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Keep socialist blog En Passant going - donate now
If you want to keep a blog that makes the arguments every day against the ravages of capitalism going and keeps alive the flame of democracy and community, make a donation to help cover my costs. And of course keep reading the blog. To donate click here. Keep socialist blog En Passant going. More... (4)

Sprouting sh*t for almost nothing
You can prove my 2 ex-comrades wrong by donating to my blog En Passant at BSB: 062914 Account: 1067 5257, the Commonwealth Bank in Tuggeranong, ACT. More... (12)

My interview Razor Sharp 18 February
Me interviewed by Sharon Firebrace on Razor Sharp on Tuesday 18 February. http://sharonfirebrace.files.wordpress.com/2014/02/18-2-14-john-passant-aust-national-university-g20-meeting-age-of-enttilement-engineers-attack-of-austerity-hardship-on-civilians.mp3 (0)

My interview Razor Sharp 11 February 2014
Me interviewed by Sharon Firebrace on Razor Sharp this morning. The Royal Commission, car industry and age of entitlement get a lot of the coverage. http://sharonfirebrace.com/2014/02/11/john-passant-aust-national-university-canberra-2/ (0)

Razor Sharp 4 February 2014
Me on 4 February 2014 on Razor Sharp with Sharon Firebrace. http://sharonfirebrace.files.wordpress.com/2014/02/4-2-14-john-passant-aust-national-university-canberra-end-of-the-age-of-entitlement-for-the-needy-but-pandering-to-the-lusts-of-the-greedy.mp3 (0)

Time for a House Un-Australian Activities Committee?
Tony Abbott thinks the Australian Broadcasting Corporation is Un-Australian. I am looking forward to his government setting up the House Un-Australian Activities Committee. (1)

Make Gina Rinehart work for her dole
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Sick kids and paying upfront

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Save Medicare

Demonstrate in defence of Medicare at Sydney Town Hall 1 pm Saturday 4 January (0)

Me on Razor Sharp this morning
Me interviewed by Sharon Firebrace this morning for Razor Sharp. It happens every Tuesday. http://sharonfirebrace.com/2013/12/03/john-passant-australian-national-university-8/ (0)

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Soak the rich to pay for the floods

I agree with the working class demands of Socialist Alternative for jobs, houses and pay for those workers affected by the floods. In an article called Government should rethink priorities to deal with flood region they say:

All those [workers] who have lost their homes need a guarantee that they will have another rebuilt at no cost. All those who have lost their jobs should continue to receive their full pay, or where that is not possible, should be guaranteed a job through the government. All those who were unemployed and wanting work should be given a full-time well-paid job assisting the clean up. That’s just for starters.

They make a number of suggestions for paying for this, like withdrawing from Afghanistan, taxing the gross operating profits of business, withdrawing the coal industry subsidies and not propping up private schools. Compare that to our Labor Party Prime Minister Julia Gillard who said that the Budget would be in surplus as promised by 2012/13 and that the extra costs to the Budget of the floods meant ‘tough choices’ would need to made. She means tough budgetary choices for us, not for business and the rich.

Back in July Gillard gave a speech to the National Press Club in which even then she was talking about hard choices and unpopular cutbacks. What did she have in mind? Let me quote:

What sort of unpopular choices does she have in mind? Here’s a guide, from Gillard’s speech at the Press Club again.

The sectors which may need renewal and reform are often those that were relatively untouched by the Hawke-Keating reforms – sectors like health and education that meet essential public needs, delivered largely within the domestic economy. Hospitals, aged care facilities, childcare centres, schools, and employment services – all services with a diverse range of providers from the public, private and non-government sectors, and services where competition and value is often held back by jurisdictional red tape and the lack of seamless national markets.

The implication is clear. Gillard will attack public services like health and education, hospitals, aged care and preschools.

This is Labor’s neoliberalism on display to the world. The cost of rebuilding after the floods has only made Gillard’s neoliberal resolve – hence her talk about tough choices to attack public services even greater.

All of this got me thinking about how we might tax business and the rich to pay for immediate working class flood polcies like guaranteed fully paid jobs and rebuilding workers’ homes at no cost to fix the damage and destruction the bosses’ profit driven system has inflicted across Australia and in particular in Queensland.

In a speech in February last year Deputy Commissioner of Taxation Jim Killaly said that 40 percent of big business (those with a turnover greater than $250 million) had paid no income tax in the three income years between 2006 and 2008. He also said twenty percent of those companies were actually making accounting profits.

The global financial crisis is likely to have increased the number of big businesses not paying income tax to perhaps 50 percent or more.

Analysis by Adele Ferguson and Stuart Washington in the Sydney Morning Herald showed that most industries actually pay much less than the headline 30 percent company tax rate. For the finance sector for example they found the figure was 20 percent. For mining companies it is between 13 and 17 percent.

In other words almost half of all big business pays no income tax and those that do mostly pay much less than the notional 30 percent headline rate.

What is to be done?

Some of this nonpayment of tax is a result of tax ‘planning’. For example Australian and foreign multinationals in Australia can transfer money around the world to pay tax in the least taxed countries. Part of the response to this must be more funding for the Australian Tax Office to increase the number of staff and further improve their capabilities and tools for detecting and dealing with business avoidance and evasion. 

Some of the loopholes that big business exploit are structural. In other words they are design features of the tax system, written into the law.

One way to address the lack of tax that big business pay as compared to the contribution to society they should be making is to impose a minimum company tax. This is, depending on the approach taken, for example a tax on the gross profits of a company (that is before accounting for costs and expenses) or accounting income in those cases where they don’t pay tax or pay tax at a  rate below a certain minimum amount. 

The Australian tax system is littered with disguised grants which manly benefit those who live off our labour. These are called tax expenditures and according to the Treasury Tax Expenditures Statement 2009 for the financial year cost 2008/09 cost the revenue $100 billion.

Treasury identified over $8 billion of these disguised grants as going directly to business. Abolish them and raise an extra $8 billion immediately.

In addition capital gains tax (CGT) exemptions, which overwhelmingly and disproportionately favour business and the rich, in that year cost the revenue nearly $38 billion.

Without going into the detail about $6 or $7 billion of this is not related to the principal private residence – your home – CGT exemption.

The two main ones are the 50 percent CGT discount for individuals and trusts which hold assets fro more than 12 months – a discount which favours the holders of captial – and the small business capital gains tax 50 per cent reduction. The former forgoes over $5 billion and the latter over $700 million.

Abolishing these various CGT exemptions for business and individuals would raise this $7 billion. 

In addition it is not beyond the wit of tax legislators to devise a CGT exemption for workers’ homes which still catches those who sell their homes on the foreshores of Sydney harbour.  A tax on the value of homes worth more than $2 million is one suggestion. According to The Australian, in 2008 such a  tax would have applied to only 4000 family homes sold that year. This was 2 percent of total sales . The combined worth of these homes was around $10 billion.

Defence Personnel and Army reserve volunteers receive various exemptions – for killing foreigners, from the medicare levy and their pay for being in the reserve -that total almost $200 million. Abolish grants to the professional killers for Australian imperialism and the wannabes. 

Small businesses that have an annual turnover of $50,000 or less are eligible for a tax offset of 25 per cent of the income tax liability attributable to their business income. This costs an estimated $215 million and has no justification whatsoever, other than the nonsense that small business is the backbone of the economy. It isn’t. About the only potential backbone small business forms is to reaction.

Retirement benefit concessions to employers, employees and funds total almost $25 billion a year.  The pension costs the revenue only slightly more. Abolishing these concessions and using the money to increase the pension substantially and extend its scope to all workers is affordable, feasible and viable, instead of ploughing billions each year into the superannuation industry.

Negative gearing is where the expenses on a rental property (interest, depreciation, repairs and the like) are greater than the rent itself. It allows the investor to offset the rental lost against other income.

About 2 million Australians – mostly those well off but with growing numbers of average wage workers- own negatively geared rental properties. The losses total over $8 billion  year. Abolishing negative gearing, or even just quarantine the losses to be offset only against future rental income, would save the revenue – you and me – $2 billion a year.

Taxing all economic rent of business would raise many tens of billion dollars. Economic rents are superprofits businesses make from monopoly or oligopoly. The abandoned Resource Super Profits Tax is an economic rent tax and would for example have raised perhaps $24 billion a year – double the Government’s guess.

Much more than this could be done. The Greens offer a range options including variations on some of what I have talked about above. Their other proposals include abolishing the private health insurance rebate, introducing death duties, taxing  family trusts as companies, increasing company tax from 30 percent to 33 percent and introducing a new top marginal tax rate of 50 per cent on incomes of $1 million or over.

The Minerals Resource Rent Tax applies only to certain minerals and will raise on latest non-Government estimates only $5 billion.

But economic rent arises not only in the resource sector. Superprofits are a consequence on monopoly. Capitalist competition leads to monopoly. Taxing all superprofits would produce a potential windfall, without affecting jobs or investment, in the order of at least $50 billion. This guesstimate of mine adds the economic rent of the resource and finance sectors alone, and not including Coles and Woolworths, the retail petroleum industry or utilities.

None of this will happen under Labor or the Opposition.  Clearly the money is there. The political will isn’t.

Under neoliberal Labor taxing the rich and business in a systemic and thoroughgoing way as anathema. Instead Labor and Julia Gillard will cut spending on health and education. We will pay while those who live off our labour get a free tax ride.

Soak the rich to pay for the cost of the floods. Soak business to pay for improved public health, education, transport and measures to address global warming.

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Comments

Pingback from Flood response | Chris White Online
Time January 16, 2011 at 1:34 pm

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Time January 16, 2011 at 6:02 pm

[…] This post was mentioned on Twitter by PRO Legal, Alice Jennings. Alice Jennings said: En Passant » Soak the rich to pay for the floods: The two main ones are the 50 percent CGT discount for individu… http://bit.ly/dXJjvq […]

Comment from Ross
Time January 16, 2011 at 6:18 pm

John ; a big part of the solution is to create State Govt Banks that can create new money via the fractional reserve system.

We can finance our own infrastructure without borrowing from private banks.Most of the wealth in this country is milked by the debt based money system.

New money to equal increases in productivity is created as debt when in fact should be created as a tax credit by our Govt.

Fix this debt based money creation system and prospertity will follow.

Comment from Calligula
Time January 17, 2011 at 4:24 pm

John –
Despite being of the engineering persuasion I’ve never been fond of calculation; consequently never been overfond of ‘calculating people’, if you get my drift.
Your article has listed the activities of a fair number of subsets of calculating people and by that I do mean calculating and acquisitive to the detriment of others.
Seems it’s become a national sport.
In my mind, since meeting you on the internet, I’ve come to regard you fondly as a bloke manfully soldiering on opposing that sort of negativity.

Was reading down your article as best I could muttering yep, yep, agreed etc. until about half way down where you mentioned defence personnel, professional foreigner killers, reservists and wannabes.
Half of me wants to call you out about that and the other half, to some extent agrees.
If you want to identify money wasted by defence as an organization please consider leaving the grunts and choccos alone.
They are mostly young (perhaps by your lights, wrongheaded) idealists who sooner or later work out there are better occupations.
In the reserves most see the light after only a few months.
For those who don’t it might be best for society to maintain an establishment that suits their attributes.
I doubt you’d disagree that the ADF is proving useful with our recent natural disasters.

Getting back to the money wasting aspect –
I’d suggest that if a razor blade was slipped between certain identities in certain multi-national corporations and identities in the ADF, Defence Materiel Organisation, and the ministry – much blood would flow; so close and incestuous is their association.
In your professional life you surely must have come across what I mean – a spot of nepotism slipping innocently towards a tad of insider info sharing leading to some perks and ‘enhanced career options’ so that when the graft and corruption begins the perpetrator hardly feels a twinge.

And if this happens in an organization where everyone has to swear the Oath of Allegiance it doesn’t take much of a stretch of imagination to suss out what’s happening elsewhere, say, in banking, finance and law.

But when you mention the Greens wanting death duties I’m concerned.
Our first son died at 33 after a long illness he picked up at Exercise Croc99 with the ADF.
12 Years as a Reservist, (a wannabe as you put it) left him with nary a brass razoo.
I’d humbly ask the Greens whether he’s already paid enough or would they like to dig him up for the grease?
http://calligulashorse.blogspot.com/2010/12/typical-day-at-depot.html#comments

Comment from Ross
Time January 17, 2011 at 7:30 pm

If anyone wants a deep insight into our dysfunctional,corrupt economic/political system
see http://www.csper.org/renaissance-20.hotmail

Comment from John
Time January 18, 2011 at 7:51 am

I am sorry for your loss Calligula.

The idea of removing tax concessions for the defence force is to make it less attractive to working class men and women. I agree about defence waste. In fact I think all defence spending is a waste. Only a world where production is organised democratically to satisfy human need can abolish this useless and harmful expenditure and bloody activity.

As to death duties there is a perfectly sensible bourgeois argument for these taxes. James Packer did no work to earn his wealth. He should be rewarded for his work not his lineage.
death duties wouldn’t apply to you or me or your son. It would apply to the billionaires and millionaires. The Henry Tax Review too recommended death duties.