Tax-free Threshold (tax-free + threshold)

Distribution by Scientific Domains


Selected Abstracts


Abolishing the Tax-Free Threshold in Australia: Simulating Alternative Reforms,

FISCAL STUDIES, Issue 2 2009
John Creedy
H24; H31 Abstract This paper examines the role of the tax-free income tax threshold in a complex tax and transfer system consisting of a range of taxes and benefits, each with its own taper rates and thresholds. Considering a tax and benefit system with benefit taper rates whereby some benefits are received by income groups other than those at the bottom of the distribution, it is suggested that a tax-free threshold is not a necessary requirement to achieve redistribution. Four alternative policy changes, each involving the elimination of the tax-free threshold in Australia and designed to achieve approximate revenue neutrality, were examined using the Melbourne Institute Tax and Transfer Simulator. A range of implications were examined, including labour supply responses to tax changes and the effects of policy changes on inequality and social welfare. The results demonstrate that it is possible to eliminate the tax-free threshold under approximate overall revenue and distribution neutrality, but that it is impossible to improve labour supply incentives at the same time. In order to achieve improved incentives, either revenue or distribution neutrality has to be sacrificed. [source]


REFORM OF THE PERSONAL INCOME TAX SYSTEM IN AUSTRALIA

ECONOMIC PAPERS: A JOURNAL OF APPLIED ECONOMICS AND POLICY, Issue 4 2005
Jeff Pope
This paper examines the case for reform of Australia's Personal Income Tax (PIT), argues that it is outdated, and demonstrates a growing consensus for reform. The importance of tax avoidance, particularly the use of trusts, in the Australian PIT system, and arguably its abrogation of modern-day criteria of what constitutes a ,good tax', is emphasised. Three possible ,reform' options are identified: the ,tinkering and tokenism' approach of current Government policy; moderate reform and a proposed ,significant reform option' costing around $22 billion. Essentially this comprises company and top PIT rate equalisation and a doubling of the tax-free threshold. But funding this is problematical. Two key arguments of the paper are that: (real) simplification i.e. lower compliance costs, is an important yet usually down-played objective in reform proposals; savings from reform denying PIT deductions such as work expenses are insufficient to achieve significant PIT reform. An increase in the rate of the Goods and Services Tax (GST) from 10% to 15% (with a compensation package) is therefore advocated in a revenue-neutral analysis ignoring current Government budget surpluses. The overall outcome would be a simplified, more equitable and incentive-driven PIT system that would move Australia closer to the PIT and GST policies of other OECD countries. But the political difficulties of reform mean that the Government's ,tinkering' approach is likely to continue. [source]


Abolishing the Tax-Free Threshold in Australia: Simulating Alternative Reforms,

FISCAL STUDIES, Issue 2 2009
John Creedy
H24; H31 Abstract This paper examines the role of the tax-free income tax threshold in a complex tax and transfer system consisting of a range of taxes and benefits, each with its own taper rates and thresholds. Considering a tax and benefit system with benefit taper rates whereby some benefits are received by income groups other than those at the bottom of the distribution, it is suggested that a tax-free threshold is not a necessary requirement to achieve redistribution. Four alternative policy changes, each involving the elimination of the tax-free threshold in Australia and designed to achieve approximate revenue neutrality, were examined using the Melbourne Institute Tax and Transfer Simulator. A range of implications were examined, including labour supply responses to tax changes and the effects of policy changes on inequality and social welfare. The results demonstrate that it is possible to eliminate the tax-free threshold under approximate overall revenue and distribution neutrality, but that it is impossible to improve labour supply incentives at the same time. In order to achieve improved incentives, either revenue or distribution neutrality has to be sacrificed. [source]


Evaluation of Policy Options to Encourage Welfare to Work

THE AUSTRALIAN ECONOMIC REVIEW, Issue 3 2006
Hielke Buddelmeyer
This article compares five alternative policy options with the January 2006 tax and social security system. Each option is designed to cost a similar amount of approximately $5 billion per year to the government at the observed level of labour supply. The five options include reducing the lowest income tax rate, increasing the tax-free threshold, increasing the low income tax offset, decreasing all taper rates on own and partner's incomes for a number of allowances, and introducing an earned income tax credit. The criteria for comparison are the labour supply responses, the expected budgetary cost to the government after taking into account labour supply responses, the number of winners and losers from the policy change, the effects on the distribution of effective marginal tax rates, and the effects on the number of jobless households. From the results, it is clear that the option to reduce taper rates is dominated by the other options on all criteria. The other four options each have their advantages and disadvantages; no option scores best on all criteria. [source]