Fiscal drag is part of the Government's fiscal strategy
Keith Ng has done a good post on the budget, analysing the Governments tax cuts. Go and read it. In short, if you`re earning more than $47,000, you've just had a pledge that your overpayment - or is that an interest free force d loan to the Government - is to be repaid back to you but over three years. This, in an attempt to win your vote this year. Here's the cheat sheet:
* Fiscal drag is the increase in the average tax rate (*not* the amount of tax paid) caused by the tax system failing to keep up with wage increases.
* Fiscal drag is not a right-wing conspiracy. It is real. It is significant. It's a part of the Government's fiscal strategy.
* Fiscal drag means people pay a greater proportion of their income in tax. That does not mean that people are worse off, since income is rising, too.
* Labour's tax cuts will negate the fiscal drag of the last eight years for everyone earning over $47,000 per year (22% of tax payers). For those earning under $47,000 (71% of tax payers), it will be greater than the amount lost to fiscal drag.
It is noted that WFF payment is not included in this analysis. If you're earning a more than $47,000, you've just paid for your tax cut. Congratulations, you don't really get a tax cut at all.
Labels: Budget 08