ga('send', 'pageview');
John Passant

Site menu:

April 2015
M T W T F S S
« Mar   May »
 12345
6789101112
13141516171819
20212223242526
27282930  

Tags

Archives

RSS Oz House

Share

Authors

Subscribe to us

Get new blog posts delivered to your inbox.


RSS Blog RSS

Site search

Miniposts

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
(0)

Sick kids and paying upfront

(0)

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)

Advertisement

Links:

Stop the cuts: tax the rich – one socialist’s view

 

I am a former Assistant Commissioner of Taxation in charge of international tax reform in the ATO. I retired in 2008. I am currently a casual tutor in the School of Humanities and Social Inquiry at the University of Wollongong. I am also a unionist, activist and socialist.

I will be talking later this month at the University of Wollongong about stopping the government cuts and taxing the rich. Australia is a low tax and low spending OECD country.  In fact just raising our tax level to the OECD average would raise in the abstract an extra $100 billion. The question is who to raise it from. My view is that the money is there to fund better public health, education, transport, social welfare, pensions and Universities, and to take urgent action to address climate change (among other things.

I will argue that the rich and capital are capable of paying much more in taxes to fund a fair and equitable society in Australia.

To take one simple example. Paul Wellings is the Vice-Chancellor of the University of Wollongong.  According to the Illawarra Daily Mercury, in 2012 his salary was more than $650,000. Let’s assume after 3 years it is now around $700,000.

The top one and a bit percent of income earners earn more than $250,000. So why not tax any income greater than that at 100 percent? Paul Wellings would be contributing $450,000 in tax on the $450,000 above $250,000 he earns.

Sound far fetched? Left wing French presidential candidate Jean-Luc Melenchon argued for the same sort of tax. He won 11% of the vote (down from earlier polls showing up to 17%) and forced the Socialist Party’s ultimately successful candidate to adopt a watered down version.

And as I have written before we could argue for a wealth tax, abolition of all tax expenditures for the rich (think superannuation tax concessions) and capital. We could abolish tax concessions for the rich and capital and tax all super profits (think banks as well as mining companies during the mining boom).  We could make the income tax system more progressive. We could, as Joe Hockey suggested in 2011, in Opposition, tax trusts as companies.

Eighty per cent of capital gains are earned by the top 20%. We could abolish the 50% capital gains tax concession.   We could abolish section 25-90 which, contrary to all tax principles, gives big business a deduction in certain circumstances against exempt income. There’s $600 million a year.

We could tax the capital gains on the houses of the rich.

Prompted by a commentator on the blog,  I have done a few back of the envelope calculations just to show the money is there in the hands of the rich to address the chronic under-spending on public health, education, transport, social services and addressing climate change.

Since only just over 1 percent earn income greater than $250,000 such a tax would raise some revenue. It would also send a signal to the rich and capital and to workers and the poor that the days of the rich bludging off the tax system are over. I would have thought a reader of my blog would understand that simple concept.

I don’t have a Treasury area to do the sums and analyse the impacts for me, so let’s make a few assumptions. Assume there are ten million individual taxpayers. One percent of that is 100,000. Assume the average income of this top 1% of income earners is $450,000 (skewed by the super rich to that figure.) That means we could raise in revenue about $200 bn.

To explain, $450,000 less $250,000 is $200000 all of which is taxed under my proposal at 100%. If there are 100,000 from whom we are on average raising this $200,000 in tax then that gives us $200,000 times 100,000 which is $200,000,000,000 or $200 billion.

Of course my assumptions could be way off and the average income of the top 1% of income earners might for example only be $300,000 in which case the tax figure would be $50 billion. And maybe there are not 100,000 individuals who earn more than $250,000 taxable income. Perhaps many of them would set up discretionary trusts to divert their income into lower-taxed hands, or the old bogey, flee overseas. Even if the figure is only 50,000, we’d still be talking about $25 billion.

Even if companies responded by only paying their top executives $250,000 and pocketing the difference, we socialists would argue instead of that going into dividends or reinvestment it should be paid to their ordinary workers in higher wages. That would of course require a fight from workers and their unions to achieve that.

The top 20% of wealth holders own about 45% of all the wealth in Australia. That wealth totals about $6.3 trillion, so the top 20% own about $3 trillion of Australia’s wealth. A 1% annual wealth tax on that wealth would yield according to my back of the envelope calculations about $30 billion a year. We could of course skew the wealth tax to the top ten percent, or even 1 percent since the wealth they hold is proportionately much higher, and then in recompense for the amounts lost from those rich but not super rich wealth holders, increase the wealth tax rate on them.

I’d welcome comments from readers about making these figures more rigorous. My later article on tax the 1% at 100% does a better job at calculating the figures and they may be about $36 billion before tax avoidance.

Given the effective tax rate (tax as a percentage of accounting income rather than taxable income) on the top companies is about 19 percent, and one third of the top 200 ASX listed companies pay an effective rate less than 10 percent, maybe the time has come for a minimum company tax, essentially a tax on accounting income rather than taxable income for low tax paying companies. We could also charge the likes of Google, Apple, etc a fee for operating in Australia, perhaps set at say 30% of turnover here. In Google’s case that would be a fee of about $600 million, (30% of the $2 billion in revenue its Singapore hub gets from Australia) just a little bit more than the $740,000 in tax it paid on that Australian sourced income a few years ago.

We could do the same with Apple whose tax arrangements according to tax academic Anthony Ting in the Australian Financial Review have seen it shift about $28 bn in income untaxed so far from Australia over the last decade.

However tax is a second order mechanism for addressing increasing inequality. I will argue that the shift in wealth from labour and the poor to capital and the rich over the last 3 decades in Australia (echoing trends globally) can only be addressed ultimately at the point of production, i.e. through higher real wages, defence of jobs, a 30 hour week without loss of pay etc.

To hear my discussion of these issues come along to the Solidarity Forum at 12.30 pm on Thursday 23 April in room 19.2040 at the University of Wollongong.

Update 20 April: The NTEU at UoW has today (Monday 20 April) called a members’ meeting to discuss how to fight back against the University’s cost cutting and give an update on negotiations on the staff agreements at the same time my advertised discussion of stopping the cuts and taxing the rich was scheduled (details below). I have therefore decided to postpone my meeting and urge all those who work on campus to attend the union meeting.

Details of the union meeting are:

1. All Member Union Meeting.

There will be an All Member Union Meeting for both Professional & Academic staff this Thursday 23rd April. 12:30pm to 1:30pm Building 20 Room 2, UOW Main Campus, Wollongong. At this meeting we will be discussing how staff can respond to the current round of cost cutting and job cuts being pursued by UOW management. At the meeting there will also be an update on the status of the Professional & Academic staff agreements.

So the meeting on stopping the cuts and taxing the rich will now be some time in May. When I have details I will let you know.

Advertisement

Comments

Comment from Mike
Time April 8, 2015 at 9:25 pm

A 100% income tax would raise zero revenue. I would have thought a tax commissioner would understand that simple concept.

Comment from John
Time April 9, 2015 at 6:10 am

Since only 1 percent earn income greater than $250,000 it would raise some revenue. It would also send a signal to the rich and capital and to workers and the poor that the days of the rich bludging off the tax system are over. I would have thought a reader of my blog would understand that simple concept.

Anyway since I don’t have a Treasury area to do the sums and analyse the impacts for me, let’s make a few assumptions. Assume there are ten million individual taxpayers. One percent of that is 100,000. Assume their average income is $450,000 (skewed by the super rich to that figure.) That means we could raise in revenue about $200 bn. $450,000 less $250,000 is $200000 all of which is taxed under my proposal at 100%. If there are 100,000 from whom we are on average raising this $200,000 in tax then that gives us $200,000 times 100,000 which is $200,000,000,000 or $200 billion.

Of course my assumptions could be way off and the average might for example only be $300,000 in which case the figure would be $50 billion. And maybe there are not 100,000 individuals who earn more than $250,000 taxable income. Perhaps many of them would set up discretionary trusts to divert their income into lower taxed hands, or the old bogey, flee overseas. Even if the figure is only 50,000, we’d still be talking about $25 billion.

The top 20% of wealth holders own about 45% of all the wealth in Australia. That wealth totals about $.3 trillion, so the top 20% own about $3 trillion of Australia’s wealth. A 1% annual wealth tax on that wealth would yield according to my back of the envelope calculations about $30 billion a year. We could of course skew the wealth tax to the top ten percent, or even 1 percent since the wealth they hold is proportionately much higher, and then in recompense increase the wealth tax rate on them.

Anyway, I am more about getting the ideas out there that we can tax the rich.

Comment from Mike
Time April 9, 2015 at 8:00 am

A 100% income tax would simply put a ceiling on wages.

Why would an employer pay someone above this amount when it does not benefit the employee or the employer.

Comment from Chris Warren
Time April 9, 2015 at 10:21 am

Mike is a bit confused. It is clear that higher rates of tax are appropriate for income earners at several standard deviations from the mean.

Macroeconomic stability requires that the purchasing power at the point of final consumption is sufficient to purchase all the products workers were employed to produce.

By definition, under capitalism this cannot apply as some part of wages is sequestrated by executives, shareholders, and companies (for reinvestment). This is a econ-political fact of life under capitalism.

Consequently a government must step in to reinstate economic stability. The best way is to find an alternative to capitalism, but the second best is to return the missing purchasing power back towards final consumption. This means taxing “surplus value” where-ever and when-ever it shows its head.

A third best option is to increase debt and the money supply, and pray for exports, but this road is only for Keynesian nutters.

While some people are jumping on the Tobin truck, I take a different view.

According to: http://www.afma.com.au/data/afmr/2014%20afmr.pdf

annual financial markets turnover is:

125 Trillion (that is not an error)

So a tax across this pond that averages less than 1% will return 1 trillion.

This is broader than a Tobin tax, and could extend to FX as well.

Enough to give public full time blue-collar and admin employment to all without requiring them to spend years gathering debt by heading off into post secondary education.

Comment from John
Time April 9, 2015 at 1:25 pm

Ah, that is a much better point Mike. Because then we can say they are really about not contributing through the tax system to the society, again. A neoliberal might then argue this frees up that unpaid salary for capital investment. We socialist would say it frees it up for increased wages to lower paid workers. The push for a 100% tax puts pressure on social democrat parties to move a little bit to the left and propose a watered down version, as happened in France with 75% on salaries above 1 million euro.

Comment from Matthew
Time April 12, 2015 at 1:49 pm

Naïve. A modest proposal for the creation of yet more ways for the wealthy to hide or disguise income.

Comment from John
Time April 12, 2015 at 2:39 pm

Yes I agree. We should tax them at zero and give in completely to their tax avoidance ways.

Pingback from STOP THE CUTS : TAX THE RICH – Written by JOHN PASSANT | winstonclose
Time April 14, 2015 at 4:42 am

[…] at 12.30 pm on Thursday 23 April in room 19.2040 at the University of Wollongong. This story was originally published on John’s blog enpassant.com.au and has been republished with […]

Comment from Lorikeet
Time April 14, 2015 at 8:35 pm

I’m all for taxing the rich to the eyeballs, but won’t some of these suggestions limit the number of available jobs?

Those holding our superannuation contributions want to take over public hospitals, schools, public transport etc as places to invest our nest eggs. Money hungry capitalists seem to be the cause of the government’s diminishing kitty, so making them pay their fair share of tax in Australia could work against people managing to live on superannuation pensions. Is this not true?

Public hospitals are more likely to be providing health care to government pensioners, so I think superannuants with large holdings will be eager for privatisation, together with the poor losing their homes to pay for their health care, instead of accessing it free of charge. The loss of homes will also give capitalists a new opening in the property market, which will be supported by poorer working conditions requiring younger people to rent (from banks).

Comment from Lorikeet
Time April 14, 2015 at 8:40 pm

A rise in pay for workers will be a non-goer for as long as we are locked into global flattening by the ACTU’s membership of a global union body.

Any union which is affiliated with the ACTU ends up working for capitalists.

More gobsmacking is the lady from ACOSS coming out in support of cutting the lower threshold of the Assets Test for pensioners in half (worse for couples). There’s no way she is still working for those in receipt of pensions and benefits.

What a corrupt country we are now living in.

Comment from Lorikeet
Time April 15, 2015 at 10:07 am

Just thinking again about the conversation between John and Mike. I agree that a boss who doesn’t have to pay his CEO millions of dollars should have plenty of funds available to pay more workers. I would certainly love to financially kneecap the CEO of Qantas. Maybe then baggage handlers would get a fair go.

It’s a sad day when the lust for money causes companies to spend exorbitant amounts hiring the most skulduggerous “animals” to financially screw workers and service recipients, while delivering poor service, and possibly also providing a poor return to shareholders in order to build a larger empire.