The Battle Of Tax And Social Division

The discourse surrounding taxes is indeed a sensitive matter and tends to take on a political hue. Politicians deftly maneuver to sway votes in their favor, often leveraging mechanisms such as tax reforms. And more recently the revised stage 3 tax cuts.

The aversion to taxation is a sentiment widely shared. It becomes even more palpable when the wealthier echelons benefit from reduced tax burdens. The previous proposed stage 3 tax cuts exemplify this, directing more money into the pockets of the upper income brackets. For instance, an individual earning $190,000 could expect a tax return of $9100.

In the Australian context, the prevailing conversation rarely centers on paying too little tax; instead, it predominantly echoes concerns of paying too much. Some individuals express discontent by attributing tax funds to what they label as “dole bludgers.”

In the broader economic discourse, discussions on inflation often intertwine with considerations of unemployment. Recently, in efforts to curb inflation, the Reserve Bank has indicated a preference for an increase in unemployment. The irony of this juxtaposition is hard to ignore.

In summary, the consensus remains: the prospect of paying taxes is universally unpopular. Nonetheless, in a well-functioning democratic nation, the inevitability of taxes is acknowledged, contingent upon judicious government spending.

Our current reality is one where wealth disparity is starkly evident. Inflation has reached unprecedented levels, leading to financial strain for many. However, those holding assets such as stocks or property witness their values ascend. Notably, the ASX has recently achieved an all-time high.

In the midst of this, the pertinent question arises: given that taxes are a collective obligation, how can we maximize the utility of our after-tax income?

Giving Tax Back To Lower Income-Earners

The proposed stage 3 tax cut unmistakably favored Australians in the higher income brackets, particularly those with earnings exceeding $125,000.

Conversely, low-income earners found no reprieve in the stage 3 tax cuts, as they remained unaltered. The inception of these cuts can be traced back to the Morrison government. However, under the leadership of the Albanese government, there is a concerted effort to revise them.

This revision primarily involves redistributing wealth from high-income earners to their lower-income counterparts.

Examining this through the lens of inflation, the modified tax cuts are poised to potentially boost consumer spending. While I am supportive of empowering lower-income earners with additional funds, it’s essential to recognize the necessity for this financial support.

Nonetheless, it introduces an extra economic stimulus that would otherwise be absent. Given recent indications of a decline in inflation, the ramifications of this fiscal strategy remain uncertain.

Conversely, the general sentiment is unfavorable towards the affluent receiving more financial benefits. Considering that the lower and middle-income brackets constitute the majority of the population, one might question whether the modified stage 3 tax cut was implemented to garner broader public appeal.

To be among the top 10% of earners in Australia, one needs to surpass the $120,000 threshold. Pondering this, it becomes evident that attaining a position in the top 10% is not an arduous feat. Implying that the majority of individuals fall below this income level.

Logically contemplating this, the top earners are unlikely to be in dire need of the extra income. Unless they find themselves heavily burdened by debt, a narrative that merits a separate discussion.

These high earners are improbable to significantly increase their consumption of everyday essentials like bread or milk, making it less likely that the additional funds they receive would contribute to stimulating inflation.

How changes to stage-three tax cuts will affect you

Below, you will find a table detailing the impact of the revised stage cut on your finances.

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