Alternative Taxation - Raising the Social Security Threshold

A number of proponents of cutting GST have suggested that a good way of increasing income to the States is by raising the social security threshold. Currently those above a certain income only pay up to a limit, and no more. Increasing that threshold would produce more income from all those earners.

It should be noted, however, that the whole principle of thresholds has to do with the way in which social security payments are viewed. They are not in fact viewed as another form of taxation, but as a specifically earmarked charge on income. The fact that there are thresholds prevents them from being just another form of income tax by another name.

One of the most iniquitous facts about social security payments is that they are in fact a double charge upon employees. The employee is charged income tax on their gross pay, but that includes social security payments, which are deducted at source, and go into the coffers of the State. This means that people get income net of social security, but pay income on gross earnings including social security payments. The State thereby taxes income it is already taking by law via other means.

The argument that is mustered against this is that the thresholds ensure that this is not in fact just taxation by another name on earnings. But the more thresholds increase, the closer it becomes to being precisely that.

If thresholds are to increase, so that it becomes more of a payroll tax on earned income, then it is clear that the basis of its relationship with income tax should be restructured so that it does not tax employees twice over.