Income Tax reduction & 7% GST: the rich pay less...
i dunno how true is this, but wat u guys think?
Example 1- Lower Income Bracket
In 2006, if after rebates etc and your net taxable income is $25,000, the income tax you need to pay is $187.50 (3.75%).
If you spend 25% of your income, which is $6,250, on needed goods and services, the GST paid for 5% will be $312.50.
Total taxes paid for the year : $500
In 2007, if after rebates etc and your net taxable income is $25,000, the income tax you need to pay is $175 (3.5%).
If you spend 25% of your income, which is $6,250, on needed goods and services, the GST paid for 7% will be $437.50.
Total taxes paid for the year : $612.5
Effectively, your income tax is reduced by $12.50 but you pay $125 more in GST.
Result: Net Increase of $112.50 in overall tax payable!!
From $312.50 in 2006 to $437.50 in 2007, it is an effective INCREASE of 22.5% of taxes paid... not 2%
Example 2 - Middle Income Bracket
In 2006, if after rebates etc and your net taxable income is $60,000, the income tax you need to pay is $2,700 (8.75%).
If you spend 25% of your income, which is $15,000, on needed goods and services, the GST paid for 5% will be $750.
Total taxes paid for the year : $3450
In 2007, if after rebates etc and your net taxable income is $60,000, the income tax you need to pay is $2,600 (8.50%).
If you spend 25% of your income, which is $15,000, on needed goods and services, the GST paid for 7% will be $1050.
Total taxes paid for the year : $3550
Effectively, your income tax is reduced by $100 but you pay $300 more in GST.
Result: Net Increase of $200 in overall tax payable!!
From $750 in 2006 to $1050 in 2007, it is an effective INCREASE of 5.8% of taxes paid... not 2%
Example 3 - Higher Income Bracket
In 2006, if after rebates etc and your net taxable income is $400,000, the income tax you need to pay is $61,650 (21%).
If you spend 25% of your income, which is $100,000, on needed goods and services, the GST paid for 5% will be $5000.
Total taxes paid for the year : $66650
In 2007, if after rebates etc and your net taxable income is $400,000, the income tax you need to pay is $58,700 (20%).
If you spend 25% of your income, which is $100,000, on needed goods and services, the GST paid for 7% will be $7000.
Total taxes paid for the year : $65700
Effectively, your income tax is reduced by $2950 but you pay $2000 more in GST.
Result: Net DECREASE of $950 in overall tax payable!!
From $312.50 in 2006 to $437.50 in 2007, it is an effective DECREASE of 1.4% of taxes paid... the rich DOES NOT pay more!
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