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Geofferoo
Posted Thursday, 22 September 11 at 2:54PM

History clearly shows that when taxes are collected on high income earners and spent not on hand outs and middle-class welfare, but on improving infrastructure, public health and education levels, it benefits everyone, including the wealthy. Businesses get a better environment in which to operate, and a healthier, happier and more productive work force.

Of course, that presupposes that those wealthy people are actually engaged in providing real goods and services. Much of today’s super-wealth is derived from non-productive speculation, and that kind of destructive and destabilising gaming should be hammered by taxation.

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Perfidious Rex
Posted Thursday, 22 September 11 at 3:01PM

Ben

Why stop at 70pc tax? In fact why bother with tax at all?

Why not just waltz into Marius Klopper’s house and steal all his belongings and arrange for the sequestration of his bank accounts and share portfolios?

In fact you could probably grab his kids and sell the into slavery. So long as the proceeds go to treasury! PR

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meski1
Posted Thursday, 22 September 11 at 4:52PM

If the rich are rich from a salary, they are are already paying more dollars in tax than most of us get as gross income[1]. If they are rich from other sources, for instance owning shares, assets, etc, then unless they realise that wealth and pay CGT, increasing the tax levels won’t increase revenue at all.

[1] do the arithmetic. For 1 million, it’s

54,550 + ((1E6 - 180,000) * .45) = 423,550 tax.

I haven’t included Medicare or the flood levy in that, but neither have I included deductions.

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Rockjaw
Posted Thursday, 22 September 11 at 5:20PM

Here we are again, slap bang in the worst financial crisis in history and all we hear from our so called “economists” on the looney left is all this b/s talk of more taxes, more spending, more debt and more “command” economics.

The only reason the looney left has not yet banned all civil liberties and the protection of the right to private ownership is because without it neither their beloved central authorities nor their overtaxed consumers would be able to borrow the debt required to fund their incessant and insane excessive spending.

Ben, for years you have preached to all who would listen that the secret to a sound economy is to spend more, tax more and control more.

Long after this financial crisis it will hopefully become clear to the looney left that we do not suffer from a deficit of revenue, that we do not suffer from a lack of government controls, but that our present economic woes are the consequence of restrictions to our economic and personal freedom, an excess of government spending and an excess of interference in our private lives by central governments.

No government in history has ever managed to efficiently control any economy.

I know it is difficult for Keynesians to understand this simple concept Ben, but with a little effort you will find that it is really not that difficult. Repeat after me:-

1- the global economic and financial crisis was caused by excessive debt and excessive spending by greedy governments and not “greedy taxpayers”
2- It is greedy governments, and not “greedy taxpayers”, who continue to spend excessively and borrow excessively;
3- it is greedy governments, and not “greedy taxpayers” who cannot balance their budgets;
4- ipso the problem is not the consequence of a deficit of revenues, it is in fact the result of an excess of debt and an insane spending excess.

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meski1
Posted Thursday, 22 September 11 at 5:37PM

You sure about that, Rocky?

For the record, “two legged” private debt now stands at $1,917 billion. Households owe over $1 trillion on mortgages and $139 billion on personal debt, and businesses owe the remaining $755 billion.
“Four legged” government debt currently stands at a comparatively trivial $47 billion, and is projected to rise to $188 billion by 2013.

http://www.thepunch.com.au/articles/private-debt-is-the-pig-in-the-farmy…

compass1312
Posted Thursday, 22 September 11 at 6:33PM

Uncle Kevin had the right idea with his mining tax. Simple, effective, left us plebs alone, and if it’s too dear to sell. CO2 problem solved.

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Perfidious Rex
Posted Thursday, 22 September 11 at 7:22PM

Meski

The private debt you refer to (predominantly household mortgages) is both Govt subsidized (through the support given to banks to allow them to borrow short/lend long) and, when push comes to shove, it will end up on the Govt balance sheet.

Households are chock full of debt because they have been coaxed into it through Govt policy (loose monetary policy, FHBG and stimulus of all kinds). Howard lost his marbles when he stimulated an over-cooked housing market with the first FHBG in the early part of this century and Rudd/Gillard have easily surpassed his lunacy levels.

Debt has been far too cheap for far too long and now of course we have the great Looney of them all - Bob Brown - who would legislate to make it even cheaper!

And of course, as Rocky points out, Governments the world over are doing everything in their power to keep the spending and consumption party going. What’s that Greece? You’ve lived beyond your means for decades, committed a bit of fraud here and there etc but you want to keep on consuming? Well here’s some bailout money - party on dudes!!!

Unfortunately the piper has come a calling and it is time for the profligate Governments of the world to pay their dues…..

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Grumpy293
Posted Thursday, 22 September 11 at 7:39PM

The rich have had it there way for far to long and been getting away with shifty schemes to avoid paying there taxes like anyone else. Now it’s time for them to pay up.
All well and good for people to say they (the rich) have earned their money, good on them but the question is they have not paid their proportion of taxes like every one else has.
Why is it then ok for the rich and big mining companies to rip out the wealth of Australia and not pay proportional taxes but can sell our riches overseas to make ginormous profits to line their own greedy pockets.

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Perfidious Rex
Posted Thursday, 22 September 11 at 7:47PM

BTW. Interesting that ACOSS doesn’t compare income taxes across the 33 OECD member countries but instead relies on a comparison of “revenue for all levels of Govt”.

I am guessing that a comparison of income taxes wouldn’t help their argument quite so well?

As it turns out a quick fact check would indicate that Australia is above the OECD average when it comes to top marginal tax rate and almost on the average when it comes to the threshold at which it kicks in.

Why is that Govt submissions always seem to bring out the worst in statistical abuse and misuse? PR

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Rockjaw
Posted Thursday, 22 September 11 at 8:02PM

When you use GAAP to account for value in the private sector and you use a different method of accounting for the public sector, well then you would reach the sort of conclusions which you do.

I wonder why nobody includes little items like the Australian government guarantee of all bank deposits?

You forget that instead of reorganising the bankrupt financial system in 2008 our government participated in a bail out and transferred the impending bankruptcy on to the public.

Just the 90 day debt exposure to the international markets alone is around $500 billion. Who the heck accounts for that? In fact who the heck is going to pay that if it ever comes due?

Apart from dodgy accounting, are you even surprised private borrowing is so high Mesk1?

With the 3rd highest corporate tax rate in the world, second only to Belgium and Finland, and in the top 15 highest personal income tax rates in the world you would not wonder why Australians have to borrow themselves into oblivion - to pay the excessive taxes which fund the excessive spending.

No Mesk1, I subscribe to the system deployed by Germany in 1948 and which brought about the economic miracle of that century. That miracle was brought about by the removal of all socialist constructs and in the face of blistering criticism from the Keynesian economists of the world, half of devastated Germany grew from the ashes of WWII to become the strongest economy in Europe in a short seven years.

Interestingly enough, the socialist half on the East wallowed in misery and misfortune, looked after and tenderly cared for by their socialist state.

I know which half I would rather live in.

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Perfidious Rex
Posted Thursday, 22 September 11 at 8:14PM

Grumpy

I don’t think Ben is arguing the rich haven’t paid their proportional share.

The argument seems to go that the rich haven’t paid sufficiently in excess of their proportional share to compensate for his big spending Govt buddies.

The Govt is the biggest income earner in the country yet they still can’t limit themselves to spending what they earn (something to do with the economic incentive on politicians to buy votes perhaps?). If only we all had the ability to call on someone else to pay our bills when fiscal competence deserts us….. PR

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ben.eltham
Posted Thursday, 22 September 11 at 8:25PM

Perfidious Rex

Not so. I’m arguing that the super-rich should pay more tax not only as a method of increasing revenue, but also a curb on inequality.

There is pretty much no substance to the argument that Australia is a high taxed nation, whatever some of the commenters here think. Any way you slice it, Australians pay less tax than nearly all our major trading partners. Our GST for instance is one of the lowest rates in the world for those countries that have sales taxes.

Rockjaw I have indeed preached standard 1960s Keynesian economics for some time. I guess that puts me in the same company as the Treasury, the Reserve Bank, and even (at least for the first tranche of the stimulus) the Coalition. The reality is that the events of the past four years have proven the Keynesians essentially right, while completely discrediting the real business cycle theorists, the Says Law adherents and the rational expectations crowd.

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ben.eltham
Posted Thursday, 22 September 11 at 8:33PM

Just in answer to this one:

Why not just waltz into Marius Klopper’s house and steal all his belongings and arrange for the sequestration of his bank accounts and share portfolios?

Sorry, but taxation is not theft. Theft is the unlawful or wrongful taking and carrying away of the personal goods or property of another. Taxation is by definition lawful: the result of legislation passed by the Parliament.

Even by analogy, taxation is not theft. The reason is that property rights are themselves a function of the rule of law; indeed governments are busily making up new property rights all the time in areas like patents and intellectual property. Without a functioning rule of law, property rights cease to have day-to-day meaning as society descends into Hobbes’ state of nature. And what pays for the army and the police and the courts to enforce all these property rights? Taxation.

You can argue that taxing Marius Kloppers more is unjustified or unnecessary or impractical. But it’s not theft, any more than a mining royalty or a stamp duty is theft.

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ben.eltham
Posted Thursday, 22 September 11 at 8:33PM

Just in answer to this one:

Why not just waltz into Marius Klopper’s house and steal all his belongings and arrange for the sequestration of his bank accounts and share portfolios?

Sorry, but taxation is not theft. Theft is the unlawful or wrongful taking and carrying away of the personal goods or property of another. Taxation is by definition lawful: the result of legislation passed by the Parliament.

Even by analogy, taxation is not theft. The reason is that property rights are themselves a function of the rule of law; indeed governments are busily making up new property rights all the time in areas like patents and intellectual property. Without a functioning rule of law, property rights cease to have day-to-day meaning as society descends into Hobbes’ state of nature. And what pays for the army and the police and the courts to enforce all these property rights? Taxation.

You can argue that taxing Marius Kloppers more is unjustified or unnecessary or impractical. But it’s not theft, any more than a mining royalty or a stamp duty is theft.

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meski1
Posted Thursday, 22 September 11 at 9:08PM

Yes, the government is responsible for it, *if* it defaults. But there’s no way you can regard it as greedy government debt, it’s greedy private debt. FHBG? Don’t make me laugh. It’s not even enough to pay the stamp duty on an average purchase. (BTDT) And that’s supposed to encourage? You guys are using more spin than a gyro.

You might care to examine some of the countries with a low corporate tax, Rocky - such as Ireland (12.5% trading)- which is one of the I’s in PIIGS

Australia 3rd highest corporate tax?

http://www.businesspundit.com/12-countries-with-the-highest-lowest-tax-r…

And which category was Australia in? 12 countries with the *lowest* tax rates.

Australia, with a 31.5% marginal tax rate on average income workers, manage to clock in at 17th on the IMF’s GDP per capita ranking with $36,918. The island nation is bouncing back surprisingly strong from the worldwide economic meltdown, with the BBC reporting on January 14, 2010 that had fallen to 5.5% at a time when similarly situated nations are struggling with double-digit unemployment. According to Deputy Prime Minister Juliar Gillard, the BBC’s findings “provide further evidence of how Australia has outperformed virtually every other advanced economy during the global recession.” With a tax rate similar to that of the United States, Australia has long provided incentives for the hard work, entrepreneurship and risk-taking that are fundamental to sustained economic growth and high standards of living.

http://en.wikipedia.org/wiki/Tax_rates_around_the_world

Click on corporate/individual tax column sort. Its wikipedia, but its hard to stuff up hard data like tax rates with opinions.

Next time, come up with some facts to back your assertions.

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Rowan
Posted Thursday, 22 September 11 at 10:01PM

Great article as usual Ben.
Not pulling your chain; but when we have taxed the wealthy and they arrive down here with the rest of us … .

… . who do we tax then?

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Perfidious Rex
Posted Thursday, 22 September 11 at 10:01PM

Ben

Leaving aside the point that 4 years is statistically insufficient to prove anything I am not sure how you go about arguing that it has proven the Keynesian’s essentially right? Keynesian policies don’t seem to be working so well for the Greeks, or the US for that matter. I guess he just forgot that the real world doesn’t supply unlimited debt….

Re the other points:

- Firstly, all traditionally regarded forms of theft would not constitute theft according to your definition so long as they were sanctioned by the legislature.

- Secondly, I know we have discussed this point before but taxation, whilst it may not be theft, is certainly an involuntary expropriation (and therefore economically equivalent to the non-violent seizing of a portion of a person’s household belongings). Given Marius Kloppers would probably have the accountants on the job to ensure he didn’t end up paying 70% income tax I would suggest that the “go direct” strategy might actually have a better chance of achieving your aims.

- Thirdly, you make a very good case for an increase in the rate of GST (or perhaps a broadening of the base in the manner it was originally designed?). The IMF I believe agree with you on this point.

My point was simply that our top marginal tax rate is quite high by OECD standards (factoring in both rate and threshold and contrary to the impression that ACOSS were attempting to create). I remain unconvinced that a lower than average rate of GST is justification for increasing the top marginal income tax rate.

- Finally, I would be interested to understand how your “super-tax” is going to “curb inequality”? Reality says that the super-wealthy will find a way to avoid paying 70% tax (remember they can just leave the country if they wish). How is an increase in tax accountant and lawyers fees and increased number of former Australians taking up residence in places like Bermuda going to help the cause of the low-income earning Australian? Last time I looked there weren’t a whole lot of tax accountants and lawyers amongst the most needy of Australians and there weren’t too many low-income Australians with jobs in Bermuda.

We would actually be better off with say a “low-tax on billionaires” to encourage more global billionaires to come live in Australia and contribute to both the economy and the tax base.

***

If you want to suggest a way to help low-income earning Australians then taking a blowtorch to half our legislation (and at least half of our politicians and Govt bureaucracy) would be a good start….. PR

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Joe Politico
Posted Thursday, 22 September 11 at 11:51PM

Excellent article Ben. I hope they come up with some good ideas. A revision of Capital Gains would certainly be helpful, as would a review on Trusts and Inheritance. It’s a shame that so much of the Henry review was disregarded because it contained some very good policy ideas.

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Rockjaw
Posted Friday, 23 September 11 at 1:36AM

Good on you Ben, keep them coming.

Perhaps the Keynesian economists might one day forecast an economic catastrophe before it happens, instead of pompously providing us all with weak explanations about how and why it all happenned after the event.

Mesk1, during the Asian crisis our group advised our clients to move their capital offshore, and many did.

Of those who moved to low tax countries their average capital growth of the past decade outstripped the growth of those who kept their capital onshore by an average ratio of 2.7:1 as at the end of the 2011 financial year end.

The offshore investors are now able to pay 270% more tax than those onshore. Assuming an offshore tax rate of only 15%, the offshore investors are now able to contribute the equivalent of 40.5% of that income earned by those poor unfortunates who kept their capital onshore. At 15% tax rate they can contribute almost 50% more tax than local taxpayers paying 33% marginal tax on their income.

Ipso, the offshore capital is now capable of creating much more employment, funding new industries and growing existing ones.

In my industry it is the bottom line which counts, not some post modern economic claptrap where theory and hope triumphs over reality.

Universities, halls of government and central banking environments, where there is zero economic productivity, are fabulous places for fairy tale Keynesian economics, but life in the real world soon fixes fairy tale economics.

Ask the Greek government for further details.

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ben.eltham
Posted Friday, 23 September 11 at 11:29AM

Rockjaw:

so, the economists that predicted the 2007-08 crash included: Dean Baker, Paul Krugman, Nouriel Roubini and Steve Keen. Keen wouldn’t describe himself as a Keynesian but and perhaps Roubinin wouldn’t either but the first two certainly would.

What all the economists who predicted the crash shared is an understanding of the crippling instability of financial markets and the likelihood of huge debt overhang and growth-killing deleveraging in the crash’s wake.

By the way, the Greek government has been pursuing austerity, not Keynesian spending.

Olivier
Posted Friday, 23 September 11 at 11:58AM

Ben- ‘nother good one.
I support a (AG) 50% tax rate on over $1 million incomes p/yr.
Over 50% tax rate I’m still unsure of.
Paying over half what you earn to your community is a disincentive.
Earning more than 20 times what your lowest worker earns is unfair.
Is there another way to redistribute renumeration for work?
Geoferoo- We should indeed invest ‘windfall’ taxes on infrastructure only. We should indeed tax speculative profits at a higher rate, or perhaps do like George Monbiot said- as a tiny percentage of each amount speculated (the Robin Hood tax).
RockJaw- Wrong! the GFC was caused by a lack of regulation of speculatory practices. Speculators destroy, not create. These investors make their profits by taking enormous risks rather than investing reponsibly. They enjoy the adoration of their enormous wealth when their gamble succeeds, and silently get enormous Public subsidies whenever their gambles fail. The Private investment Corporations caused the GFC, which only later moved on to similarly poorly run Public economies.

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Perfidious Rex
Posted Friday, 23 September 11 at 12:51PM

Ben

Nicholas Taleb also predicted the GFC and its potential magnitude and he is certainly no Keynesian. Predicting that the Greenspan inspired loose monetary policy would end in disaster didn’t require any particular philosophy, just a recognition that insane levels of debt (esp by those who never had the capacity to repay it) would not work out well.

Re Greece - Keynesian economics relies on the infinite credit card. My point was that it doesn’t work so well when the day arrives for the credit card to be cancelled. Or to put it another way - in the real world Keynesian theory stops working at exactly the moment that its supporters would say it is most called for. PR

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Rockjaw
Posted Friday, 23 September 11 at 2:50PM

Steve Keen does not consider himself a Keynesian, and I am not qualified to argue with Prof Keen.

Krugman and Baker were attacked quite viciously by fellow Keynesians from academia, IMF and the World bank when they voiced their concerns about the pending disaster. I remember it well.

Group think, Ben, no room for individual thought amongst our Keynesians, as you probably already know.

That leaves Roubini. Hats off to Roubini, because it took some guts to face the battalions of Keynesians economists he peeved off with his forecasts and warnings at the time.

We would like to claim Roubini as one of our own, but I am afraid he might object most strongly.

But you Keynesians are in great company, and it is wrong to ignore your own. Or perhaps you have forgotten Africa’s famous Keynesian, Robert Mugabe of Zimbabwe, who long forecast that his economic policies straight from the Keynesian text books would outlast even the oldest European nation states. I guess Greece qualifies as one of those.

Olivier, wrong. it is governments, and not speculators who are incapable of proper investment.

Speculators do not destroy, they provide sellers when goods and services are under supplied and they provide buyers when goods and services are in oversupply.

Governments are non-productive and their efficiency is a perfectly hyperbolic inverse proportion of their size.

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Dr Dog
Posted Friday, 23 September 11 at 4:32PM

Does anyone know where Marius Kloppers house is? Because I would rob him with a smile and walk away whilstling.

Rockjaw, great to hear from you, and that you seem to have abandoned the gold standard as the basis of all economic theory. Gold is going throught the roof now too so it’s a great time to say I told you so.

I am not sure why you are so keen to separate government and companies in relation to the awful financial mess the world is in. Surely the crisis occurred because government and capital colluded to create an unsustainable economy.

Taxing the rich sounds a lot more healthy than eating them, so I support Ben’s proposal.

zeroxcliche
Posted Friday, 23 September 11 at 4:34PM

Suggestion - A Corporate super profits tax of 40% and end of deductions for earnings over $1 billion could be used to lower company taxes of less than 100 million not to increase revenue but to increase competition. When you have the banks or supermarket chains behaving in a cartel fashion / earning 1 to 2 hundred dollars for every man woman and child in a country their market dominance is beyond unhealthy it is dysfunctional. Like in the current mining tax debate we are seeing the tax shaped by big business interest that could end up being to the disadvantage of smaller players - it is not good for the free market or democracy to have this situation.

For the neo liberals out there history makes clear that government is often responsible for economic development - the post ww2 boom was a result of massive govt investment - most of the technological development we have has come from developments in the public and military sectors. I think govt intervention should try to be small, act ahead of the curve and needs to be more competent and less grandiose - still some of the arguments in this discourse mirror the simplistic political standoff we see in the US and reality is always more complicated.

As for the current crisis - the language and thinking is banking centric - hence austerity has come to fast - Australia has generally got this right - stimulus, recovery, then austerity?(still to come). The stimulus could have been more skilful and cost half as much and when we had a bounce some austerity and targeting of the housing bubble which is what we wasted a lot of the wealth from the boom on would have been good. What is happening in Greece is what is in the interest of the French and German banks - Greece is being stripped of its assets and being forced to sell the furniture before it defaults with particular focus on the public sector. I haven’t heard much about reforming the tax system, something the IMF and EU should have demanded after the GFC - bankers are not interested in these kinds of reforms because they are ideologically bound to this kind of austerity - so ideology triumphs over good management again but it won’t triumph over the large scale correction and stagnation to come - look at Japan that’s the future -

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Rockjaw
Posted Friday, 23 September 11 at 5:07PM

Dr Dog, at first I felt outnumbered, but now I feel outclassed.

Good to see you again, blogging away, and obviously impervious to the problems of the world.

Indeed, if Keynesians would but acknowledge that gold and honest money, not government and monetary authorities, were the true elixir of economic life.

Can you see it? Utopia!

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Perfidious Rex
Posted Friday, 23 September 11 at 7:18PM

Zeroxcliche

The only “shaping” i can see is your proposal to tax based on size. How is a flat 30pc tax rate shaped to suit any particular company?

I agree with your comments about the unhealthiness of our supermarket cartel. However this is a natural result of an over-regulated market place. Regulation favors the strong.

Moving on to more grandiose matters… “most of the technological development we have has come from developments in the public or military sectors”. Really? Will be interested to see your list. Tough to think

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Perfidious Rex
Posted Friday, 23 September 11 at 7:25PM

of too many from our public or military sectors!

Australia has “got stuff right” because we are selling commodities during the biggest commodity boom ever. There is no policy reason for our “success”. There are however plenty of policy reasons why it might come unstuck. PR

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Joe Politico
Posted Friday, 23 September 11 at 8:05PM

Rex - ARE you Marius Kloppers?

I ask because you seem to have confused BHPs success - with Australias.

We’re all aware how well BHP are doing out of the mining boom, but have you heard Gerry Harvey lately?

It’s a shame Australia isn’t doing a whole lot better out of the boom, by taxing miners for digging up Australian natural resources and selling them on at a huge profit. Enough of a profit to pay for the whole of the NBN within a year.

The only reason the resource boom will come unstuck is when the raw materials in the ground run out. At which point, BHP will go somewhere else, and you and I will be stuck - with Australia… and a stack of houses, once priced at 10 times their worth - devalued to market value with a stack of public debt thanks to unscrupulous bankers who encouraged gullible people to take out mortgages to buy them…

huey_pham_04
Posted Friday, 23 September 11 at 8:41PM

Ben,

you are such a big pulling card for me to NM, and i was truly disappointed by this article. The economist’s blog’s analysis of Obama’s tax plan shows that while the proportions of taxes on incomes are low, because the rich are earning so much more these days, they give to government much more than the rest of the population. however, this doesn’t mean that they have a magic mountain of wealth that will solve all of america’s problems. http://www.economist.com/blogs/democracyinamerica/2011/04/obamas_budget_…
http://www.economist.com/blogs/freeexchange/2010/04/taxation
also, while we definitely need to cut loopholes that the rich use to elude their fair share of taxes, but that doesn’t change the argument. taxes need to be directed at the middle class first and foremost in order to broadening the tax base. and i agree with that claim too, but let’s call a spade a spade, let’s not go into this whole ‘it’s us vs them’ mentality which just justifies (what were) erroneous conservative claims about class warfare. it’s such a safe claim that allows people to say ‘oh it’s not me who’s screwing people over, it’s some rich guy’.

and it surpises me that you would use the argument that millionaires would have to be levelled with the middle class. egalitarianism is not as uncontroversial a philosophical position as one mgiht think. i always thought the use of welfare and taxes was to help the poor in and of themselves, not for the sake of equality in and of itself. indeed, many philosophers point to this conflation as an argument AGAINST egalitarianism. http://plato.stanford.edu/entries/equality/#EquVsPriSuf
you might end up right, but it certainly isn’t as clear cut.

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Perfidious Rex
Posted Friday, 23 September 11 at 10:49PM

Joe

Just to be clear - I wasn’t patting Australia on the back. The fact we are one of the world’s most indebted nations would suggest we haven’t managed the resources boom well at all.

And this has nothing to do with any failure to “super-tax” miners but simply our collective desire for present consumption - especially super-sized houses. Is it really the Commonwealth Banks of this world who are luring people into paying for over-valued houses? Or is it more to do with a culture that spawns ridiculous reality TV shows based on making money for nothing from property development and Govt policy that puts rising house prices as top priority?

The mining boom may well come unstuck before the resources in the ground run out. Or are you prepared to back the infinite growth of the US consumer dependent/inflation afflicted/stats manipulating Chinese?

The fact of the matter is that the average Australian homeowner/mortagee sits somewhere on the spectrum between a gullible dope and a greedy pig. Even if it was practically feasible - why should the Marius Kloppers of this world be required to pay for it? PR

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Joe Politico
Posted Saturday, 24 September 11 at 9:13AM

Rex,

I think you can put the blame for house prices just about everywhere:

Poor planning and management by successive governments have led to a shortfall in housing supply.

It’s hard for any government to pass policy which would devalue housing, because it would really upset owners and possibly destabilise the banks.

There is greed, particularly in the investment market - but no surprises there.

If there’s a single thing though that has led to this bubble - it’s that banks are lending irresponsibly. Time was you could only borrow 3 times your annual salary - which constrained property prices fairly well.

In Australia, where there is so much space - outside the very centre of the capitals, housing really should not cost too much more than the material and labour costs needed to build it. It doesn’t make sense that land prices have skyrocketted so much just about everywhere.

The huge public debt which has been amassed to service the interest payments on home loans and mortgages is a timebomb. The same one as caused the US-led GFC when house prices slumped.

______

I’m very concerned if all the wealth generated by the boom has just got vacuumed up into higher property prices because that’s basically throwing all that money down the tubes.

There’s nothing to show for it. The same house has a higher paper value, but nothing else has changed except the bankers bottom line when someone buys it.

______

Taxation should be and often is a good thing. It’s money collected by the government on our behalf - to be spent on improving our standards of living and safeguarding our futures.

Money spent directly employing doctors, nurses and teachers provides a direct social benefit as well as creating jobs.

Governments invest in infrastructure which has a long term return, or is even loss making, but needed for industry and commerce to function at all - like roads and rail.

The wealthiest in Australia have become so (if they didn’t inherit it) because they have been able to take advantage of a progressive country with an educated population where vital infrastructure is already in place.

The miners especially are doing not much more than taking Australias sovereign wealth out of the ground and raking in a hefty commission for digging it out and selling it.

Taxing that wealth should plow back money to build the kind of future we want, instead of just lining shareholders pockets. Australia won’t have this opportunity again.

_____

What I’d like to see from this boom is people enjoying higher disposable incomes and government investing tax in building stuff we really need.

What I am seeing is banks raking in interest from higher property prices and declining disposable incomes leading to retail slump.

Taxing the rich and the miners can go some way to addressing infrastructure and development, but until housing and rental prices are tackled seriously, consumer spending will stay in the dumps and personal debt will continue to be a ticking timebomb.

However, any government trying to devalue housing would face a storm that makes the Carbon Tax look like a breezy walk in a summer meadow.

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Godfrey
Posted Saturday, 24 September 11 at 10:10AM

Should the rich be taxed more? Of course.

Remember what the reasoning was when we lowered all those taxes on rich people in the first place? They will have more money to invest in productive enterprises and we would all be better off.

Kind of didn’t happen. One thing we don’t have is a public discussion about the rich and higher end managerial class actually fulfilling their social obligations as a class.

http://wp.me/pb4Hp-1g

www.tradeunion.wordpress.com I @gemoase

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Perfidious Rex
Posted Saturday, 24 September 11 at 10:47AM

Joe

I agree with many of your points (the main exception being that Marius Kloppers is not too blame for it all).

A few points of distinction:

1. Firstly, the whole undersupply of housing concept is a myth perpetuated by the property industry to justify higher prices in the face of poor investment fundamentals.

2. Re causation - I think you need to go beyond the banks and look at the underlying regulation that causes them to over-finance the housing sector. For as long as I can remember residential mortgages have received concessionary capital adequacy treatment. Hence banks have been incentivized by Govt policy to lend to the non-productive housing sector at the expense of lending productively. This comes on top of the basic structural incentive in the banking system - borrow short term/lend long term and rely on taxpayers when it blows up.

Other policies such as negative gearing and FHBG’s have only exacerbated this underlying structural problem.

Can we really entirely blame the banks for following the policy incentive that has been laid down for them?

3. I agree with your point about lax lending standards but Banks have long given up worrying too much about a borrowers capacity to repay. A housing loan these days is more in the nature of an “equity lend” where as long as the bank can recover their money through enforcing their security the income level of the borrower is somewhat irrelevant to them (and hence the need for mortgage insurance).

4. In terms of the benefits of the boom being invested in ever larger houses I agree that this is a terrible waste of our national wealth. However the biggest disaster of all is that we have not just spent our own savings on super-sized houses but have financed our profligate lifestyles with foreign debt.

If we had financed it with our savings we would just end up unproductive. But as we have financed it with foreign debt the risk is that we blow up in spectacular Ireland-style fashion.

***

What can Government do to address these issues? Well they probably can’t do much to help those that have consumed way beyond their means by loading up on personal debt. Tragically (albeit fairly) their bankruptcy is probably only a question of time.

However they could start removing the perverse incentives that push up house prices (esp negative gearing - which should get support from the Greens as it is one of their policies) and they need to start working on how to pull back their subsidization of the banks. The latter will be tough but far more critical for Australia’s long term well being than working out how much we can tax Marius Kloppers. PR

Marga
Posted Sunday, 25 September 11 at 11:28AM

What then should be addressed during the Tax Summit?

1. Income and labour related taxes are easy-to-levy taxes but inherently inefficient (progressive income tax is a tenet in the Communist Manifesto). They are being evaded, avoided, tax-planned away, circumvented by both the rich and the poor end of the scale, and only the middle person pays.
They may not legally be theft but when an amount of money is forcibly removed from my hard-earned income and I do not know how it is being spent, then I see that as theft.

It is not so much whether or not we are a high-taxed country, but more so, what do we get from our taxes? Not much when I look at our infrastructure (or lack of it), education, health, our bloated welfare sector.

A big problem is that we have far too many taxes, most of them generate very little income. The whole system is far to complex and leaves even experts baffled.

Another problem is that taxes flow into Consolidated Revenue and then come under the control of politicians who use the funds to buy electoral favours leading to inequality.

2. This topic is so huge that it cannot be addressed in one article.
But here are some items on my - quite radically thought out - wish list (in no particular order):

2.1 Reduce the emphasis on income and labour-related taxes and ultimately phase them out.
Introduce instead natural resources charges, so-called edonomic-rent (windfalls that now go to the ‘owners’ of natural resources). Natural resources are common wealth, community wealth, and if monopolized by anyone entity this entity should pay for the exclusive use. (see the Henry George principle).

In this context (and talking as an environmentalist): introduce progressive charges for environmental use and abuse.
Example: why do we reward frequent flyers? Should we not charge frequent flyers extra, especially where the flying is for pleasure or otherwise not necessary?
At least until such a time when/if we derive all our energy needs from solar, wind and other renewables, but not from fossil fuels.

2.2 Introduce a transaction cost (now being looked at in Europe) for all stock exchange/exchange rate transactions. The cost need only be a fraction of 1% per transaction, based on volume, but the sheer volumes that are traded each day make this a generous income earner.

2.3 Increase and broaden user-pay taxes (GST in our case). The Lefties will cry out: but what about the ‘needy’? Well, if there are truly needy people, there are ways and means to assist them.

2.4 Address negative gearing. At a minimum, treat property/investment losses like you treat capital losses (the latter are offset against capital gains, not against income): offset property/investment losses against income from property; carry forward the losses where needed, as are capital losses.

2.5 Stop tax-exempting religions unless it is for genuine charitable purposes.

2.6 A total revamp of our Social Security and Education systems.
Our welfare system is bloated, inefficient, exploited, middle class, inegalitarian, and funded from Consolidated Revenue.
Phase it out over time and phase in over time social insurance, directly funded (not via Cons. Rev.), in 5 key areas (retirement, aged care, health, unemployment, disability).
Do away with family payments, baby bonuses, single parents pensions and instead strengthen education (including childcare)and employment.

Alas, the Tax Summit will just be Talkfest, generously catered for from our taxes.

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Perfidious Rex
Posted Sunday, 25 September 11 at 8:49PM

Another great analysis Marga. The Tax Summit will indeed be a waste of everyone’s time and money. If “negative gearing” can’t even make the agenda then I think that is a good indication of how seriously Wayne Swan is considering tax reform.

To comment on a few of your suggestions:

1. As you say income taxes are a poor way to raise revenue since you are literally taxing people’s effort and productive activity. Probably not the end of the world if the rate is 20% but once people are talking about 50%+ taxes then you have to seriously consider the potential extent of the damage. Mind you payroll tax is the most diabolical tax of all - a tax on giving someone a job!

A much lower rate of income tax would solve a lot of the problems you mention. With a lower rate there is much less incentive to bother minimizing it and so the rules don’t end up anywhere near as complex. A quick look at the tax systems of the world illustrates this point - Hong Kong/Singapore etc have simple systems. Countries like the US and Australia have diabolically complicated systems.

2.1 - Not sure exactly what you had in mind here? I am not a fan of retrospective legislation so wouldn’t want to see someone taxed for a right they had already purchased (effectively double taxation) but fundamentally I don’t have a problem with the idea of taxing someone’s “free ride” (just complicated?)

2.2 - The problem with transaction costs like these is that they are fairly easily avoided and/or it just pushes up the prices of everything reliant on the transactions.

2.3 - Absolutely the GST should be increased. The Lefties are a funny lot. One minute they are screaming about excessive consumption and the need for the Govt to tax. But the minute you say “why don’t we tax consumption?” they scream blue murder. I guess they only like taxes that are imposed on other people?

2.4 - Negative gearing. Should have been gone long ago as it is impossible to justify from a policy perspective. We’ve got the worlds most over-priced houses and we are giving tax concessions to push up demand?

2.5 - Agree.

2.6 - Agree again. The tax system shouldn’t be used to encourage having babies, staying at home or not staying at home etc etc. And the welfare system needs a complete overhaul. This is where the energy and resources of our politicians should be going - not arguing about asylum seekers, carbon tax and broadband networks.

Cheers PR

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Perfidious Rex
Posted Monday, 26 September 11 at 9:08AM

The US “Fairtax” initiative is interesting viz a viz tax reform. 23pc flat sales tax with fixed rebate to cover essentials for low income earners.

I only just came across it but, unlike super-taxing the wealthy, it seems based on common sense. Simplify the system, get the tax admininstrators back to productive activity and minimize avoidance. PR

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Joe Politico
Posted Monday, 26 September 11 at 10:29AM

@ Marga…

Your failure to understand how tax is being spent on you doesn’t mean that it wasn’t. You still get the benefit whether you understand or not.

Australian infrastructure certainly does need improvement, but if you think it’s bad maybe you should try visiting India or even England some time soon.

Progressive taxation has been FUNDAMENTAL since Adam Smith invented taxation, because even in the 1700’s it was pretty obvious that is the only fair way to do it.

Your dislike of income tax in favour of GST type taxes misses a fundamental truth that the rich earn much of their income passively through shares and capital gains which is every bit as much income -by effect - as a pay packet.

To suppose that the middle income are the only taxpayers is also naive. The poorest don’t pay much because they don’t have much to begin with. If you have a problem with that, I suggest trying to live on a minimum wage in Sydney or Brisbane for a few months and tell me how much fat you think you can trim.

The rich do find ways to get round tax, but the solution to that is to tighten up tax law - which has been quite effective - not to do away with income tax.

“Middle Australia” is hurting because people are over-mortgaged, overspending and overpaying for private education. I’ve never seen so many $100k+ income earners pleading poverty. It’s not because of taxation.

Looking at your individual points, I can find some things to agree with.

2.1 - Is not one of them. Tightening up housing planning and making incentives for genuine energy efficiency carefully (i.e. not stupid insulation scam-schemes) is the way to go.

2.2 - Tobin tax is a great idea - will encourage investors and push out speculators.

2.3 - GST is a highly regressive taxation. Increasing GST on luxury items like expensive new cars and other targets could work well, but GST levied on food, fuel and educational supplies is plain silly and has been avoided to an extent already. On the whole GST hits the poorest hardest because they need to spend most of their income to survive and therefore bear a proportionally larger burden of tax. This is basic maths and well understood.

Taxing consumption isn’t the issue. Income tax taxes consumption proportional to - well - income!

2.4 - Agree

2.5 - Agree

2.6 - Disagree. I have huge issues with how superannuation is managed as effectively a subsidy to the private sector with very few restrictions placed to stop them charging huge management fees and no guarantee at all that the next stock market crash won’t wipe off half te value of peoples retirements. It’s conceptually a great idea but it is going to be a great big rort for a lot of peeople and guess who is going to have to clean up the mess after the vultures have taken their share?

Public welfare is the hallmark of a civillised society which cares for the poor and the sick and funds that through the public purse. Social benefits are not a great deal of money, very hard to live from. Almost nobody is doing it as a jolly. I don’t begrudge some of my tax dollars paying for it. Better that than corporate welfare and bank bailouts.

I have no confidence the private sector can fill the gaps with income protection insurance or any large scale health and welfare. See America for details. When private schemes fold, those who paid in have no recourse, and the private sector acts from a profit motive rather than to keep people healthy and working.

That said, I would also do away with the baby bonus and paid parental leave. We don’t need more kids and if we did, there’s a ready willing supply of skilled migrants to make up the numbers and we won’t even have to pay to educate them.

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Perfidious Rex
Posted Monday, 26 September 11 at 11:14AM

Joe P

There were plenty of things that were “obvious” to Govts of the 1700s. Many of them aren’t so “obvious” today….

A key rationale for consumption taxes is to make sure the wealthy (and black market operators) do pay their appropriate share of tax. As I think you are saying - passive income tends to end up concessionally taxed. If someone makes their money speculating on real estate they can potentially get away with paying no CGT, whereas a highly trained lawyer/engineer/doctor who works his ar*se off over say 5 years and is saving a nest egg, might make the same amount of money but pay 45% tax.

Everyone acknowledges the fact that a consumption tax is regressionary but this can be dealt with through other means (eg the FairTax’s fixed rebate per person). There would be plenty of savings through simplification that could be passed on to the most needy.

Agree with you that superannuation is a gravy train for the financial planners and fund managers. However switching management of retirement savings to the most incompetent managers of all is not the answer. Just ask the Greeks how well this has worked out for them!

Like many issues what we need is more education and investors taking a more active interest in ensuring their retirement savings are managed properly.

Finally - it is interesting that one of the few points of agreement between socialists and free marketer supporters is that they don’t want taxpayers bailing out banks and many would agree that we should rid ourselves of our current banking system. Whilst they are each coming at the issue from different perspectives I think this speaks volumes…. PR

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Joe Politico
Posted Monday, 26 September 11 at 11:44AM

Rex - you might give your accountant or tax agent a good laugh suggesting GST is simpler than income tax!

GST is pretty complicated to administrate and managing it imposes a big overhead especially on small businesses. Many microbusinesses don’t register for GST and lose out as a result - but they are right not to - the extra reporting costs for a business with less than $75,000 a year turnover are generally greater than what they can claim back.

It’s often easy to think of GST as a consumer-only thing, but it’s a big issue for small businesses and it doesn’t favour them. For a small non GST registered business, the entire value of the sale counts as income - no GST decuction to apply.

One of the core ideas behind GST was to get some revenue out of cash-in-hand workers who have to purchase supplies (builders for example) - the government doesn’t have to refund the GST if the person isn’t registered, so they still get some revenue even if an amount of income tax is illegally avoided.

By contrast, it’s very easy for employers to impose PAYG withholding which is then paid to the ATO at regular intervals. The withholding calculations are simple and most software (MYOB etc) works it out easily. As there are far fewer employers than individuals - there’s less administration, and it is less prone to corruption as a fairly small number of employers provide jobs to a very large number of people.

Refund type systems to pay back low income earners can be very burdensome - not least because they generally rely on some combination of a government agency (like centrelink), the individual and a tax agent (and tax agents charge by the hour) - so compensating which relies on means testing tends to be pretty expensive.

The regressive/progressive thing is ideological. I just dont think someone on $30k a year should be taxed 30% of their income like someone on $85k.

Marga
Posted Monday, 26 September 11 at 3:15PM

Perfidious Rex and Joe Politico:

PR: Thanks for your encouraging comments.
Item 2.1 deals with the Henry George concept of natural resources taxes (in his days it was just land), a topic that has pre-occupied thinkers for centuries.
The principle is that the earth belongs to all and if we want to monopolize a part of it for exclusive use, then we have to pay the community for it.
Prosper Australia (www.prosper.org.au) is the contact here.

The Ken Henry review proposed a flattening of income tax scales and introduction of land tax.

Item 2.2: I see no problem with the transaction tax (Tobin Tax) as it applies only to share/exchange rate transactions.

Joe Politico:
With some of your remarks I just have to say: been there, done that and survived because I relied on my inner strengths and independence.

I am all for helping people, but only helping them to get onto their feet, not helping them in perpetuity.
In this context I think of the Canadian wealthy couple who founded, and manage, a $100m foundation for disadvantaged kids. The rule is: if you mess up, you are out.
Social workers and do-gooders dislike the couple, not only because they run their own show, but because of their strictness.
I applaud them.

You obviously have a strong dislike for GST, perhaps speaking from experience. It is very messy, but was made so messy because of all the exemptions, thanks to the Democrats. It would become a lot easier, if GST would be applied across the board.
I say it again, the TRULY needy can be helped in other ways. Unfortunately, many needy are just needy because they are greedy or can’t manage.

Our Super system certainly needs a big makeover. That is why I included it in one of the 5 key areas where I want social insurance rather than welfare.

It is not social welfare (or public welfare) that is the hallmark of a civilized society, but social security. So, it is a matter of defining, packaging and funding it, of risk-sharing and of everyone making a contribution to the best of one’s ability and means.

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ninetynine
Posted Monday, 26 September 11 at 4:15PM

Marga wrote: “It is not social welfare (or public welfare) that is the hallmark of a civilized society, but social security. ”

- Provision of welfare from the public purse IS social security. Remember when Centrelink used to be called the Department of Social Security? I think the latter was a more apt name.

…

Marga also wrote: “So, it is a matter of defining, packaging and funding it, of risk-sharing and of everyone making a contribution to the best of one’s ability and means.”

- Sounds like an argument for progressive taxation, however you want to package it!

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Joe Politico
Posted Monday, 26 September 11 at 4:51PM

Just for you Marge :)

“‘At this festive season of the year, Mr Scrooge,’ said the gentleman, taking up a pen, ‘it is more than usually desirable that we should make some slight provision for the Poor and destitute, who suffer greatly at the present time. Many thousands are in want of common necessaries; hundreds of thousands are in want of common comforts, sir.’

‘Are there no prisons?’ asked Scrooge.

‘Plenty of prisons,’ said the gentleman, laying down the pen again.

‘And the Union workhouses.’ demanded Scrooge. ‘Are they still in operation?’

‘They are. Still,’ returned the gentleman,’ I wish I could say they were not.’

‘The Treadmill and the Poor Law are in full vigour, then?’ said Scrooge.

‘Both very busy, sir.’

‘Oh. I was afraid, from what you said at first, that something had occurred to stop them in their useful course,’ said Scrooge. ‘I’m very glad to hear it.’

‘Under the impression that they scarcely furnish Christian cheer of mind or body to the multitude,’ returned the gentleman, ‘a few of us are endeavouring to raise a fund to buy the Poor some meat and drink, and means of warmth. We choose this time, because it is a time, of all others, when Want is keenly felt, and Abundance rejoices. What shall I put you down for?’

‘Nothing!’ Scrooge replied.

‘You wish to be anonymous?’

‘I wish to be left alone,’ said Scrooge. ‘Since you ask me what I wish, gentlemen, that is my answer. I don’t make merry myself at Christmas and I can’t afford to make idle people merry. I help to support the establishments I have mentioned-they cost enough; and those who are badly off must go there.’

‘Many can’t go there; and many would rather die.’

‘If they would rather die,’ said Scrooge, ‘they had better do it, and decrease the surplus population. Besides-excuse me-I don’t know that.’

‘But you might know it,’ observed the gentleman.

‘It’s not my business,’ Scrooge returned. ‘It’s enough for a man to understand his own business, and not to interfere with other people’s. Mine occupies me constantly. Good afternoon, gentlemen!’

Marga
Posted Monday, 26 September 11 at 5:47PM

See Joe, they lacked social vision, social organization, social insurance, collective risk insurance, long-term planning.
The Bismarck concept had not caught up to them. Ciao

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Perfidious Rex
Posted Monday, 26 September 11 at 8:11PM

Joe P

I agree completely that the GST system is too complicated. But as Marga says this is because different items are subject to different treatment (thanks Meg). Consumption tax on everything is not that hard. Businesses simply need to apply the % rate to every amount they bill. As the treasurer of a community organization I can guarantee this would be very simple.

I don’t think there are many people who think someone on $30k should pay the full rate of tax. Hence the suggestion that they be compensated. It doesn’t need to be means tested - if everyone gets the same rebate it will eliminate the tax payments of a low income earner and make very little difference to the tax payments of a wealthy person.

Anyway. Ben wants to tax the wealthy. I was simply suggesting a way that the system might be changed to ensure the wealthy are taxed appropriately. I can guarantee you that if the rate was changed to 70% they will find a way to not pay it (and most likely they will end up paying less than today since it is hard to avoid only part of an income tax impost). Having a look at what happened when the UK tried to “super-tax” banking bonuses. Half of them left the UK and the other half got massive pay rises to compensate!

You can come up with all the Scrooge analogies you like but improving the system is a better approach than just adding more handouts and grabfests. PR

MrFreedom
Posted Friday, 30 September 11 at 12:38PM

Wow, this article reads just like a propaganda flyer for Socialist Alliance - so naive and so shallow. Other commentors have already noted the obvious reasons why the ‘super income tax’ proposal would fail to raise any more revenue (ie, further tax avoidance, the wealthy leaving Australia, reduced incentive to earn, etc.). There is also no point trying to raise enough revenue for the endless wish-list of government spending ideas… because it is endless – just like any financial entity, government income is finite and that should be a driver to spend the limited funds in the most efficient way possible. Japan’s lost decade(s) and the looming global recession mark 2 are perfect examples of Keynesian government spending (even on well-intentioned infrastructure) not delivering a vibrant economy with a strong middle class (aka. the ‘equality’ being sought).

Whilst tax reform is a good thing, changes to the tax system are not the reason that income distribution is now more ‘unequal’ in Western nations, and they will not be able to reverse the trend. For a some real journalism that goes beyond petty class warfare and looks at underlying reasons for increased inequality in the West, how about some investigation in these areas?

1. Globalisation: the ‘equality’ in Western nations is based on its strong middle class (in manufacturing and mid-level white collar), which is now being hollowed out and re-created in China. This both reduces wealth and numbers in the West’s middle class and increases corporate profits in Western companies who outsource, producing more wealth for shareholders and top management.

2. Technology: this both facilities globalisation and allows more to be created with less people. Also, I contend that jobs involved in creation of new technology in the West tend to be fewer in number but highly specialised and high paid – the ‘middle class’ manufacturing portion is done in China. Finally, I think we are also starting to see the endgame of technology manifest itself – it simply takes far fewer people to create the necessities of life than there are people, so there is starting to be polarization of Western society between a large number of unemployed welfare consumers and poor service sector employees, and a small wealthy elite of ‘technology-masters’ and company shareholders. How big our elite category is (and hence how long they can prop up the rest) depends on both our Education system and the business/tax conditions here relative to other country’s (aka. China’s/India’s/USA’s).

I don’t know exactly what the solutions to these drivers of Western inequality are, except that neither of them can be naively reversed, say by protectionism or mandated job sharing – the world economy is too connected for us to bury our heads in the sand and do something like that unilaterally. Nevertheless, this is what NM, politicians and the media should be discussing!

On a side note, I do believe corporate director/top management mega-salaries are probably being rorted, reducing the share for employees and end shareholders (such as individual super fund members). I have heard that the consultants hired to recommend ‘fair’ salaries/bonuses are often the same for the big companies and their biggest shareholders (the super funds), so it is in the super fund director’s personal interests not to kick up a stink and draw attention to these arrangements – a massive conflict of interest. Perhaps there could be a law such that intermediate shareholders (the super fund companies) have to pass on their votes to the ultimate shareholders (us – the super members) for all the companies they have stakes in? NM investigative story idea?

MrFreedom
Posted Friday, 30 September 11 at 1:05PM

PS. Above comments were for Western countries in general - admittedly Australia is benefiting from the mining boom temporarily so its bottom line is a bit better, but we are still in the same bucket.

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ben.eltham
Posted Friday, 30 September 11 at 2:37PM

MrFreedom (love your handle by the way) -

It’s worth addressing some of the furphies put forward by PR and yourself here.

For instance - a tax will simply encourage the wealthy to leave Australia. Well - the current tax rate of 45% is already a lot higher than Bermuda or Monaco or Vanuatu, but I don’t see Gail Kelly or Wal King or Clive Palmer setting themselves up there. There is certainly a bit of this going on but the ATO has been pretty vigilant in policing it, as Operation Wickenby shows.

The reduced incentive is my favourite argument in this whole debate. Are we really saying that people who are already so rich that they don’t have to work will suddenly withdraw their labour and retire to a beach shack? Somehow I doubt it. CEOs and other members of the super-high earning executive class are highly intrinsically motivated people. Sure, they won’t say no to an extra million or two every year, but the real reason they crave these jobs is the power and the relevance it brings them.

As for the causes of inequality (not responding to your more annoying trolling etc etc) the best work has been done in the US by economist Emmanuel Saez. And yes, he found that the super wealthy are capturing far more of the wealth of western societies than in the 1950s and 1960s. A winner-take all society has developed where those at the top of the pyramid really can expect to be remunerated in ways unimaginable to ordinary middle managers or professionals.

Can tax policy address that? Not on its on. And I haven’t suggested that it can. But taxing high income earners can certainly help to address the issue, and raise extra revenue in the process. One of things you could do with that extra revenue, by the way is give tax cuts to low income earners or to small business. Just saying.

Whether you think Australians pay too much tax is a rather different issue. There will be many that argue that almost any amount of tax is too much, but on international comparisons Australia is low-tax nation.

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Perfidious Rex
Posted Friday, 30 September 11 at 5:41PM

Ben

I have already responded to the low-tax point (assume you are still relying on the ACOSS study?).

I don’t think anyone has suggested the wealthy will leave Australia en mass in some Atlas Shrugged style response to high taxation. The point was simply that at 60-70pc they will find a way to ensure they don’t pay - probably more likely through judicious use of leverage and structuring than relocation - although 60-70pc does open up the option of shifting to just about every single other country on earth (whereas 45pc rules out many developed nations).

Operation Wickenby caught some blatant tax avoidance although not Hoges as I recall (perhaps not quite the success you make out?) However again I don’t think anyone was suggesting they would resort to this style of tax minimization.

Inequality may well be an issue but, as MrFreedom points out, your tax proposals are not going to help it. PR

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Rockjaw
Posted Saturday, 01 October 11 at 7:16AM

It is true that high income earners are not paying their fair share, but it is true because they are paying more than their fair share, not less.

Besides, it is the rich who are providing the necessary venture capital to create what little employment our Keynesian policies has not yet destroyed.

Not only that, but yes, it is true that capital has left the country, and it continues to leave in much larger sums than anyone is willing to admit.

For decades now the western industrialised nations have been misguided by these new economists whose policies and theories have taken us fluently from one crisis into the next. Never an end in sight except the promise of greater unemployment, reduced productivity, greater taxes, disappearing investment capital flowing to those nations which are more fiscally modest.

These mad modern economists get it wrong 100% of the time and yet never do we witness any of them dealing with their shortcomings as economists.

As was pointed out by James Galbraith, “they predict disaster when none occurs, they deny the possibility of events which then happen. They oppose the most obvious and logical reforms while offering placebos instead. They are always surprised when something untoward like the current recession actually occurs, and when finally they sense that some position cannot be sustained, they do not re-examine their ideas. They do not consider the possibility of the flaw in their logic or theory.”

The public has lost confidence in their ability to address these problems, sensing that the problems have become worse not better. This is not not despite the best efforts of these misguided political economists, but because of their misguided efforts.

All which has been bought for the trillions of dollars spent across the Keynesian world has been tepid change in the rate of destruction and the prospect of certain economic collapse, and yet we are coerced by an ever more menacing totalitarian political class to accept these disastrous economic policies.

Yes, as you rightly point out, austerity is not working in Greece, and for obvious reasons, the most obvious being that the damage is already so intense that only complete collapse of that same toxic debt, and the institutions encouraged to write them into existence, should be allowed to occur without further cost to the few remaining productive members of our various societies. And yet here we are being talked into more of the same failed economic policies of infinite debt.

Even Bernanke has finally admitted that the Fed can do nothing more without yet more fiscal spending which, despite trillions already having been spent, has bought the debt weary American public nothing but further declines in employment, credit downgrades of the world’s biggest economy and the first signs of civil unrest throughout the nation.

But the failed policies and the dogged adherence to the madness contained in those economic policies persists, and it persists at the dire peril of every economic region which is exposed to them, from Zimbabwe in Africa to Greece in Europe.

And yes, the wealthy are removing capital from this country, in proportions too large for our relatively small economy to afford.

We have been hoodwinked into this road to perdition and it is only those who are blind and deluded who cannot see it.

With some relief the voter appears finally able to see through the madness and we hope that the world’s productive communities will not be too slow to lift these spendthrift bankrupts from our seats of power and to replace them with leaders who are capable of bringing us all back from this mad road to ruin.

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