Assess the effectiveness of fiscal policy on Distribution of income and wealth

wealth policies

superannuation
Compulsory superannuation has significantly improved the distribution of
wealth in Australia, since its introduction in 1992. Employers in Australia are
required to contribute a minimum of 9.5% of an employess wages to a
superannuation fund which they cannot access until their retirement. Since the
mid 1980s, the proportion of employees covered by superannuation has risen
from 42 94%. While superannuation assets boost the wealth of all wealth
quinitiles, they are particularly important for low income earners, for whom
superannuation may be one of few significant financial assets. Although
compulsory superannuation has reduced wealth inequality, the tax concessions
given to voluntary superannuation contributions mainly benfit high income
earners who can afford to set aside extra income at reduced tax rate. The
beneficial effects of compulsory superannuation for reducing inequality are
expected to grow further as compulsory superannuation contributions are
increased to 12% of employee incomes by 2025.

Recent developments in the UK, in the form of riots, have indicated the dangers of social instability
resulting from social inequality. Therefore, it is important for governments in developed economies
to use fiscal policy to reduce the income gap between rich and poor, and account for the negative
externalities of income disparity and poverty. The Australian economy has a relatively equitable
distribution of income with a low Gini index (as a percentage) of 35.2%, compared with the USA at
40.8% (UN Development Program 2010). However, periods of recession as well as unsustainable
economic growth serve to exacerbate income inequality. Thus, as the Australian economy emerges
from the GFC, it is imperative for the Gillard Government to address income distribution through
fiscal policy measures. Recent changes to the taxation system have provided for some level of
increased income equality. During the GFC, the Australian government targeted fiscal stimulus at
low-income households which have high marginal propensities to consume (MPC). According to
Richard Kahns simple multiplier effect: these low income households would contribute more to
consumption expenditure if provided with an increase in income. The Low Income Tax Offset
introduced in the 2010-2011 budget increased the no-tax threshold for workers earning up to
$16,000 reducing the taxation burden on low-income earners.
capital gains tax

Capital gains tax (CGT) is the tax you pay on a capital gain. It is not a separatetax, just
part of your income tax. Selling assets such as real estate, shares or managed fund
investments is the most common way you make a capital gain (orcapital loss) - talk about
housing affordability

negaative gearing

Proposals by the property sector to tackle housing

affordability by boosting land supply and retaining negative
gearing have been slammed by an expert as "factually
incorrect".
The Property Council released a 10-point plan on Wednesday that
said a "sustainable pipeline of land" in existing suburbs and
greenfield sites would boost supply and provide greater choice for
homebuyers.
It warned the Federal Government against changes to negative
gearing or capital gains discounts, which it said were "essential to
the continual supply of rental accommodation".
But Professor Michael Buxton from RMIT University said "artificial
stimulants" such as negative gearing were the real problem.
"We've never had more supply for land in Australian cities and
we've never built more dwellings," he said.
"The problem is that we're building the wrong type, we're building
two- and one-bedroom tiny apartments that very few people really
want or very large outer-urban suburban houses."
He said investors were snapping up new dwellings, driving up
prices and forcing rents higher.
"The Labor Party's proposals to remove negative gearing and
substantially alter the capital gains regime are really positive steps
because they will have the impact of reducing investor demand," he
said.
social wage (public free education and medicare levy
Scott Morrisons decision to increase the Medicare levy will more than
swallow the gains from the abolition of the deficit levy for many high income
earners when it kicks in from mid-2019.
The Treasurer has announced the Medicare levy will rise by 0.5 per cent to
2.5 per cent in two years as the government moves to pay for its decision to
fully fund the National Disability Insurance Scheme and underpin the
nations health care system.
The decision pushed out to beyond the next election will disappoint
taxpayers with incomes between $180,000 and up to $240,000 who will find
themselves worse off under the new arrangements when they begin in two
years. These taxpayers will however have been able to pocket the gains from
the abolition of the deficit levy for two years.
The Medicare levy increase is predicted to reap $3.55bn in 2019-20 and
$4.25bn in 2020-21.
But the increase the Medicare levy will also impact on other taxes which are
linked to the top personal tax rate such as the fringe benefits tax rate. This is
expected to also provide $400m in revenue in 2018-19 meaning the measure
will contribute $8.2bn to the budget over the four years of forward estimates.
By contrast the deficit levy, introduced in 14-15 by Joe Hockey raised around
$3bn over its lifetime.
When the increased Medicare levy kicks in two years, a single income earner
on $100,000 would pay an extra $500 a year in Medicare Levy to a total of
$2500, while the cost to a wage earner on $150,000 would be $750 extra and
a wage earner with a taxable income of $200,000 would pay an additional
$1000.
That same taxpayer on $200,000 would receive a gain of only $400 from the
abolition of the end of the deficit levy. The gain from the abolition of the
deficit levy doesnt begin to outweigh the gains from the abolition of the
deficit levy until taxable income passes $240,000.
Delivering the budget speech last night Scott Morrison promised to tackle the
$55.7bn in unfunded NDIS liabilities over the next 10 years by increasing the
Medicare Levy when the extra bills start coming in.
.
NDIS
Housing affordability
company tax
bank levy ( surface is good because wealth of bank is decreasin however as the
cost of the cos