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There are 3 main types of taxes in Australia: progressive, proportional and regressive.Progressive taxes: The higher the income, the higher the percentage of tax paid. Income tax for individuals in Australia is a progressive tax. Progressive income tax helps to alleviate poverty by taking a larger proportion (percentage) of income from the rich than from those on low incomes. The money raised in this way potentially becomes available to pay for…

Prepare a briefing advising Treasury of the costs and benefits of one welfare reform. You have been appointed as an advisor to Treasury. The government is considering welfare reform as an aggregate supply policy. It is seeking to initiate welfare reforms that grow Australia’s productive capacity but is aware of the delicate balance between this goal and promoting equity in the distribution of income. Write a briefing paper to the Treasurer…

Average rate of taxIt is difficult to know if taxation is proportional, regressive or progressive without calculating the average rate of tax (ART). The following shows the relationship between tax models and the ART:Progressive – ART is higher for higher income earnersProportional – ART is constant regardless of incomeRegressive – ART is lower for higher income earnersThe ART is calculated as total tax paid divided by income.Average rate of tax…

In Australia, the government uses budgetary measures such as the tax-transfer system to reduce inequality in the distribution of income. The government intervenes in the economy to reduce inequality by imposing higher taxes on wealthiest groups and redistributing income to lower socio-economic groups. Two main mechanisms are used to achieve this: The progressive system of income tax Social welfare payments The progressive system of income tax…

Table 1: Changes to the personal income tax-free threshold 2012–20 2011–15 Tax rate 2016–17  Tax rate 2019–20 Tax rate 0 –$6,000 0% 0–$18,200 0% 0–$18,200 0% $6,001–$37,000 15% $18,201–$37,000 19% $18,201–$37,000 19…

How to explain supply-side policies with the example of welfare reform. The increase in Australia’s productive capacity shifts the whole aggregate supply line out and to the right of the original line (the move from AS1 to AS2). Supply-side measures will boost the sustainable level of national production (the shift from GDP1 to GDP2) that can be achieved while enjoying lower prices or cost inflation (the shift from P1 to P2). This offers…

Use the data on the Redistribution of income – Data sheet to complete the following. Discuss the main forms of government policies used to reduce inequality in the distribution of income. Refer to all tables in the data sheet in your answer. Explain how changes to the progressive tax rates since 2011 have impacted on income inequality in Australia. Use statistics to justify your response. Using the data in table 5 to construct a graph…

On 27 July 2015, the then Federal Treasurer Joe Hockey claimed in an interview on ABC RN Breakfast that: ’50% of all income tax in Australia is paid by 10% of the working population’. The table below shows the amount of tax paid by each decile in 2014–15. Set up a spreadsheet to calculate the percentage of total income tax revenue paid by each decile. Was Joe Hockey’s assertion correct? Discuss how statistics can be used to test assertions in…