Ken Henry and me, the tax nutter
There’s always one nutter at high profile public meetings isn’t there? Well today it was my turn to be the nutter.
At the Australian National University today a high flying panel which included Ken Henry of Henry Tax Review fame and Nobel laureate Sir James Mirrlees of British tax review fame talked about tax, and in particular Ken’s review released back in the dark ages of 2 and a bit years ago when Kevin Rudd was still Prime Minister.
It was the usual dreary neoliberal line up, all concerned with efficiency, except for one ray of sunshine, Patricia Apps. She lambasted the Henry Review for its further embrace of family taxation and the adverse impacts this will have on women workers.
She showed the impacts of Ken’s suggestions for a flatter tax system would be an increase in effective tax rates on workers.
I asked a question, which was more a comment about neoliberalism producing a fightback in Europe, the Arab Spring and the Occupy movement.
Ken had stressed looking at progressivity as a whole, not in relation to just income tax but in relation to the tax and transfer systems overall.
I made the point that even according to the OECD’s Divided We Stand report there had been a massive shift of wealth to the rich and that Australia’s tax and transfer system had done little to address that shift. In fact his changes would speed that transfer up.
‘Viewed as a whole’ the system has become less progressive. According to the ACTU the average tax rate on the bottom 20% of workers is 26.7%. In other words the people who own only 1% of Australia’s wealth and earn a pittance pay just under 27 cents in tax for every dollar they earn.
The figure for the top 20% of income earners is 34.5%. So the people who own over 60% of the wealth in Australia and earn motzas in effect only pay 34.5 cents in every dollar of income they earn, a mere 7.8 cents more per dollar than the bottom 20%.
What Ken’s proposals will do is make that difference smaller.
His vision is for an expanded Commonwealth GST, and for the States to impose their own GST, a tax called a business expenditure tax to replace stamp duties. He wants a progressive land tax, which is really about attacking working class wealth to fund lower taxes for companies and the rich.
The usual bourgeois wet dreams about removing the exemption on fresh food, education, child care and health from the GST came up, as did increasing the rate. Unfortunately this seed may not fall upon the ground.
The impact on the working class and poor of these changes would be big. For example one suggestion at the discussion was to increase the rate from its current ten percent to 20%.
Supposedly the extra $15 or so billion from extending the GST base could be used to improve the life of the poor and working class. Pigs might fly. What the bosses want is company tax cuts and cuts to the top marginal tax rate.
Supposedly company tax cuts are all about benefiting workers. That must explain all those workers’ demonstrations for big business to pay less tax.
But hang on. According to the ATO, between 2005 and 2008 40% of big business paid no income tax. So what do we want; that no big business pay income tax?
And Ireland, with its 12.5% percent company tax rate turned out well, didn’t it?
Ken talked about filling in the holes in the tax base to produce more equitable outcomes. I agree one hundred percent. All those tens of billions of tax expenditure benefits that the rich receive should be swept aside.
he said that he dare not ask the question whether the resource rent tax was worth it. of course not. This pathetic little tax has been designed to give the impression of taxing the miners without actually doing so. It is an example of the degeneration of social democracy in Australia.
Ken made the point that to fund the expectations of the community taxes might have to rise.
I argued that all across the developed world the response was for governments of whatever persuasion not to increase taxes on the rich and capital but to cut welfare spending and spending on public goods like health, education and transport, as well as shift the tax burden from capital to labour.
Apparently in response to me putting the discussion in terms of capital and labour Ken also said that the idea of a top marginal rate of 66% was a joke. I hadn’t mentioned it, but would say it doesn’t go far enough.
In France Jen-Luc Mélenchon from the Front de Gauche wanted a 100% tax on all income greater than 360,000 euros. That’s about $430,000.
Taxing all income greater than $500,000 at 100% sounds good to me, and is perfectly defensible.
He suggested his fringe benefits and superannuation changes were about progressive. Ken, ever heard the words mickey mouse to describe reforms? If your FBT and super changes are the sum total of progressivity then god help us.
A progressive tax system in which the rich and powerful and companies begin to pay more, to pay their fair share, won’t be won from their table by being nice. Certainly tax reviews by the one percent for the one percent won’t change the fundamental inequalities of society. We’ll have to shake their table for more than crumbs to fall off.