Over-taxed and confused

Aussies say they are over-taxed but appear to misunderstand several key elements of the taxation system

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Australians believe they are highly taxed, yet public perceptions of taxes are wildly different to reality.

In the most recent Per Capita annual survey (opens PDF), 95% of respondents felt that low-income and middle-income earners are taxed too much, while only 16% felt that high-income earners paid too much tax. However, it seems that many of our beliefs about tax and government spending are wrong, for example, that the government spends too much on defense and overseas aid, or that companies pay more tax that individuals.

Here are some of the main findings of the survey.

Australians want a more progressive tax system, with 53% believing that high income earners do not pay enough – even the high income earners believe they and big businesses do not pay enough tax. 64% of respondents believe that big business do not pay enough tax, while 44% said that small businesses pay too much.

A large majority would prefer the tax system to be made easier to deal with, rather than adjusted to make it harder to avoid paying tax. Given the choice, the preferred option would be to centralise federal, state and local taxes (34%), followed by a reduction in the number of taxes (24%) and a simplification of deductions, rebates and exemptions (20%).

73% of respondents say governments should spend more on public services, especially health, while just 6% want government to spend less. This is a significant change in public opinion since the 1980s, when 65% of respondents favoured tax cuts, while only 15% wanted more spending. In the current survey, more than 90% wanted higher spending on health, followed by education and social security.

In light of the current government’s desire to see a budget surplus, 61% of respondents felt it was better to stimulate the economy through a budget deficit than a surplus, when responding to an economic downturn. The majority of people feel that the deficit should involve a combination of greater public spending and tax cuts.

Foolish takeaway

Another key takeaway from the survey was that people’s attitudes are underpinned by a poor understanding of the balance between personal and company tax and of the relevant expenditure allocated to various policy areas such as health, defence, overseas aid, education and social security.

For the political parties in the run up to the September election, the survey offers a virtual road map of which policies to focus on.

In the market for high yielding ASX shares? Get three “Rock-Solid Dividend Stocks” in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »