Some comparisons of the Australian income tax brackets to other nations. From the 2002 taxation statistics, I try to discern where the main burden of taxation is falling. It seems the Australian income tax system is progressive in name, but not reality, with two of the five brackets carrying ninety percent of the Australian federal income tax burden.

Australian Federal Income Tax Brackets

This is for residents in 2005 and does not include the Medicare Levy which is another 1.5%;

  • $0-$6000 : Nil
  • $6,001-$21,600 : 17c for each $1 over $6,000
  • $21,601-$58,000 : $2,652 plus 30c for each $1 over $21,600
  • $58,001-$70,000 : $13,572 plus 42c for each $1 over $58,000
  • Over $70,000 : $18,612 plus 47c for each $1 over $70,000

Non residents pay 29c for every dollar from $0-$21,600. The remaining upper brackets are the same as for residents. This is blatantly unfair and inequitable for non-residents. Many of the Australian Diaspora find partners overseas who return with them when they come back home. Once again the Diaspora finds itself discriminated against by government policies.

I think this table is the one that breaks out the amount of people in different brackets. The table is for 2002. They don't match the tax brackets either, so I have tried to approximate the tax brackets and the information in the table to get comparable sums to the 2005 tax brackets. From that table, the tax brackets approximately netted;

  • $0-$9,824 : ~ $132,000,000
  • $9,824-$20,902 : $2,562,000,000 (sum $2694,000,000)
  • $20,902-$58,614 : $40,298,000,000 (sum $42,992,000,000)
  • $58,614-$67,362 : $ 7,512,000,000 (sum $50,504,000,000)
  • Over $67,362 : $36,265,000,000 (sum $86,769,000,000)

That is a very heterogeneous outcome. Two tax brackets are doing the lion share of funding government.

This suggests that the progressive tax system isn't as equitable in sharing the burden as it is presumed to be.

US Federal Income Tax Brackets

This is the American federal tax income brackets for 2004. These are for a single unmarried person. This is in USD, so add about twenty-two percent more at the current exchange rates to convert it to AUD;

  • $0 to $7,150 : 10c in the dollar
  • $7,151 to $29,050 : 15c in the dollar
  • $29,051 to $70,350 : 25c in the dollar
  • $70,351 to $146,750 : 28c in the dollar
  • $146,751 to $319,100 : 33c in the dollar
  • $319,101 and above : 35c in the dollar

The US Federal government does not leverage any consumption taxes, such as a GST. Many US states have sales taxes while others have no income tax.

British Income Tax Brackets

The British tax brackets for 2005 are in pounds. A pound is about 2.4 Australian dollars.

  • 0 to 4,745 ($11,678 AUD) : Nil
  • 4,745 - 6,765 ($16,650 AUD) : 10p in the pound
  • 6,765 - 36,145 ($88,961 AUD) : 22p in the pound
  • over 36,145 : 40p in the pound

The British tax brackets have a very large and wide bracket which has a 22% tax rate.

Indonesian Income Tax Brackets

The only information I could find on Indonesia's tax rate was for 2001, and from a US embassy .

  • 0 to 25 million IPD ($3,330 AUD) : 5%
  • 25 million to 50 million IPD ($6,660 AUD) : 10%
  • 50 million to 100 million IPD ($13,322 AUD): 15%
  • 100 million to 200 million IPD ($26,644 AUD) : 25%
  • over 200 million IPD : 35%

I could not find information on tax brackets for Japan, Germany, Sweden and South Korea. In 2002, China had nine tax brackets with tax rates progressing from 5% to 45%. It appears common for nations to have a mix of income tax and consumption taxes. The goods and services tax is usually between 10% and 15%.

cam
More reading: Tags, Tax, Bracket Creep
Cam Riley: South Sea Republic. Freedom, liberty, equity and an Australian Republic.

Comments
  • avocadia . # .
    More info...: Does the US system work the same way as Australia\'s; meaning at each step do you pay $x + y cents in the dollar? Or is it just a straight up and down percentage of your income?
  • cam . # .
    Same As Australia: The tax percentage is only leveraged on the tax bracket itself.

    cam
  • cam . # .
    Graph of income for 2002: Here . Unfortunately the data from the tax office was imprecise above 87,000. No way to determine how the income is spread above that point.

    It appears that the middle 30% tax bracket is designed to catch the largest part of the bell curve. That and the 47% one both look like bracket creep to me.

    cam
  • I seem to have missed something:
    This suggests that the progressive tax system isn\'t as equitable in sharing the burden as it is presumed to be.

    I don\'t get this. I thought a progressive tax system is one that taxes people who earn more more. The system seems to be doing precisely that.
  • cam . # .
    Looks like Bracket Creep to me: I think those at the bottom end of the 20K-58K bracket are being overtaxed, as are those at the bottom end of the 70K+. Even though it looks like a five bracket system, judged from where the money comes from, it is really a two bracket system.

    It also makes the back benchers, raising a raucus to have the highest tax bracket dropped to the same as corporate tax (35% IIRC), look silly. I think it is more important to even out the brackets a bit and give some tax relief to those earning between 20K and 30K.

    cam
  • cheesy10 . # .
    re: more info: Yes, it works the same in that way.
    Otherwise, someone who earned $29,051 would run into a situation where they would end up with quite a bit less money in net income after taxes than someone who earned $29,050.

    In this case, the person earning $29,050 would pay $4357.50 in taxes, leaving him with $24,692.50.
    However, the person earning just one dollar more would pay $7262.75, leaving him with only $21,788.25.
    That extra dollar in income would cost him $2,904.25!

    However, because it\'s taxed in brackets, the person earning $29,050 actually ends up with $25,050 ($4,000 in taxes) and the person earning $29,051 ends up with $25050.72 ($4,000.28 in taxes).
  • avocadia . # .
    I\'d be interested to see:

    I\'d be interested to see the same sort of chart, contribution by bracket, for the US and UK. When you chart out the number of people in the (approximate) brackets, it isn\'t all that surprising that the middle bracket contributes the most; 60% of tax payers are in that income range and earn 54% of taxable income. 10% of taxpayers are in the highest range, yet have 29% of taxable income, which kind of  explains why their contribution is so high.

    Anyway, what I got most out of this was that I am against a flat tax like you suggested a couple of posts ago. I don\'t like the way the workers between $6000-$9824 would be paying 635% more than they do already; doing that will only mean more incentive to stay on welfare payments.

    That verged on strawman, didn\'t it? Getting back to the point here, and I am so not a student of taxation, is to increase the threshold for the top two brackets out by 10K-15K each. The notion that someone on $60K (coincidently, what I earn) is a wealthy spiv is reasonably laughable. If I discounted credit debt and HECS debt, I still wouldn\'t be able to afford a mortgage, even in Campbelltown where I live. It doesn\'t matter where you stand on the notion of the Great Australian Dream of home ownership, if you can\'t afford a house you are not wealthy.

    I\'m happy to pay a greater percentage than, say, your average call centre worker (coincidently, the majority of my co-workers); but what I am on is not wealthy.
  • cam . # .
    Increase in Cost of Living:

    ... means bracket creep is worse in chewing up people\'s wealth and economic liberty. There definately has to be a reduction of the tax burden on pretty much everyone. Howard\'s method is to increase taxes through nefarious means and then give it back in the way he wants as middle-class welfare. Usually as electoral bribes that fit his mythologized perception of Australia\'s golden path. [shh mr strawman]

    There is going to have to be tax relief, and the folks that are taking it hardest are those in the lower levels of the two brackets that pay 90% of the tax. It is an inequitable system at the moment that is designed to make people dependant on the government.

    I think I will email the tax department and try and get a breakdown of the incomes above 87,000. A better idea of how the higher incomes stretch out is needed. Like you said, $67,000 is not wealthy. The escalating cost of living and home ownership means aussie battlers occupy all brackets in the current tax system.

    Their is a bill floating around Congress where they want to change the system entirely to a consumption tax. The poor who will get hit disproportionately by that, will get \"rebates\" back from the government. Those rebates will come with strings attached. Bad idea. With the current US style of conservatism the rebates will probably be provided as long as the working poor go to church, have babies and dont drive cadillacs.

    I dont like that idea.

    cam
  • cam . # .
    US Income tax 2000: This is the best data I could find for the US federal income tax system. It doesnt quite fit the tax brackets either. But it does at first glance appear better apportioned than the Australian system.

    The blue is income, the maroon is the amount of money taxed (ie 10%, 15%, 25% etc).

    cam
  • avocadia . # .
    It\'d be a right bastard to implement: …but it\'d be nice to have a lot of tax brackets each with a 1 percentile point increment from the last. Dibs on not being the one to try and codify it though.
  • cam . # .
    Part of the argument behind a flat tax: .. is simplicity. Since Au has a two bracket system in reality, it might be easier to formalise it and have 0% tax under 25,000 AUD, and 15% above that. We have consumption and capital gains taxes already, so the wealthier will get caught in that net anyway.

    Whether income tax or consumption tax, the government is still outsourcing their tax collection. Which is not cool. Business is bearing the burden of collecting it.

    cam
  • cam . # .
    Where-abouts in the states?: I am currently working in the Washington DC area.

    cam
  • avocadia . # .
    I was creeping my way towards...:

    …suggesting the only way a flat tax could be equitable would be to do it as a negative income tax, and then someone, Ross Garnaut, goes and says it for me.

    I don\'t quite know yet. The second of my qualms about a flat tax is that the Government would end up wasting a heap of money in administration for more welfare making sure the bottom end of the income scale isn\'t clobbered  - the first being that they would be clobbered. I imagine there must be a fair amount of administration overhead in hading out $x to every adult citizen, working or otherwise. There is a few more Medicare cards than there are people living in Australia, fr\'instance.
  • cam . # .
    Negative Income Tax: I dont like that idea, as the government takes the money and then gives it back. A Republican fellow in Congress is trying to get a flat tax consumption through, it has rebates for the less well off. As soon as government hands out money it comes with strings attached. It is better if they dont take the money in the first place.

    cam