February 12, 1997
Issue
How to plug the real black holes
By Dick Nichols
The following measures, which would fall most on those most able to bear them, would readily rake in funds needed to fund public health care, education and other welfare spending:
- Lifting the personal tax rate on higher incomes to 60%. If, in 1993-94, a 60% threshold had cut in at $50,000, it would have adversely affected 632,330 or 8.3% of taxpayers, but raised an extra $13.92 billion. If the 60% threshold had cut in at $80,000, it would have affected 144,256 or 1.9% of taxpayers, and yielded an extra $5.26 billion.
F41559S>lRemoving dividend imputation. Dividend imputation (which makes dividend income tax-free if the company which paid the dividend has paid income tax) was introduced by treasurer Paul Keating in 1985.
Imputation credits to individuals cost $8 billion in just four years. As Keating told a Labor audience in 1993: "We gave the private sector $30 billion and they sprayed it around like a garden hose".
- Restoring the corporate tax rate to 46% (now 36%). In 1993-94, Australia's 459,797 companies earned a total income of $779.822 billion, yielding a taxable income of $68.177 billion. On this taxable income, net tax of only $14.252 billion was paid, a rate of 20.9%. An increase in the effective tax rate to 25% would have yielded $2.79 billion: an increase to 30%, $6.2 billion.