The recent Queensland budget audit showed an expected 2012-13 operating deficit of $4.9 billion (up from $4.2 billion), and proposed a range of tax increases and soft spending restraint over several years, with serious structural reform only briefly hinted at in a few sentences on page 203. We can do better.
This document shows how we can immediately return to surplus, fundamentally reform hospitals & schools, cut taxes in half, and slash regulation to get the economy booming.
The below reforms are a clear break from “business as usual” and would require brave political leadership. The spending cuts will be unpopular, especially from those people who previously received the “free” money.
However, while these reforms introduce some short-term pain, the long-term benefits are clear and significant. A more competitive hospital and school system will lead to better quality health and education. Dramatically lower taxes and fewer regulations will spur new investments and productivity growth – leading to more jobs and higher wages. And importantly, these reforms ensure the budget position is sustainable so that we do not leave a legacy of debt and deficits for future generations.
Payroll tax (like many other taxes) leads to fewer jobs, lower take-home pay, higher consumer prices and lower returns for investors. As I have previously argued, we should be striving to cut (and some day abolish) payroll tax.
In Queensland the government defends itself by saying that we have the lowest payroll tax rate of any state, at only 4.75%. But that isn’t quite right.
Queensland is the only state that charges a variable payroll tax, with medium-sized firms actually paying 5.94% marginal payroll tax, while only the larger firms (with labour costs above $5 million per year) pay the reported 4.75%.
This means that for medium-sized firms, Queensland’s payroll tax rate is actually higher than every other state except Tasmania.
Governments of all persuasion often claim that they support a strong private business sector, while at the same time burdening business with a range of taxes, regulations and obstacles. One such tax that has been a consistent thorn in the side of the private sector is the state payroll tax.
Payroll tax is paid by businesses based on the amount that they pay their staff. It is literally a tax on jobs.
In many ways, the payroll tax is similar to the income tax. Both drive up the cost of employing people. Both are paid by employers, based on wage payments. Both result in lower take-home pay for workers, higher prices for consumers, and lower profits for investors. The main difference is that while the Commonwealth income tax applies to everybody, the state payroll tax only applies to people working in a medium or large business.