A Fair Tax and Transfer System - Term Paper Example

 Analysis The primary goal for the tax review is to provide a fair tax and transfer system for everyone. That has taken a full study and looking very closely at how the economic part of the government has been run in the past. Through a long a grueling study of all of the needs of the populations in Australia and trying to determine the best way to show fairness to all of those populations through all of the tax and transfer processes, these proposals were developed. There is controversy though as billions of dollars will come from the mining industry that will be used to cut corporate tax making Australia more competitive and providing tax concessions for small companies to come to Australia. Included in the revamping will be pension fund and savings. There is good and there is bad in the proposals and of course hte mining industry is fighting the whole thing. With that in mind, this paper will look at three of the proposals and compare them to the design principles that are to include fairness. The principles that will be used here are simplicity, equity of fairness, and efficiency. Superannuation The simplicity of this program is excellent. It is clear and easy to understand both for those that are young and just beginning to plan their retirement and those that have been saving for awhile. The catch up issue for older Australians may be a little more difficult than the rest as even though it does give a good opportunity for catch up, understanding how they might do that is difficult. They may need some advice on the best way to manage that in such a way that it is to their advantage then and now. At the same time, it seems very equitable. It would have been very easy to change the rule now and not go back and help those approaching retirement. That would have caused a very unequitable situation for the elderly Australian's now. For example the new guarantee has been extended to workers aged 70 to 75 so they can be on an equal footing with the younger workers (futuretax.gov). It also allows for changes to key amounts when there have been breaks in working throughout a career. Efficiency by the definition given appears to be well distributed. The funds that are put away from this process will go to build infrastructure and increase jobs for the young who will continue to work toward funding the process. This seems to be a very effective and quite efficient way of doing this. However, it works very much like the social security system in the United States (sociealsecurity.gov) which over the years has become a disaster and that may warn that this needs to be watched closely. In the U.S. social security monies were paid in for retirement and used for other things and now with a large retirement about to happen, there is no money. There is also going to be a smaller group of people to fund it over the next few years so there is every possibility that the system will collapse and many will be left without any retirement. Cutting the Company Tax This proposal is intended to use funds from the mining industry to reduce the overall tax that companies in Australia are presently paying. By doing this, it is meant to make Australia more competitive and increase jobs in this country. The plan is easy to understand and is written in such a way that we can all understand it. Attracting industry to Australia is important in keeping the economy healthy. This move will also make the Australian dollar stronger which in the world economy today is very important. This is definitively a proposal that is fair to everyone. In fact it affects everyone in the country in one way of another. The mining industry which is doing very well now will contribute funding to the treasury which allows them to reduce taxes on industry in general which then encourages more industry to come here. That industry, of course, increases jobs which then increases the tax base again. It will move Australia from 22nd to 17th among other countries of the same size and that is very important (furturetax.gov). The efficiency of this program goes right along with this in the sense that it redistributes revenue as well as allowing for equality in both tax and transfer of funds. The increased numbers of jobs will improve the economy and the lives of many while again increasing the treasury. This should be self-sustaining for quite some time as increasing funds create increasing jobs which then again increase funds. This cycle brings many things to the Australian public including better healthcare and infrastructure. The overall improvement here from one proposal is enormous. Helping Australians Save Savings are very important in everyone’s lives as it serves in an emergency, boosts overall numbers of dollars in savings, and helps people plan for their future. It was important to have a proposal that improved the outlook of many Australian families including the future which includes their savings plans. This proposal will work by giving Australian families a 50% discount on interest in the savings up to $1,000. This includes interest on any of the savings types including annuities (futuretax.gov). This has never been done before as far as this writer could see in the economic history. This one proposal will encourage many Australian's to begin to save money for both themselves and their children's future. The proposal meets the simplicity model as stated. It is easy to understand and definitely easy to comply with. The entitlement is well documented and understood and their obligations are easily understood. There might be some difficulty in understanding the capital gains part but not enough to affect the use of the program. This should easily make the plan transparent enough to encourage use which is what the government is trying to accomplish. This last two years, all over the world has shown us all how important savings are and the Australian public must be protected. This proposal goes a long way toward doing that. This should help, according to the government approximately 5.7 million people all of which make less than $80,000 per year. As far as efficiency is considered, by definition, there is some wealth redistributed such as the reduced taxes on interest and more people are keeping their money longer. There are very few administrative fees involved and the fact that there is more money in the banks allows for more money to be used to fund housing and make loans which again will generate interest for the person saving and for the bank. Equity does exist as tax and transfer is treated the same in each group of the population. For example, clearly those people above $80,000 in income will not have a reduction in tax rate on their savings but this allows for equalization for those who make less. Though those people who make more money can still put more in savings, less will be paid out in taxes for those that make less, increasing their savings also. This allows the tax burden to be shared more equally among the populations. This program will reduce the amount of interest that is being paid out by those that have a low income and are trying to save quite a bit of money. The examples that are shown, show about 50% savings in the amount of taxes paid out on interest. In conclusion all of these proposals are quite simple to understand. The only one that might need someone to advise is when talking about capital gains taxes. They are all quite efficient though the savings plan is the least efficient. Though it does generate some funding for Australia to use to improve the overall economy, it is very little. What it does do though is allow the little guy to keep some of the savings interest that he has had to pay out in taxes. This allows for a stronger Australia through her citizens. All three of the proposals are fair and well distributed. All of Australia’s citizens are treated the same and the only adjustments that are made are toward populations and are done in a fair way. Certainly, the overall effort is a good one, however, the rest of the world waits to see if the mining industry will win out with its battle to stop the loss of its profit margin. Resources Australia's Stocks drop as tax proposal threatens mining profits available at www.businessweek.com/news/2010/05-03/australian http://www.futuretax.gov.au/pages/FairerSuperannuation.aspx http://www.socialsecurity.gov http://taxreview.treasury.gov.au/content/FinalReport.aspx?doc=html/publications/papers/ Fin http://www.futuretax.gov.au/pages/CuttingTheCompany/TaxRate.aspx http://www.futuretax.gov.au/pages/HelopingAustraliansSave.aspx Read More