Tax the billionaires for a fairer tax system

Treasurer Josh Frydenberg was less than honest when he told Insiders on April 3 that the government’s vision of tax reform includes a “simpler tax system, a fairer tax system and lower tax”.

This may be how it sells its tax policy, but the Coalition’s approach is anything but simple or fair. It only supports lower taxes for the rich.

Frydenberg falsely claimed that the stage three tax cuts will maintain “the progressive nature of our tax system”. In reality, they will mostly benefit the very rich: workers on $45,000 a year will pay the same marginal tax rate as those on $200,000. In a “progressive taxation system” those on higher incomes pay a higher rate of tax.

Three quarters of taxpayers in 2021 lived on less than $90,000, whereas $202,000 was the average income of Double Bay in Sydney — the country’s richest suburb. Only 3% of taxpayers had incomes of more than $188,000.

The Coalition’s tax reform plan — supported by Labor — groups the richest with average and low-income earners. Their plan is to shift the tax burden from very high income earners to ordinary people.

Pre-budget analysis by The Australia Institute (TAI) found that that 9 out of 10 taxpayers would be worse off as a result of the planned scrapping of the Low and Middle Income Tax Offset (LMITO), part of the “stage three” tax plan. Trying to win the election, Frydenberg’s budget has extended the LMITO by a year and added a $420 tax incentive for the next 12 months.

This is only an election bribe, not a policy shift. Prime Minister Scott Morrison will still implement the unfair policy if he wins the election — just one year later than scheduled. The Coalition has no plan to make the super rich pay their fair share of tax.

Richard Dennis, from TAI, believes the tax system is complex by design. “There are always calls to simplify the tax system, but few people realise that the complexity isn’t an accident, it’s the cloak behind which an enormous amount of tax is avoided.”

The tax avoidance mechanisms mean that some people with more than $1 million in gross income are able to reduce their taxable income to less than the $18,000 tax-free threshold. This means they pay no tax whatsoever.

The opportunities for this kind of tax avoidance increase the richer you get. Far from being the “hard workers”, almost a quarter of those with incomes over $250,000 don’t do any work at all. Their entire income comes from investments or sources other than work.

Labor leader Anthony Albanese has steadfastly stuck to his “small target strategy”, signing up for virtually all of the headline measures in Frydenberg’s budget.

If elected, Labor has promised a new budget later in the year. It has sought to stake out a difference by pledging $2.5 billion for aged care reform. Significantly though, Labor has promised not to introduce any new taxes if it wins. This thoroughly neoliberal party has no plan for significant progressive reform.

We need a progressive taxation system to provide the services and infrastructure the country desperately needs. Taxing the billionaires, the corporations and the super rich would easily pay for more health and education services and help the transition to renewables.

The Socialist Alliance's tax policy includes bold measures including scrapping the GST, which is an inherently unfair tax that falls disproportionately on the poorest. It also advocates raising the marginal tax rate to “70% for incomes over $200,000”. Introducing a wealth tax for the super rich and reducing taxes on those earning less than the median income are other parts of a progressive taxation policy.

The government’s tax cuts for the rich have largely been paid for by the GST imposed on the poor. A fairer tax system is possible, but it won’t come from pro-capitalist parties. We will need stronger unions and grassroots power to win a progressive tax system. Voting for and getting active with the Socialist Alliance is one way to help make this happen sooner.

[Alex Bainbridge is a member of the Socialist Alliance national executive.]

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