A not-so-taxing time for the rich
Opinion by ACTU President Ged Kearney
First published in the Daily Telegraph, Thursday 25 February, 2016
The Australian tax system is tangled up in a web of subsidies, exemptions and arrangements that unfairly advantage the top 10 per cent of income earners, do nothing to drive innovation or productivity growth and hold us back from investing in nation-building.
Capital gains tax exemptions, superannuation tax breaks, negative gearing and loopholes in the tax system are available to the super wealthy, who simply do not need them.
Ironically, the better-off you are — the more properties you own, the more you can top up your superannuation savings, the more you can afford to pay for accounting services — the greater the benefit you receive.
According to the Parliamentary Budget Office, negative-gearing costs the federal budget at least $2 billion every year. While many middle-income earners do use negative gearing, 50 per cent of this windfall goes to the top 20 per cent of earners.
A property mogul with a portfolio of six investments valued at about $500,000 each is handed the entire annual tax paid by half a dozen aged care or retail workers. There’s something deeply distasteful about a worker on $50,000 a year funding the wealth creation schemes of millionaires.
Almost three-quarters of capital gains tax exemptions, estimated to cost taxpayers between $4 billion and $5.7 billion a year, are paid to the top 10 per cent of high income households on more than $200,000 a year.
Meanwhile, of the $35 billion per annum in superannuation tax breaks (the same amount we spend on the pension), more than half of this goes to the top 20 per cent of income earners and only $1 in every $200 in super concessions goes to the bottom 20 per cent.
The higher up the income ladder you go, the worse the problem gets. While the average Australian contributes tens of thousands of dollars in tax, 75 Australians who earned more than $1 million declared an average taxable income of $1.09.
Of 1539 large public and foreign companies operating in Australia, 38 per cent paid zero tax. ExxonMobil, Qantas and General Motors paid nothing. Last year the cleaners at Spotless paid more tax than the entire company.
With just 10 per cent of Australians now holding more wealth than the rest of us combined, we need genuine tax reform.
Leading into this election, we have a huge opportunity to unwind this net of government waste on wealthy welfare and reinvest that money in the Gonski education reforms to give our kids the support they need to reach their full potential.
If Malcolm Turnbull genuinely wants to use the tax system to drive innovation and productivity growth, he will look seriously at taking wasted resources and investing in our young people — in our future. Tackling this problem will take guts, and proposals like better targeting negative gearing and capital gains tax should be embraced. Indeed, we need more politicians prepared to put their necks out on issues that have traditionally been off limits because of vested interests.
It was disappointing that Treasurer Scott Morrison was not prepared to throw bipartisan support behind this proposal, although he did leave the door wide open on reform to negative gearing.
These exemptions and arrangements for the wealthy are expensive for us, but highly valued by powerful people and businesses at the big end of town. It is no surprise, therefore, that they are pushing with one hand for an increase in the GST to pay for more corporate and income tax cuts while with the other hand defending this raft of tax breaks.
Instead of turning off the “wealthy welfare” tap, Treasurer Morrison’s advisory panel on tax urged big business and its industry bodies to mount a PR campaign to “educate” Australians on why companies shouldn’t always pay the mandatory 30 per cent tax rate.
The government should also seriously look at a minimum average tax rate of 35 per cent for very high income earners. Modelling shows that would raise another $2.5 billion a year.
Australians don’t need education about the tax system. They need a treasurer and a government that will stand up to vested interests and unwind “wealthy welfare”.
With just 10 per cent of Australians now holding more wealth than the rest of us combined, we need genuine tax reform.
It’s time to scale back multinational tax avoidance, stop pouring hard-earned tax dollars into the pockets of property developers and the super wealthy and design a system that serves the majority.
If we do this we may be able to fund the commitments we so desperately need in health, education and disability.
Ged Kearney is president of the ACTU
