Like what you've read?

On Line Opinion is the only Australian site where you get all sides of the story. We don't
charge, but we need your support. Here�s how you can help.

  • Advertise

    We have a monthly audience of 70,000 and advertising packages from $200 a month.

  • Volunteer

    We always need commissioning editors and sub-editors.

  • Contribute

    Got something to say? Submit an essay.


 The National Forum   Donate   Your Account   On Line Opinion   Forum   Blogs   Polling   About   
On Line Opinion logo ON LINE OPINION - Australia's e-journal of social and political debate

Subscribe!
Subscribe





On Line Opinion is a not-for-profit publication and relies on the generosity of its sponsors, editors and contributors. If you would like to help, contact us.
___________

Syndicate
RSS/XML


RSS 2.0

The payroll tax that dare not speak its name

By Gavin Putland - posted Monday, 16 May 2011


Hence the best chance of reducing the distortionary taxes that presently pay for the age pension is to displace that pension by expanding superannuation funded by the "least bad tax."

Here's how the system might work:

The present de-facto payroll tax is abolished (the saving being passed on in higher wages and lower prices). In its place, every person of working age, whether working or not, receives two compulsory contributions to a private super fund, those contributions being:

Advertisement

Part A: a levy payable by that person, of so many percent per annum on the value of residential land owned and occupied by that person; and

Part B: a per-capita share of the revenue from a similar levy on the value of commercial land, rural land, and non-owner-occupied residential land.

Part A is off-budget and is strictly for the benefit of the payer, neutralizing the political sensitivity of a levy on the "family home." As it is not payable by retirees, it largely avoids the "asset-rich, income-poor" issue that often arises with municipal rates.

Part B, which could be on- or off-budget, is meant to become a non-means-tested replacement for the age pension. Consistent with this purpose, the payout from Part B is taken as a lifetime annuity and its preservation age is greater than for Part A. But, as a political sweetener, and as a dividend from the economic expansion that follows the abolition of the de-facto payroll tax, the preservation age for Part B is less than the present pension age, and won't need to be increased as the pension age will be.

The preservation age for Part B is taken as the upper limit of "working age": Part A is not payable by, nor Part B for the benefit of, persons past that age.

As a test of political feasibility, let us estimate the rate per annum at which the two levies would raise enough revenue to replace the SG.

Advertisement

In 2009/10, Australians earned about $549 billion in wages and salaries [according to ABS 5204.0 Tab.6]. The SG should have raised 9% of that, i.e. $49.4 billion.

The alternative revenue base would be land values as assessed in mid 2009. Because residential land owned and occupied by persons of pensionable age is exempt, taking the base as the total value of residential, commercial and rural land would overestimate the base, hence underestimate the rate.

To the contrary, one could argue that a lower rate, causing a lower level of saving, is acceptable because the abolition of the de-facto payroll tax would reduce prices for retirees.

  1. Pages:
  2. 1
  3. 2
  4. Page 3
  5. 4
  6. All


Discuss in our Forums

See what other readers are saying about this article!

Click here to read & post comments.

5 posts so far.

Share this:
reddit this reddit thisbookmark with del.icio.us Del.icio.usdigg thisseed newsvineSeed NewsvineStumbleUpon StumbleUponsubmit to propellerkwoff it

About the Author

Gavin R. Putland is the director of the Land Values Research Group at Prosper Australia.

Other articles by this Author

All articles by Gavin Putland

Creative Commons LicenseThis work is licensed under a Creative Commons License.

Photo of Gavin Putland
Article Tools
Comment 5 comments
Print Printable version
Subscribe Subscribe
Email Email a friend
Advertisement

About Us Search Discuss Feedback Legals Privacy