Reform tax on poor, Catholic welfare chief says

The government's tax inquiry provides an opportunity to examine the inequities and disincentives in Australia's tax system, Catholic Welfare Australia's Executive Director, Frank Quinlan said.

Releasing Catholic Welfare's letter to the Treasurer Peter Costello's inquiry, Mr Quinlan said there is scope for the inquiry to lead to small, but significant changes ahead of this year's budget.

"People moving from Government benefits into the workforce are hit with obscene effective marginal tax rates," he said.

"Under the new Welfare to Work legislation single parents and people with a disability who combine part-time work with benefits face effective marginal tax rates of up to 73 cents in the dollar.

"Effective marginal tax rates for people on Newstart were slightly reduced but, at up to 75 cents in the dollar, are still significantly higher than the top marginal tax rate of 47 cents.

"The high marginal tax rates for these people undermine the principle aim of the legislation, which is to increase participation in the paid workforce. The inquiry should investigate ways to reduce effective marginal tax rates and increase household incomes for low income earners moving from welfare to work," Mr Quinlan said.

"The 30 per cent marginal tax rate kicks in before tax payers reach the minimum wage.

"The inquiry should also investigate taxes on savings, such as superannuation contributions, and the inequity that exists between high and low income households.

"In the six years to July 2006, the tax paid by someone on the minimum wage will have increased from 12 per cent to 13.27 per cent but over the same period, the tax paid by someone earning five times that amount will have fallen by 2.79 per cent," Mr Quinlan said.

Catholic Welfare's letter to the Treasurer coincided with new research released yesterday which shows that the richest one percent of the population has almost doubled its share of national wealth since 1980.

The tax inquiry, headed by businessman Dick Warburton and Australian Chamber of Commerce and Industry chief Peter Hendy, will study how Australia's tax system compares with those of other countries.

Australia's poor are our most highly taxed (Catholic Welfare Australia 15/3/06)

LINKS (not necessarily endorsed by Church Resources)
Catholic Welfare Australia

Catholic Welfare: poverty report a lost opportunity (CathNews 10/3/06)

Poverty report 'naive and faulty' (The Age 16/3/06)

16 Mar 2006