 Money can't buy Poverty

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    If every one paid more tax nothing would change the feds would only spend more and most likely get deeper into debt as they know they have a bigger taxpayer funded income.
    WB tax would only fund the USA Fed's over draft for a short time and USA is paying 2.5 Million a second interest so they are going to need a lot of WB's.
    More money for the OZ Feds in both partied would mean more pink bats, (inset loony ideas here ).
    Avoid pay any more than you have to and protect your wealth the feds are always working on ideas to take it from you with super being high on the list.
     
  18. drsmith

    drsmith

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    Broad based tax reform can only be achieved by strengthening the tax base.

    Deductions from salary income (including negative gearing) could potentially be eliminated by incremental change over time, for example, by reducing the percentage of total deductions a taxpayer can claim from one year to the next.

    Simple example:

    Current: 100% of deductions.
    year 1: 80% of deductions.
    Year 2: 60% of deductions.
    Year 3: 40% of deductions.
    Year 4: 20% of deductions.
    Year 5: no deductions.

    Thus, after 5 years, deductions would be eliminated from salary income. A combination of redirection into reduced marginal rates and the taper above would would help eliminate any sudden post tax income disruption. To that end, the period need not necessarily 5 years. It could be longer if desired.
     
  19. johenmo

    johenmo

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    Heck Yeah!! And when I get there then the laws will suddenly become absurd and require instant change.
     
  20. So_Cynical

    So_Cynical The Contrarian Averager

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    Agree with above..but would prefer my numbers.



    • 0 > 20k = 0% tax
    • 20 > 60K = 25% tax
    • 60 > 100K = 35% tax
    • 100k+ = 50% tax
     
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