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.