This week the Budget has been the big news story although most of the media circus has focused on gossip, not facts.
What is good about this budget is the taxes were not increased and for small business tax decreased.
This week I want focus on tax and small business and what this means for our economic future.
What is clear this week is that Government realizes that increasing taxes will not drive our economy. People drive the economy and like it or not Small Business if the major driver of our economy.
Let's look at some facts:
1. When you include all of the taxes Australian pay including the tax on superannuation, then on average we pay 33% of our wage in tax. This is close to the highest average tax rate worldwide.
2. Of our taxpaying population, 76% of taxpayer’s pay 33% of all income tax collected while 24% of taxpayers pay 67% of all income tax collected.
However, the top 3% of taxpayer’s pay 28% of all income tax collected.
3. 96% of business in Australia is small business employing around 4.5 million people or 44% of taxpayers.
Take the time to digest these figures. Contemplate what an increased tax on high-income earners would mean for Australia. And what small business means to the recovery of our economy. You clearly start to see why this budget is the right budget at the right time.
What would happen if the budget decided to increase taxes on the rich and target the top 3% of income earners?
We only need to look at England in the eighties to find our answer. They would leave the country. The effect would be:
1. The government needs to make up the lost earning from income tax of $43 billion.
2. The remaining 97% of taxpayers would need to foot the bill that is an increase of tax of around $4387 per taxpayer.
3. You would lose your top talent in the country.
4. You could increase company tax rates, but clearly we can see this will not work as companies are already quite legally setting up in more tax-friendly countries.
Small Business measures outlined in this Budget will be an untold benefit for our economy and start to pull Australia out of the current economic slump.
1. The $20,000 write off means business saves around $6000 in tax. This will improve their cash flow and allows them to upgrade, as they need to. It will also push money out to the retail sector. We have already started to see share prices in retail stocks improve.
2. Start up costs allowed to be written off straight away. Again reduces tax in a new business in the first year of trading when business is generally cash strapped. New businesses need new jobs.
3. Tax cuts free up cash flows allowing business to spend on expansion or hire more people. Remember 44% of us are employed by small business and this is where the jobs come from.
The focus in the media has been wrong. Paid Parental Leave is only an issue if you have a job.
Let’s get the economy moving first and create jobs before worrying about paid leave.