Why are we penalised for working harder/earning more?

[Sir Osisofliver]

Ok, probably a controversial topic, so think of it as an early weekend discussion that Kennas would normally post

Why is it the more we earn, the more we get penalised? (excluding the super rich)



Do you agree/disagree?

Discuss...

Hi Prawn,

Good topic.

here's my

The system struggles to counter the stupidity of it's constituents.

It's an old adage..make something foolproof and the world makes better fools.

Almost everyone is capable of saving money and over the course of their lives investing it wisely and retiring comfortably. Yet a surprisingly small amount of the population appear capable enough to do so. Hence our welfare state supports those too stupid to save for themselves by mandated super contribution. But that contribution is not enough (when you consider our aging population and that in a relatively short period of time there is going to be a much larger section of the population retired). Those taxes also gop towards doing all those things that a government is supposed to do like build roads, schools, hospitals, infrastructure, police force, armed forces etc etc etc. Hence why if you earn more - more is taken away from you - because you can afford to support more of those too stupid or lazy to save for themselves.

Super rich people obviously feel agrieved by this and pay $5,000.00 an hour tax lawyers to make sure they keep as much as they can.


In terms of YA - Go back before the days of free education and University used to be only affordable by the wealthy. The socio-economic engineering we've seen in the last 50 years means that now everyone can go to uni - should they be motivated enough to do so.

When I did Uni the first time around as a fresh faced 17 yr old kid, my parents were too wealthy and I couldn't get any benefits (despite the fact I wasn't living at home). So I went to the army and did my degree through that avenue and lived a very spartan existence for 5 years. When I went back to Uni full-time as a mature age student a decade ago I had too many assets to qualify, so I've never had the benefit of government assistance for education purposes.

Sir O

 

[theasxgorilla]

Do you agree/disagree?

Discuss...

There are two angles to consider this situation from. One is that your are being penalised for ernstwhile activity and endeavour. The other is that some people were penalised from birth. Or from the glass half full point of view, some people are more fortunate than others.

In general I think it's fair to say that on the whole life acknowledges and rewards deserve as opposed to simple need.

There is a book called the Undercover Economist which uses an analogy which likens the participants of an economy to runners in a race. Each runner is given a distance handicap according to their speed. During the race each participant races their hardest. Who wins will be determined by who ran their best during the race, in spite of their disadvantages/penalities.

It's kind of like the race they do sometimes at the GP with the F1 car chasing the V8 supercar chasing the BMW 3-series. Each driver must still drive well inspite of their advantages/penalties. The stableford golf scoring system is a slightly version of this as well.

Food for thought.

 

[Naked shorts]

The system is horrid, and I highly doubt its going to change.

But I have come up with a possible solution...
What would be the implications of moving to another country, trading the ASX in a low tax environment and then coming back to Australia once you have all the money you need?

 

[prawn_86]

. During the race each participant races their hardest.

The thing is this doesn't happen in real life. I guess it comes down to their financial education, something which I am eternally grateful to my parents for.

Going slightly off track, but still within the thread:

How much better off would society/the economy be, if a basic budgeting subject was compulsory from Years 8 - 10?

Obviously its not something that could be studied and tracked easily, but i would bet my left one, that over a statistically significant sample size, those with a subject like that would have greater financial security throughout their life.

Also comes back to the government vs parents debate.

I personally have come to the conclusion that the gov cannot be relied on for anything whatsoever.

 

[Hyperion]

Do ppl think that there is anything wrong with claiming welfare if one qualifies for it legally, but doesn't need the money at all?

E.g. Full time student, lives with parents, does not need to pay rent, very low spending patterns, works part time job but still under threshhold for YA.

 

[theasxgorilla]

Going slightly off track, but still within the thread:

How much better off would society/the economy be, if a basic budgeting subject was compulsory from Years 8 - 10?

IMO WE, the Australian people, are better positioned for this than anywhere I know...why? Self managed superannuation. Imagine we started learning about SMSF in the latter years of secondary school...I get tingles just thinking about it.

 

[fordxbt]

We're all supposed to sit at home, smoke weed and watch movies and then bitch and complain when the person next to us, who has saved their money starts to enjoy what they have saved.

hah! teenage memories

 

[prawn_86]

IMO WE, the Australian people, are better positioned for this than anywhere I know...why? Self managed superannuation. Imagine we started learning about SMSF in the latter years of secondary school...I get tingles just thinking about it.

Yeh, even without this much detail, just knowing the fact that super will accumulate and how to budget and plan around it would do a world of good.

Shame its never going to happen though...

 

[Timmy]

Do ppl think that there is anything wrong with claiming welfare if one qualifies for it legally, but doesn't need the money at all?

Yes (IMO)
There can be a big difference between what is legal and what is 'right'.

 

[xoa]

I think we should lower and flatten the tax rate for occupationally earned income, and compensate by taxing speculative investments. That would provide an incentive for hard work, and discourage asset bubbles.

 

[Julia]

Yes (IMO)
There can be a big difference between what is legal and what is 'right'.

I'm not sure about this. I have a friend who has worked consistently for more than 30 years as a nurse. She recently needed to have an operation and will be off work for another couple of months. She has her Super plus about $20K in an every day account.

She approached Centrelink with her doctors' certificates for a sickness benefit but was refused until she had used up her $20K. The Super, however, is untouchable as it's quarantined from Centrelink assets and income tests until the person reaches Age Pension age.

It doesn't seem fair to me that someone who has contributed to the tax system for so many years should not receive some support when she needs it.

 

[Timmy]

I think you might have misread something here Julia (or maybe I have!).

This was the question:

Do ppl think that there is anything wrong with claiming welfare if one qualifies for it legally, but doesn't need the money at all?

Emphasis mine.

This is my answer:

Yes (IMO)
There can be a big difference between what is legal and what is 'right'.

This is your friend's situation:

I have a friend who has worked consistently for more than 30 years as a nurse. She recently needed to have an operation and will be off work for another couple of months. She has her Super plus about $20K in an every day account.

She approached Centrelink with her doctors' certificates for a sickness benefit but was refused until she had used up her $20K.
It doesn't seem fair to me that someone who has contributed to the tax system for so many years should not receive some support when she needs it.

The situation you describe is someone who does NOT legally qualify, which is a different question completely to the one I answered?

 

[prawn_86]

Thought i would drag this thread up again. Glen48s thread reminded me

Again, with IR drops recently and the gov saying they want more cuts, its those that work hard that are again been penalised. If you had been diligently saving instead of loading up on debt, your interest is now only about equal with inflation, so your not going anywhere.

Can leaders not see the problem or do they just choose to ignore it while they live the high life?

 

[nomore4s]

Thought i would drag this thread up again. Glen48s thread reminded me

Again, with IR drops recently and the gov saying they want more cuts, its those that work hard that are again been penalised. If you had been diligently saving instead of loading up on debt, your interest is now only about equal with inflation, so your not going anywhere.

Can leaders not see the problem or do they just choose to ignore it while they live the high life?

The problem I see atm is that with our society being built so heavily on debt, the need to continue growth by trying to encourage more debt (or at least the continued reliance on debt) is more important than trying to encourage savings.

If we were to reduce our debt levels and increase our savings on a national level I think our economy would fall into a very deep and painful recession (at the very least) and this is what worries the people in power. Just think of all the money that would be withdrawn from the economy.

We are now paying the price for decades of no savings and over use of debt imo. This puts the current leaders in a catch 22 situation and none of them want to be caught holding the ball so they will do anything they can to keep the bubble inflated for as long as they can.

The majority of people nowadays have little or no savings but mountains of debt - members of this forum may be somewhat different but we all know plenty of people up to thier eyeball in debt with little or no savings. Unfortunately I can't see this changing anytime shortly.

 

[Nyden]

Can leaders not see the problem or do they just choose to ignore it while they live the high life?

No, because they're morons - the lot of them.

My only solace is that one day hopefully winter will come, and this ant certainly won't be sharing any acorns with any starving grasshoppers

Terrible really, I guess indirectly I'm hoping for widespread suffering. House prices, and inflation are only going to come down if there is widespread unemployment, and folk becoming homeless ... oh well, those that take on more debt than they can afford deserve what comes their way I suppose.

 

[Julia]

prawn_86;360979
Again, with IR drops recently and the gov saying they want more cuts, its those that work hard that are again been penalised. If you had been diligently saving instead of loading up on debt, your interest is now only about equal with inflation, so your not going anywhere.

Pretty much what is preoccupying my mind at present, too, Prawn.
Withdrew from the market to protect capital in January this year. Fine as long as interest rates on term deposits remain at a reasonable level. But rates are forecast to fall below 4%, and inflation is 5%, negative territory even before tax!

Getting back into the market for high yield fully franked stocks risks loss of capital considerably in excess of any profit from the yield and franking credits.

Does anyone have any suggestions? The thought of chewing through capital is fine for a while but this could go on for a very long time.

 

[prawn_86]

Does anyone have any suggestions? The thought of chewing through capital is fine for a while but this could go on for a very long time.

Exactly, and someone in my situation (young, good savings, no debt) needs money on hand, not somewhere where capital losses can take effect if i need the money for important things (like moving house when i get a job etc).

Even gold is pretty volatile and subject to exchange rate fluctuations.

Perhaps i should just load up the CC and spend all my money on booze, drugs and chicas

 

[gav]

Julia, thats if you believe that inflation really is at 5%. Have you watched "The Crash Course"?

 

[Julia]

No, Gav, but I know that the cost of living has risen exponentially over the last year or so.

 

[gav]

Julia, basically the Inflation video on the crash course shows how inflation used to be calculated - take a basket of goods, then find out how much that same basket cost the following year. However now its calculated differently. Say chicken breast (which I eat alot of) has gone up 20% this year, the govt can say "well you dont NEED to eat chicken breast to survive, so we'll replace chicken breast with chicken mince". Also, if a brand new car this year has more features than the same car last year yet is still the same price, they see this as the car actually being cheaper... There are more examples, but thats just a few. If you go by the exact same basket this year as the previous year, you would find that recently inflation has increased roughly 13% each year. No wonder people are working longer hours, yet have less savings and more debt.

I apologise for going a bit off-topic, but I thought as inflation was mentioned here a few times, this is relevant IMO