Magazine of Socialist Action in Australia

Marginal Tax Rate: Howard slugs low income earners

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The marginal tax rate for low income earners is trapping millions of people (mainly women) at home or into cash-in-hand casual work. The marginal tax rate is the real economic effect on people when they get a job or earn more income?they lose much of their government assistance for child care, their health care card, family tax benefit and more.

This eats into the extra money they are earning from their new job or extra hours, in many cases making it not financially worth while entering into paid employment and thereby committing them to poverty.
A secret Federal Cabinet document leaked to the media in January shows that low income earners face a marginal tax rate of over 60%?compared to the 47% tax paid (sometimes!) by the highest income earners.
120,000 families are subject to this marginal tax rate, one fifth of all Australian families.
This fact of life is a major barrier to unemployed or underemployed people (most frequently the young and women) entering or returning to the workforce. No wonder so many people feel they have no option but to accept cash-in-hand second rate casual jobs to pay their bills.
The Howard Government claims to be a low taxing Government – that is true for the super rich and for big business.
For the rest of us it?s the GST and a punitive marginal tax rate.