Would you want Australia to become more like America? How on Earth did so many Yanks vote to reinstall a crazy, destructive leader such as Mad King Donald? If we don’t want to become more like them, it’s worth thinking about how it happened, so we know what not to do.
Americans brought Trump back for two main reasons. First, extreme partisanship. Many registered Republicans voted for him because, no matter how bad he was, he couldn’t possibly be as bad as a Democrat president would be. But second, I suspect many Americans voted for him because they’d become so disenchanted with the way the country was run, felt so mistreated and estranged from the rest of America, that they wanted to give the system a big kick up the backside.
It wouldn’t do any good; Trump was no more to be trusted than any other politician, but it would make the outcasts feel a bit better.
I worry that if we go on the way we have been, we could end up with a section of our own community that was so peed off it wanted to kick against the pricks (excuse my language; not all politicians deserve that description). And it’s a mighty big section to have on the outer – the young. Everywhere they look, the young feel discriminated against.
Most of the older generation bought homes when they were affordable, but now they’re unaffordable. At work, they get paid much less than most older workers. And while their parents paid nothing for their tertiary education, they’re hit with huge HECS debts.
The young are right to feel ill-treated. Our system of tax and welfare benefits is biased in favour of the elderly and against the young.
Many people on the age pension benefit only to the extent that their paid-off home is ignored in means testing. Many self-proclaimed “self-funded retirees”, however, are doing very well for themselves.
It’s possible for a young family on, say, $150,000 a year, to be paying a lot of income tax, while a well-off retired couple on the same income pays very little.
The Albanese government is already facing annual budget deficits for at least the next decade, adding to the annual interest bill on our growing public debt. If we’re going to be spending more on defence and many other things, it will have to raise more in taxes.
How? Well, the nation’s chief executives in the Business Council of Australia helpfully suggest an increase in the GST. But it would be fairer if the government started by reducing the tax concessions and loopholes used mainly by the well-off.
And that brings us to the massive tax concessions attached to superannuation, which cost the government almost $50 billion a year in lost revenue. The concessions are worth far more per dollar saved to high income-earners than lower earners.
But they also favour the old rather than the young. The old earn more than the young, find it easier to save, and get the benefit from super sooner than the young. That’s why, in the government’s efforts to collect more tax, fixing the super concessions is a good way to reduce the tax system’s bias against the young.
Two-thirds of the value of super tax concessions go to the top 20 per cent of income earners. The concessions are intended to ensure people have enough income to live comfortably in retirement, but a fifth of withdrawals from super go as bequests to the superannuant’s children.
Treasury estimates that the share of withdrawals going as bequests will rise to a third by 2060. In other words, the concessions are so great that super has become a taxpayer-subsidised inheritance scheme. Meanwhile, other taxes must be higher to cover the cost of this inheritance scheme.
Treasurer Jim Chalmers intends to press on with a super tax measure he announced two years ago, but hasn’t yet been passed by the Senate. The plan is to increase the tax rate on super annual earnings for balances exceeding $3 million from 15 per cent to 30 per cent. The tax would apply only to the amount above $3 million.
The change will affect just the top 0.5 per cent of people with super – only about 80,000 people (including me). It would save the government more than $2 billion a year.
But the people affected by the change – mainly rich men – have put up an almighty resistance, portraying the measure as utterly iniquitous and – would you believe – unfair to the younger generation. “I’m not opposing this for myself ...”
However, the proposal has had strong support from the Australian Council of Social Service and the Grattan Institute.
The claim that the proposal would harm the young rests on the government’s intention not to index the $3 million threshold. If you left it unchanged forever, inflation would eventually cause the higher tax to apply to all the young.
Sorry, this is fanciful. There will be plenty of time to raise the threshold before then. Meanwhile, it will just apply to more, but slightly less-rich, old men (and a very few rich old women).
The other claim is that the extra tax would apply not just to interest and dividend income but also unrealised capital gains. This is true, but not as iniquitous as the protesters claim. It will mainly affect self-managed super funds.
It’s a messy way to tax earnings, but it’s difficult to avoid administratively because the existing 15 per cent tax on earnings is imposed on the fund, not its individual members.
Taxing capital gains that haven’t yet been realised may mean the tax has to be covered by money taken from elsewhere, but most people this well-off have plenty of money outside their super funds.
So, don’t believe it. These rich people just don’t want to pay more tax, and, as usual, are hunting around for the best counter-arguments they can find. I can afford to pay it, and so can they.
