Illustration: Matt Davidson If the 49 per cent top rate has been causing problems, they are hard to discern. As would be the case for Labor's proposed 49.5 per cent, it doesn't kick in until $180,000. At that kind of wage, high earners are almost always full time and usually not paid overtime. They work for as many hours as are needed to keep the jobs, not because they get to take home extra, half of which the Tax Office would take away. The total rate paid by a high earner on $200,000 is nothing like 50 per cent. The first $18,200 isn't taxed at all because of the tax-free threshold, the next $18,000 is only taxed at 19 per cent, and so on, meaning the total tax taken works out at $71,232 including levies – a rate of 33.8 per cent. By keeping the deficit reduction levy and keeping the Coalition's proposed 0.5 percentage point increase in the Medicare levy, Labor would lift it to 34.3 per cent.

Treasurer Scott Morrison and Prime Minister Malcolm Turnbull "persist with gloss and spin rather than substance and policy adjustment". Credit:Alex Ellinghausen And it's that rate – 333.8 per cent or 34.3 per cent – that matters for foreign high earners thinking about coming here or Australians thinking of heading overseas, not the published marginal rate that applies over only a fraction of their income. And a lot more besides. What also matters are our other tax rates. Our goods and services tax is only 10 per cent. New Zealand charges 15 per cent. The UK charges 20 per cent. We offer Medicare. The United States does not. What matters when deciding to switch countries is salary, and the total tax and services package. In the past financial year Australia took in exactly as many skilled migrants as it did in 2013-14, just before the Coalition introduced the deficit levy and pushed up the top marginal rate to 49 per cent. Many more would have come if they had the chance. If Australia wants more skilled migrants, it merely has to lift the quota. It doesn't need to cut the top tax rate.

Without meaning to, the May budget pushed at least one effective marginal tax rate up towards 100 per cent. Which isn't to say that high effective marginal tax rates don't matter. They do, for part-timers with discretion over their hours; often women caring for children who are considering returning to work full time. Who'd work an extra hour if you had something better to do and thought you'd lose most of what you earned in tax and lost family payments? The effective marginal tax rate for a sole parent considering moving from three days work per week to four days is more than 70 per cent according to Australian National University calculations, and more than 90 per cent if the parent needs to pay for childcare. Very high effective marginal tax rates deny us full-time workers because, in the words of the Henry Tax Review, they "reduce the effective returns from working".

Very high effective marginal rates are worth removing, but as the Henry Review acknowledged, it's hard. Change one set of rules and you're likely to interfere with others in ways that can't easily be predicted. It's just happened. Without meaning to, the May budget pushed at least one effective marginal tax rate up towards 100 per cent. According to David Plunkett, a retired Department of Social Security analyst who used to run the numbers for the government, the higher Medicare levy and the changed rules for repaying student loans mean that low-income couples in which one partner has left university and the other is still studying face effective marginal tax rates north of 97 per cent as they attempt to lift their incomes beyond $37,000. The high rates persist, peaking at 99.2 per cent, almost all the way up to $50,000. As he tweeted sarcastically: "One just has to marvel at the obvious thought that's gone into the careful way the various tax-transfer layers are intermangled". Fifty years ago The Beatles wrote about the Taxman.

"Let me tell you how it will be, there's one for you, nineteen for me," George Harrison sang, in what appeared to be an exaggeration. Loading But he was describing something real. Under Harold Wilson, Britain's Labour government had imposed a 95 per cent tax on high earners. Without realising it, our government has imposed something worse on low earners. High earners are doing OK.