ROI 15 A person who earned $200,000 a year will pay $60,007. The effective tax rate will be 30%. The difference in their taxes will be around $55,500. Now a person looking at this, through different eyes, might say: “Why should the person earning $200,000 get a $7,200 tax cut when the person earning $40,000 only get a $450 tax cut. That’s not fair. The reason this is fair is the person earning $200,000 is paying far more tax into the whole system than the person earning $40,000. And though Australia is a wonderful country, we want more people earning higher salaries and paying more tax. Indeed, the person earning $40,000 a year is likely also claiming significant Government welfare including Family Benefits, which pushes their income higher. As the Budget this year notes; 40 per cent of Australian households receive more in Government benefits than they pay in income tax. You need wealthier people in the system, with an incentive to earn more, to keep the system of welfare robust and afloat. But the problem is, over time, there has been an increasing tax burden placed upon higher income earners (largely because of bracket creep but also because benefits have mainly disappeared for them) as greater welfare and income tax offsets have been added for lower income earners. What we do not need — or want — is large numbers of our best, brightest and most aspirational young people choosing to leave Australia and its high-income-tax environment for our closest neighbours and competitors, including Singapore and Hong Kong, with effective tax rates half those in Australia. And we should also remember that many of those who earn less than $95,000 a year — the point at which ultimately the political debate over who is wealthy and who is not rests — are young people, who aspire to earn significantly more. And one wonders if that aspiration might be another reason that debating who is rich and who is not is a mark against politicians who engage in it. What we do not need — or want — is large numbers of our best, brightest and most aspirational young people choosing to leave Australia and its high-income-tax environment for our closest neighbours and competitors, including Singapore and Hong Kong, with effective tax rates half those in Australia.