Continued attention and support

In last week’s article, I indicated the reason that low-income workers appeared unenthusiastic about the relief that the 2017 budget has brought them. It was explained that their economic circumstances, though much improved from previous years, were still difficult and they would need continued attention and support. Their purchasing power is below their needs and they will have to continue to survive as best as they can. The article ended by observing that high-income earners would be better off than those falling between the two groups, particularly those earners who fall into the new marginal tax bracket of 40 per cent. Where income tax is concerned, it is the group that is earning $163,650 to $250,000 that would see the highest increases in their tax liability. In this final part of the article, an examination will be made of the likely impact of various taxes on the personal incomes of workers in the abovementioned income category and the economy as a whole.

Share of burden

In looking at the situation of the income group referred to above, the persons who were earning between $163,650 and $180,000 must regret ever receiving the salary increases that they got. The truth is whenever adjustments are made to the income tax structure a group of workers is made to bear an unfair share of the burden. Last year when salaries increased, some of the workers who were earning just below the exemption amount found themselves paying taxes for the first time. Things looked unfair then, but would have been regularized for most of them with the adjustment to the exemption threshold in 2016 and that proposed for 2017. For persons earning at the lower end of the income range stated above, the 10 per cent salary increase could bring no joy since it takes them into the 40 per cent marginal tax range. They would have been given no opportunity to celebrate receipt of the higher income. The effective tax rate for this group of workers has risen by nine percentage points. A similar feeling of remorse must be facing the persons who received the six percent salary increase from $170,000. This increase carries them also into the new marginal tax rate of 40 per cent and has caused their effective tax rate to increase by eight percentage points.

Disaffected

As a consequence, this group of income earners is most likely to feel disaffected by the changes in the income tax structure and the 2017 budget. When the concerns of this group are added to those of the low-income workers, it would appear as if the budget did not reach out enough to workers. This situation has given rise to the notion that the government gave benefits with one hand and