Reforming the tax scales

[Jovial Monk]

http://larvatusprodeo.net/2009/03/09/gu ... #more-8031

Top income earners being given $11,000 a year handouts

[freediver]

I'd like to see the tax brackets simplified. Instead of a number of steps, it should be a simple ramp function. For example, it could be 0% tax below $20000 income, then increase linearly from a marginal rate of 10% at $20000 to a marginal rate of 45% at $60000, then a fixed marginal rate of 45% above $60000. That way, there would be only four numbers for the politicians to adjust - 20000, 60000, 10 and 45. Any adjustment would automatically spread evenly over the majority of taxpayers. It would be far simpler to monitor bracket creep. For example, you could set the 60000 to adjust automatically with the top tenth percentile and the 20000 to adjust automatically with the bottom 20th percentile of wage earners.

[Jovial Monk]

But govt needs bracket creep and the creep Costello's overgenerous tax scales do not allow much bracket creep. Without bracket creep might be hard to repay deficits/debts.

[Rainbow Moonlight]

I don't think i agree with the article you linked this time JM. I tend to think that the tax break on super contributions is a good thing- helps build up our savings.

[Jovial Monk]

yes but that tax break should be spread more evenly. do those on $1m+ incomes need an $11000 subsidy each year?

[Rainbow Moonlight]

But the idea is they are going to be able to be totally self supporting in retirement - that saves the government money. Maybe there could be a limit set to deal with the problem you see.

[freediver]

Someone earning $1m per year is not going to be on welfare when they retire. Even if they were, it would be cheaper to not give them the tax break and use the money to pay for their welfare instead.

In fact, someone making that much money would probably do the community far more favours by maintaining direct control over their investment portfolio.

[Jovial Monk]

But they still collect that $11,000 subsidy--upper class welfare!

[mantra.]

But the idea is they are going to be able to be totally self supporting in retirement - that saves the government money. Maybe there could be a limit set to deal with the problem you see.

Well it seems that the IMF - a subsidiary of our world order believes Rudd is being far too generous with pensioners and self funded retirees. I don't know where you got the information you referred to earlier Rainbow stating the IMF approved of Rudd's stimulus package - but the IMF have warned that we're going to be hit particularly hard - especially in the areas of superannuation and has urged Rudd to use caution and make some serious economic reform. Our hospitals, assets, pensions, super and retirement age are going to have to be reviewed to enable a sustainable economy according to our World Shadow government.

THE Rudd Government should immediately consider lifting the retirement age and cutting healthcare entitlements to combat rising welfare costs because of the global financial crisis, the International Monetary Fund has warned.

In a staff paper prepared for the fund's executive board, the IMF warns of a blowout in Australian pension costs from the collapse of superannuation savings.

The warning comes amid new fears that global credit markets are seizing up and follows a World Bank forecast that 46 million people will be pushed into poverty this year as developing countries are hit by the collapse of world trade and investment.

The World Bank said the crisis would hit East Asia the hardest, which would hamper Australia's efforts to recover quickly from the global downturn.

The IMF warning on pension costs is not restricted to Australia but its research shows Australian retirees are the most heavily exposed to the financial crisis of any country.

Concern about a blowout in pension costs comes as the Rudd Government grapples with an uncertain financial outlook only eight weeks out from the May budget in which it had planned to make Australia's pension scheme even more generous. Its response to the Harmer review of pensions is expected to include an increase in payments. Among the reforms, the Government is expected to raise the single pension to two-thirds of the couples pension, which is also expected to be increased.

The IMF paper says there is an urgent need for governments to find savings as the financial crisis pushes their budgets deeper into deficit. It says there is a risk that financial markets could lose confidence in governments' ability to repay their debts, leading to serious consequences for global growth. "Confidence in governments' solvency has been a source of stability and has, so far, helped to avoid a complete meltdown of financial markets," the paper says.

The IMF highlights winding back entitlements to pensions, government benefits and publicly funded healthcare as the key areas for major savings.

"Arguably the largest fiscal risk is that governments may be forced to step in to support participants covered by private pension plans severely hit by the crisis," the fund says.

It says this is particularly the case for nations, such as Australia, where superannuation is based on "defined contribution" savings, with no guarantees on the final payments.

The IMF data shows Australian superannuation funds have about 80 per cent of their assets allocated to equities and mutual funds. Most countries have less than 10 per cent of their pension savings invested in shares and mutual funds.

The IMF calls on governments not to lose the stomach for reform of entitlements because of the financial crisis. "Enacting major reforms ... at times of severe economic weakening is likely to be challenging," the IMF concedes. "It may also be that the crisis environment offers some countries an opportunity for a 'big bang' approach, where a strong package of immediate stimulus to support the economy would provide the quid pro quo for the introduction of long-lasting reforms in entitlements and other areas.

"Times of crisis have in the past provided opportunities for enacting politically difficult reforms."

The fund says an immediate step should be to raise the retirement age. This would not have any adverse effects on levels of consumption.

"In the area of healthcare, most countries will need to limit the types of services covered under public systems to ensure solvency," the IMF says.

"Consideration could be given to reducing entitlements in a gradual way so that any adverse economic reaction would be spread out over time."

The IMF says the financial crisis is compounding the budgetary problems caused by the ageing of the population. Although countries have long known of the need to commit to clear strategies for health and pension reform, "the weaker state of public finances has dramatically raised the cost of inaction".

The IMF said budgets were under conflicting pressures:


* The risk of prolonged depression and stagnation, and

* The risk of a loss of confidence in government solvency.


The threat of depression meant governments were taking extreme steps, such as guaranteeing bank liabilities and launching stimulus packages, despite the effect it may have on solvency.

It says countries have to monitor the financial market treatment of their government bonds, assessing interest rates, spreads and debt maturity.

"The more these indicators weaken, the less would be the room for further fiscal action," the paper says.

The IMF indicates that Australia still has plenty of room for government borrowing, noting that if debt blew out to 10 per cent of GDP (about five times the Government's forecast), it would require the budget balance to improve by only 0.1 per cent of GDP (about $1 billion) to stabilise the debt ratio.

The World Bank yesterday forecast that the crisis would push 46 million people into poverty this year as developing countries were hit by the collapse of world trade and investment. It said world trade was facing its biggest fall since the Great Depression, tipping a downward revision in the IMF's latest forecast that advanced country imports would decline by 3.1 per cent this year.

The World Bank said the garment industry had laid off 30,000 workers, or 10 per cent of its workforce, in Cambodia. In India, more than 500,000 jobs had been lost in the past three months in export sectors such as jewellery, cars and textiles.

[Jovial Monk]

What garbage! That article I referred to said Asian countries will not have a bar of the IMF incompetents. Let's cut spending, let us hit our pensioners already doing it tough so even less will be spent! Weeeee!

The sooner the IMF is reformed and the neocons/neofiberals sacked the better the world will be: Keating is right, the G20 is who should control the IMF.