Monday, July 11, 2011

Who's ahead? Who's behind? The numbers the government didn't publish:

There isn’t a household in Australia that won’t be (at least slightly) better off under the tax changes announced by the prime minister, but when the carbon price is set against the tax cuts around one-third will be worse off.

From mid next year no-one earning up to $18,200 need pay tax. By mid 2012 the cutoff will be $19,400. Treasurer Wayne Swan says the change will free more than 1 million Australians from having to file a return.

In order to counteract the extreme generosity of the measure (the present tax-free threshold is just $6000, and $16,000 for workers using the low income offset) the government will actually increase the marginal tax rate facing the bulk of Australians earning between $37,000 and $80,000 - lifting it from 30 per cent to 32.5 per cent next year and lifting it again to 33 per cent in 2015.

The net effect of the carefully designed changes will be to ensure that everyone gets a tax cut, even if it’s an imperceptible $3 a year for Australians earning more than $85,000.

For more modest earners the benefits are large - $626 a year for a single earner on $20,000, $1226 for a dual-income couple with two children on $75,000. They are more than big enough to pay for the higher bills that will result from the carbon tax, leaving the dual-income couple $687 a year ahead.

But for an individual the net effect is negative from $50,000 per year, for some families with children negative from $80,000 per year...

Families on $200,000 will find they are well into negative territory, paying an extra $900 per year in bills with scarcely any compensation. Individual on $200,000 will be $950 per year worse off.

Prime Minister Gillard defended the limited compensation saying there was “no money tree”.

“The budget has got to add up. We have made choices and we will stand by those choices. I understand many Australians right up the income scale feel cost of living pressures, but we have directed assistance to those families and Australians we believe need it the most.”

Pensioners, students and Australians on unemployment benefits will will receive a payment equal to 1.7 per cent of the maxium benefit, nine months of which will be paid upfront in May of June 2012 ahead of the introduction of the carbon tax in July. Worth up to $250 for a pensioner the payment will have to las t until March 2013 when future increases will be delivered through the regular payments system.

Seniors card holders will receive a supplement of $338 for singles and $255 for each member of a couple, the same sum delivered to pensioners. Payments to aged care recipients will be split 50:50 between the recipient and the care provider.

Treasury says the changes will push prices 0.7 per cent from mid 2012 and by a further 0.2 per cent from 2015 when the carbon tax gives way to an emissions trading system.

From mid next year the price of electricity will rise a further 10 per cent as a result of the carbon tax, and the price of gas a further 9 per cent. The price of food is expected to scarcely move, advancing less than one half of one per cent as a result of the tax.

Pensioners will be more affected than other Australians by the price rises, suffering average increases of 1 per cent.

Treasury says to the extent pensioners and others “reduce their consumption of goods whose relative prices have risen” the impact on the prices they pay will be smaller.

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. When Treasury modelled a minor tax change...

. Earn $25,000 tax-free. You would in Henry's world