Nice, quick Wi-Fi at IS #internetix event!

Test Date: Oct 21, 2010 12:52:01 pm
Connection Type: Wifi

Download: 3.19 Mbps
Upload: 1.85 Mbps
Ping: 52 ms

A detailed image for this result can be found here:

Media_httpwwwspeedtes_ickkg

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Something is badly wrong with our tax system

Imagine you have a married couple, Jack and Jill, and that you have two possible scenarios for how they earn income:

In Scenario A, Jack earns R20,000 a month and Jill earns R20,000 a month.

In Scenario B, Jill earns R40,000 a month and Jack quits his job to be a stay-at-home dad.

Let’s look at how they would pay income tax in each scenario:

Scenario A (both earn R20,000).

 Annual Tax: R40,890 each, or R81,780 together. 

Scenario B (Jill earns R40,000, Jack R0)

 Annual Tax: R123,109

Wait a minute… That’s a difference of more than R40,000!

Jack & Jill are paying R40,000 a year in tax simply because, as a team, they are able to add the same amount of value to the economy. 

What’s the reasoning behind this? Is it to punish them for not both working towards SA’s GDP metric? 

Shouldn’t there be recognition that Jack will play a vital role as a teacher and role model for his kids which will lead to a healthier economy and country in the long term?

Or am I missing something here? Is there a way for them to get that R40,000 back? I would think that in some countries there would be tax breaks to counter this exact situation.

If not, I’d say that this is another proof that sliding scale tax systems are badly broken.

 

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Figures calculated using Old Mutual Income Tax Calculator available here