Henry Innis explains the inequities of the NSW State Payroll Tax system.
Without a doubt, payroll tax is one of the dumbest taxes I have ever seen. Here in New South Wales it is set at a rate of 5.45% of wages that are over a certain monthly threshold (depending on the number of days). The threshold varies from $52,855 (28 days) to $58,518 (31 days), with variations on wages paid interstate, wages paid for part of a year, and so on and so forth.
The question is, however, why do we even have payroll tax in the first place?
If you think about it, payroll tax in the form described above is little more than a tax on employment. To tax employers a percentage of what they pay out sounds more like a disincentive for companies to employ, if anything.
Take a company with over 20 employees that exceed the threshold. Given that they will have to pay 5.45% of their wage value as tax, they functionally are paying out for 21 employees. That isn’t to mention high levels of corporate tax rates, income tax, the Goods and Services tax, the Carbon Tax and the myriad more hidden ones that don’t immediately come to mind.
Of course, one of the main arguments for supporting the tax is too raise revenue, particularly for often-vulnerable State Governments (when it comes to revenue, Australia is anything but a nation of federalists). But the solution should never be to create more taxes and to draw more money out of the economy where possible.
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