The typical Australian is now paying almost half their salary in tax after government spending hit the highest level since World War II, a report says.
The Centre for Independent Studies, a conservative think tank, calculated the average working couple paid up to 45 per cent of their wage to the government during the 2023-24 financial year.
That was based on federal income taxes plus other levies from the GST to state government charges and council rates – and is at its highest rate in decades.
Robert Carling, a senior fellow with the Centre for Independent Studies calculated the tax burden was at least 35 per cent of household income in 2023-24, rising to 45 per cent based on other taxes linked to consumption and property ownership.
This occurred after government spending as a proportion of the economy hit the highest level since World War II during Covid, only to moderate to the highest level in two decades.
‘The highest this measure has ever been in Australia — at least since the Second World War when taxes were very high to finance the war effort,’ he said in a research paper, The Truth About The Tax Burden.
Personal income taxes are the still biggest source of federal government revenue.
But the Centre for Independent Studies argued the latest stage three tax cuts, that kicked in on July 1, would do very little to reduce overall tax revenue in Australia.
The typical Australian is now paying almost half their salary in tax despite the latest income tax relief (pictured is Brisbane’s Queen Street Mall)
During a cost-of-living crisis, Australians are also burdened with local government rates, and state government levies from motor vehicle taxes to stamp duty on property purchases and land tax.
The report noted Australia had at least 125 different taxes, with 10 of them accounting for 90 per cent of government revenue.
‘At the level of the individual, all taxes come out of the one income — whether they go to Canberra or to state governments,’ Mr Carling said.
‘When all taxes are brought into the picture, it can be surprising just how much tax we pay.’
Labor’s revised stage three tax cuts are giving $804 a year extra back to an average, full-time worker earning $100,017 a year.
But Mr Carling argued the relief only represented three per cent of of total tax revenue in Australia at three levels of government.
Total Australian government expenditure, as a proportion of gross domestic product, hit 44 per cent in 2020-21 during the start of the pandemic.
Mr Carling estimated it had since fallen, but only to levels still above 35 per cent of GDP.
The Centre for Independent Studies, a conservative think tank, calculated the average worker was paying 45 per cent of their wage to the government – the highest since World War II (pictured is Treasurer Jim Chalmers)
Tax revenue, as a proportion of GDP, was estimated at 30 per cent in 2023-24.
‘It is fair to say this measure of the tax burden is close to the highest it has ever been in peacetime,’ he said.
This is comparable with 2001, when tax revenue made up the biggest chunk of government revenue since World War II.
Prime Minister Anthony Albanese’s Labor government has delivered successive Budget surpluses, based on company tax revenue from high iron ore prices.
But it has abandoned the former Coalition’s government’s policy of having tax revenue make up no more than 23.9 per cent of GDP.
‘This may be because, in practice, the ratio is impossible for any government to control with any precision,’ Mr Carling said.
‘But the more likely reason is that the new government aspires to spend more freely and does not wish to be constrained by a tax ceiling.’
While government spending as a proportion of the economy, during Covid, was the highest since World War II, government revenue as a proportion of GDP wasn’t because Australia’s governments didn’t raise taxes during the pandemic.
Since the Covid pandemic, Victoria’s Labor government has imposed a series of Covid levies, to raise $8.6billion.
This included a flat $975 property investor tax to pay for Melbourne being the world’s most locked down city.
Mr Carling said the tax burden on Australians would only ease if the federal, state and local levels of government made an effort to cut costs.
‘There will be pressure to increase the tax burden further to record levels unless federal and state governments make a concerted effort to curb the growth of spending and make it more effective in achieving its objectives,’ he said.
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