Many nations use income taxation to raise domestic revenue. The income taxation rates vary from country to country. Australia is one among the countries with highest taxation rate. Australia uses a system of progressive income taxation in raising her domestic income. In this system, the tax paid is proportional to the income earned. High income earners pay more tax than low-income earners. The bone of contention in this system is that all people are not taxed at equal rates. Low income earners are usually taxed at a percentage lower than 15%, while those with very high income are taxed at a rate higher than 35%. This is a great issue of concern. Currently, the issue of equal rates of taxation both for low and high income earners is a major concern revolving in Australia.
Australia is a capitalistic country. This means that people earn what they work for. Progressive taxation method brings inequity to the people. The taxation method should be fair, since earnings depend on the amount of efforts from an individual. This call for a fair method of taxation, thus an equal rate of taxation should be applied when calculating the income taxes.
Justification of opinion: main reason
The rules and regulation governing taxation in Australia propose that individuals to be taxed a fixed amount and an additional an extra charge for every dollar earned beyond a set limit. In this system, an individual earning between $6001 and $37,000 per annum pays 15c for every dollar earned above $6000. This is different for someone earning between $37,001 to $80,000 p.a who pays a fixed amount of $4650 and additional 30c for every dollar earned above $37,000. Those earning between the amounts $80,001 to $180000 pays a set amount of $17550 along with a 37c for every dollar earned over $80,000. Lastly, earnings above $180,000 p.a are taxed a set amount of $54,000 along with 45c for every dollar above $180,000. This unfair taxation discourages capitalistic values and attitudes.
Justification of personal opinion: other major reasons
Firstly, the cost of preparing tax returns and the general administration process is very high. It takes more than one billion dollars from the economy. This is a lot of money which can benefit the earners. In this case, money would be available for other economic developments. Consequently, the nation would experience a stimulus growth in the economy. Secondly, the system of taxation reduces employee morale. Employees from low socioeconomic backgrounds will not work hard; this is because they are sure they will not get gain a lot from their hard work.
Most Powerful Argument for progressive income tax
The Australian government provides a stimulus economic growth through the federal budget expenditures. The Australian government receives about $137,070 million dollars from income taxation. This is a lot of money which is spent in community services, industry development, improving infrastructure, expansion of education sector, transport networks and energy plants. This source of revenue serves to stimulate the national economic growth. The Australian government hold firmly the concept of progressive income taxation, since this is one of the greatest economic contributors.
Argument against progressive income taxation
The government is not the only way to provide for economic stimulus, however, it is important for the government to do such. The economy can be stimulated by earners spending in the local economy. Individuals on receiving a fair share of their earning, they can spend in the local economy. The government can reduce the cost of preparing income tax returns and the general administration of the income tax departments. This money can be used in development projects.
The pie chart below indicates the federal government income. Currently, the Australian government earns about $137,000 billion dollars per year from individual income tax. Using equal taxing rates will hardly change the earnings from individual tax income.
The progressive income taxation is not an effective method for a capitalistic nation. It discourages capitalistic values and attitudes, thus retarding national economic growth. It is disadvantageous for people from different socioeconomic backgrounds. Using equal income taxation rates would be fair for people from different socioeconomic backgrounds. Adopting equal taxation rates would cut down the cost of preparing income tax returns and the administration costs. This is of immediate benefit to the earners and they will have higher incomes for spending in the local economy.