Tax – making workers pay
This is a letter I sent to the Financial Reviow in response to 2 tax articles in today’s edition.
The articles by Kelly O’Dwyer and Stephen Bartos raise related and important issues about tax and tax reform. (‘Cut tax rates to attract capital, talent’ and ‘Google ‘spurs debate in an electronic age’ respectively Australian Financial Review 29 May page 63).
O’Dwyer’s premise is that Australia is a high tax country. Compared to other OECD countries this is not true. We are the sixth lowest taxing country.
O’Dwyer also argues tax is a critical consideration in determining investment decisions. This is not true for all capital but may apply to highly mobile capital.
Further, she argues that tax determines the location of labour. This is true but only for the one percent (whom O’Dwyer mislabels as the ‘talented people’) and even then is not necessarily determinative. In any event the rest of us – presumably the untalented ones – have little choice as to which country we sell our labour power in.
Stephen Bartos makes the point that some capital is highly mobile and for that reason the Henry Tax Review recommended Australia tax things that don’t move, like land and resources.
An even more interesting point might be the Henry Tax Review’s hints about taxing all economic rent, or super profits, of which resource rent taxes are merely a subset.
Henry also suggested a simplified tax on consumption, which was among other things a none too subtle way of suggesting the GST could be broadened and increased.
There is a thread that runs through the Henry Tax Review and the thinking of O’Dwyer and perhaps Bartos. It is that the state should take less out of the earnings of capital, earnings created by the labour of workers.
It may be this ‘tax capital less’ mantra is a response to a systemic problem, the tendency under capitalism of the rate of profit to fall. Cutting tax rates won’t address that threat to capitalism. Paradoxically it might increase it in the long term.
Leaving that aside, a question for O’Dwyer to address is ‘where is the money coming from?’ to pay for schools and hospitals, aged care and dealing with climate change? .Does O’Dwyer seriously think that cutting Australian taxes on capital will lead to such an explosion in income and gains that there will be an increase in state revenue despite there being lower taxes?
Now where have I heard that sort of trickle down theory before? And hasn’t it worked well for Ireland with its low company tax rates?
Maybe the hidden message in O’Dwyer’s article is that if we want tax systems comparable to Hong Kong and Singapore then we should have spending on public goods and welfare states similar to theirs as well. So where would O’Dwyer yield the axe?
Henry and Bartos seem to have another answer – tax land, resources and, for Henry, consumption.
This is in effect a further transfer of the tax burden onto the Australian working class, as part of the overall global and Australian trend to increasing inequality to address stagnant or falling profit rates globally.
Maybe the time has come to consider a tax system in which equity and not efficiency is at the forefront of tax policy. I note on that an equitable society is often more efficient for capital than an inequitable one.
Of course, if the underlying problem is systemic, if the underlying problem is declining profit rates over the long term in the developed world, then maybe it is time to consider an alternative system to profit and competition.
Organising production democratically to satisfy human need might be a good place to start.