How Millennials Are Carrying the Tax Load
How Millennials Are Carrying the Tax Load
In today's economic landscape Millennials are confronting significant financial challenges that are hindering their ability to achieve traditional life milestones such as finding a partner, raising children and buying a home.
These difficulties are compounded by an increasing tax burden, which they bear to support the aging Baby Boomer generation. The repercussions of this financial strain are far-reaching and pose significant implications for the future of the nation.
Housing the Unattainable Dream
One of the most stark indicators of generational disparity is housing affordability. In the 1990s, despite high interest rates during the recession most 30 somethings were able to purchase homes. In contrast, today's Millennials face housing prices that have surged far beyond their income levels. The average mortgage is now eight times the annual salary of a 34 year-old compared to just three times in 1990. This disparity forces many to delay homeownership or resign themselves to renting indefinitely.
Despite being the most educated generation, Millennials struggle to secure well paying and stable jobs much of this was caused and still felt from the failed workchoices policies of the early 2000s. The aftermath of the 2007 Global Financial Crisis led to a prolonged period of income stagnation. For 25 34 year olds, disposable incomes have seen little to no real growth over the past two decades . Meanwhile, essential costs such as housing, healthcare and education have soared, further squeezing their financial capacity.
This economic stagnation is exacerbated by the rise of the gig economy where while workchoices was thrown out it still made it’s way into society through these kinds of employment opportunities that see companies profit and the workers paid very little. This is where many young people find themselves in precarious, low wage jobs without benefits such as paid leave or job security. The intense competition for stable employment, coupled with underemployment leaves many Millennials feeling financially insecure.
The Majority of the Tax Burden
Millennials are shouldering a growing tax burden to support the aging Baby Boomer generation. In 2016, 30-year-olds contributed twice as much to support older Australians' living standards compared to Boomers at the same age. This disparity is expected to widen, with projections indicating that Millennials will be paying nearly four times more by 2041.
Tax policy changes have disproportionately benefited Boomers and exacerbating the financial pressure on younger generations. For example, various tax concessions for older Australians have been introduced while the income tax burden on Millennials has increased significantly. This shift in tax policy creates the growing economic divide between generations.
Student Debt
Higher education, once free for Boomers now comes at a significant cost for Millennials. The introduction and subsequent adjustments of the Higher Education Contributions Scheme (HECS) mean that many Millennials graduate with substantial debt. It’s important to note that HECS isn’t at the cost of the course and increases with indexation. Therefore, you’re being overcharged for your course. You’re better off getting a bank loan to study then using HECS as It’s equivalent of jumping into a time machine and buying a house in 60s for the cost of today while everyone else is paying past prices.
Instead of addressing HECS inequalities the repayment threshold has been lowered forcing graduates to start repaying their loans earlier and at lower income levels. It is one of the biggest rorts in human history and a ridiculous burden placed on future generations. Paying tomorrows prices today.
Impacts Leading To Delayed Life Milestones and Their Impacts
The economic pressures on Millennials have significant societal implications. Delays in family formation and homeownership can lead to lower birth rates and a potential decline in economic growth. The financial strain also affects mental health with increased stress and anxiety among young adults.
The growing tax burden on Millennials to support an aging population raises concerns about intergenerational equity and social cohesion. If these disparities are not addressed they could lead to increased social unrest and political instability as younger generations demand fairer economic policies.
Let's Take A Look At Some Of The Stark Differences Between the Generations
Income Tax Contribution
Boomers: Baby Boomers, who are now mostly retired or nearing retirement traditionally paid less income tax and tax overall. Netting larger disposable incomes and a higher portion of government services meant that there was less reliance on tax. Also the addition of user pay systems did not emerge until later on. Not to mention the arrival of Goods and Services Tax (GST).
Millennials: Millennials are now shouldering an increasing share of the tax burden. Over recent years, their contribution to income taxes has risen significantly. For example, The generational shift in tax burden is expected to continue as Boomers retire and Millennials take on more of the economic load on top of all the additional tax’s introduced and user pay systems.
Impact of Tax Policy Changes
Boomers: Recent tax policy changes have generally favoured Boomers. These include tax concessions like the senior Australians tax offset, tax free superannuation and the seniors and pensioners tax offset introduced in 2012. These policies reduce the tax obligations of older Australians significantly who hold the majority of the nations wealth.
Millennials: In contrast, Millennials face increasing tax pressures. They bear higher income taxes due to the elimination of many earlier concessions and the introduction of new taxes such as the Stamp Duty Land Tax (SDLT), which primarily affects younger people who are more likely to buy new properties. Additionally, changes in national insurance and pension savings restrictions have further strained their financial resources.
Housing and Property Tax
Boomers: Many Boomers bought homes when property prices were relatively low, benefiting from capital appreciation over time. They often avoid higher property taxes due to not needing to move frequently, thus sidestepping the increased Stamp Duty Land Tax (SDLT). Recent campaigns to entice Boomers to downsize have failed.
Millennials: High property prices and stricter lending conditions mean that many Millennials are unable to afford homes, forcing them to rent and miss out on the wealth building benefits of property ownership. When they do purchase homes, they face steep SDLT adding to their financial burden.
Education and Student Debt
Boomers: Boomers had the advantage of either free or significantly subsidised higher education. The Higher Education Contributions Scheme (HECS) was introduced in 1989 after many Boomers had already completed their education.
Millennials: Millennials, on the other hand are burdened with substantial student debt. The cost of higher education has increased dramatically and the threshold for HECS repayment has been lowered. Forcing many to begin repaying their loans earlier and at lower income levels. This debt load significantly impacts their ability to save and invest.
Health and Social Services
Boomers: Boomers generally benefited from more comprehensive social services and healthcare when they were younger. As they age, they continue to receive substantial public support through pensions and healthcare benefits.
Millennials: Millennials face rising healthcare costs and fewer social benefits. They often need to pay out of pocket for many medical services not covered by insurance and the increasing costs of living and healthcare add to their financial strain.
Employment and Stagnate Wages
Boomers: Boomers entered the workforce during times of economic expansion and higher job security. They experienced significant wage growth and lower levels of unemployment in their early careers.
Millennials: Millennials entered the workforce during or after significant economic downturns, such as the 2007 Global Financial Crisis. They face higher unemployment rates and more precarious employment conditions such as gig economy jobs that lack benefits like sick leave and pensions. This has resulted in stagnant wages despite higher educational attainment.
Millennials are facing a perfect economic storm. Skyrocketing housing costs, stagnant incomes, substantial student debt and an increasing tax burden to support Baby Boomers all without the money or ability to climb the ladder of life. These challenges are delaying their ability to achieve traditional life milestones, with significant consequences for the future of the nation.
Addressing these issues requires a comprehensive approach to reform tax policies, increase affordable housing and ensure that the benefits of economic growth are equitably shared across generations. Without such measures the economic and social fabric of the nation is at risk.
image sources provided supplemented by Canva Pro Subscription. this is not financial advice and readers are advised to undertake their own research or seek professional financial services.
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It’s really tough to see Millennials struggling with such a heavy tax load and not getting much in return. The disparities in housing costs and student debt are very unfair. It’s a complex issue bro but I hope a solution comes soon
These are definitely the struggles of our generation, plus some.
One of the things I do want to say is we better make sure not to repeat these same foolish mistakes and ruin the subsequent generations out of greed and spite. We shoulder the burden so they don’t have to, and we can make better decisions so they aren’t destitute when they reach this age. If we don’t do that, then we are truly as lost and ruined as the boomer generation is. We need to learn and put forward a lesson, not repeat the same mistakes.
Sadly, I am not sure if we will be able to do any better. We will have no money for retirement and no assets
That doesn’t mean we destroy our kids generation and prospects out of poor decisions. It’s our responsibility to prevent these things for them, not make it worse because it’s easier.
The importance of saving and growing money (investing, retirement planning) are so important to our generation (I'm Generation X), and must not be ignored.
Great article, @melbourneswest !
!BBH
Yup, thank you for popping by and keep up the great work with Silver stackers
One thing that annoys is how taxes are very heavy.
A lot of people are struggling to earn talk less of paying tax. The tax is too much and it’s killing
People can’t even save up