Taxes on Labour
A tax on labour is any government charge on the producers of labour (i.e., workers) or on the consumers of labour (i.e., employers).
The effect of such a charge is to increase the effective cost of labour and/or reduce the desire to supply labour. Most commonly in Australia, taxes on labour are included in the income taxes of workers by the Federal government and in payroll taxes on employers by the State governments.
Income taxes are relatively broad-based and progressive. This means that they fall most onerously at higher levels but also it means that the net economic loss at these higher levels is more significant as the burden falls on a smaller number of people.
|
"The hardest thing in the world to understand is income tax." Albert Einstein |
Both income taxes on labour and transaction taxes on employment are direct taxes which attracts significant political criticism. The high average rate of income tax is also a significant target of criticism. Finally, there is significant administrative costs to both employers and employees alike in calculating income taxes due to the differing levels of the tax and with the various deductions and exemptions.
Despite being an effective tax on employment, payroll taxes are considered to have a low compliance cost and do not attract significant criticism as they only are applied to large employers. Although they are directly applied to employers, to employees (and especially the unemployed) they take the guise of an indirect tax on their labour.
Australia's income tax rate is according to the following schedule:
zero for incomes less than $6 000,
15% for the margin between $6 001 and $25 000,
30% for the margin between $25 001 and $75 000,
40% for the margin between $75 001 and $150 000, and
45% for all marginal income at $150 001 and higher.
The Medicare levy also applies at certain thresholds.
