Atlas does shrug

While Henry did link to his Australian article this morning I want to draw attention to one of his final paragraphs:

A simple calculation is telling. Assuming no behavioural change, raising the top marginal rate from 46.5 per cent to 49 per cent for those earning above $180,000 would increase annual income tax collections by about $1.2 billion. However, if the response in Australia parallels that in Britain, instead of rising, taxes collected from top-income earners could actually fall by up to that amount. Nor is it difficult to see why: 30 per cent of the top taxpayers in Australia are 55 or over, so are making choices about how long to continue working; nearly a third are in occupations which have substantial discretion over the timing and form of income; and a majority have sources of non-taxable income which offer opportunities for rearranging tax liabilities. But while reducing the tax take, all those adjustments impose steep economic costs, with each dollar raised shrinking ­national income by at least 50c.

Symbolism is expensive and counter-productive.

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11 Responses to Atlas does shrug

  1. Rabz

    Gee, so increased taxation of da rich drives perverse, tax minimising behaviour?

    Who’da thunk it?

  2. Baldrick

    Increase the tax take on the successful who in turn will find new ways to decrease their tax exposure. Sounds like Swanenomics to me.

  3. H B Bear

    And for the young, tertiary educated and mobile Singapore and Hong Kong are calling.

  4. philip j. fry

    I keep my salary just below the threshold of the highest tax bracket.

    The “profits” get distributed to the “major shareholders”, fully franked.

  5. .

    A simple calculation is telling. Assuming no behavioural change, raising the top marginal rate from 46.5 per cent to 49 per cent for those earning above $180,000 would increase annual income tax collections by about $1.2 billion.

    Excise hikes? 1.8 bn or less?

    Just ditch DA, Tony. The Greens don’t like it anyway.

  6. eb

    So what if it actually reduces the tax take. For the Govt, the politics is more important at the moment.

    And the marginal rate actually only increases from 47% to 49% under this measure, as the medicare levy increase was already announced.

    Also, for somebody on $250,000, the increase in tax is only $1,400, I’m not sure that’s enough to drive that much behaviour change.

  7. stackja

    But the left needs the tax money.

  8. .

    eb
    #1301923, posted on May 12, 2014 at 11:38 am

    Also, for somebody on $250,000, the increase in tax is only $1,400, I’m not sure that’s enough to drive that much behaviour change.

    You don’t seem to understand what “marginal” means.

    These small changes make a very tax rate even higher. This is what lefties call a tipping point.

  9. viva

    I rather like Henry’s comment about “purists who contemplate losing power with the relish of an anchorite hankering for the solitude of his cell.” Ring any bells Cats?

  10. .

    viva

    Don’t be hysterical. The tax hikes will be damaging to the economy and won’t even raise enough revenue to pay for Direct Action.

    Just hold taxes the same and CUT DIRECT ACTION.

    FFS.

  11. Diogenes

    Shades of the old 15% “Reservists Tax” that Keating introduced. It was supposed to raise 15million, but ended up costing 20million as now we could deduct all our expenses.

    Originally the ATO disallowed a lot of deductions or reduced them by 50% until taken to court. Seems Treasury forgot that most officers in ranks from Major to Major General were lawyers , or CFO types and had their tax specialists work probono. That tax lasted a year as I recall.

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