In the discussion of this thread, Mark referred to this column by Guy Rundle, in which he argues easy access to credit has helped paper over the cracks in American society:
In the wake of this crisis, blame is being sheeted home to the average person, who is apparently running up too much debt. Well, mercy, what a surprise, it’s the people’s fault. Let’s face it, people only consent to this crappy society because of what they can rack up on debt. If you’re going to spend forty years of fifty hours a week – your whole one life on Earth – in the same office, doing crap you don’t want to do, damn right you want a frikkin flat screen TV at the end of it. And to eat out. And drink stupid overpriced cocktails in awful resorts.
The short point is that if we close down easy credit, the rationale for Western capitalism collapses instantly. Because the rest of it is so godawful, that without rewards, no one would put up with it. Hence the need, over the last eight years, to keep it all bubbling, at any cost.
Robert Reich, in perhaps a less colourful way, made a not entirely unrelated argument in the New Statesman recently. In essence, he argues that the stagnation in middle-income America in large part caused the explosion in debt that led to the credit crunch:
The earnings of non-government workers who are paid by the hour – and who comprise 80 per cent of the American workforce – are lower today than they were in 2000, adjusted for inflation. They are barely higher than they were in the mid-1970s. Indeed, the income of a man in his thirties is now 12 per cent below that of a man his age three decades ago…This underlying earnings problem has been masked for years as middle- and lower-income Americans found means to live beyond their earnings…
…Americans turned to a third coping mechanism. They began to borrow. With housing prices rising briskly through the 1990s and even faster from 2002 to 2006, they turned their homes into piggy banks. Now, with the bursting of the housing bubble, Americans are reaching the end of their ability to borrow and lenders have reached the end of their capacity to lend.
Reich’s prescription for fixing the ails of the American middle class is fairly unremarkable – single-payer health care, improved education, and a more progressive tax scale – but, still, if an Obama administration makes some progress on all three of those it’ll be a considerable achievement in the US political context. From an Australian perspective, however, the most interesting thing is that Reich (Clinton’s labor secretary) says out loud that progressive taxation – that is, taxing the rich more and the poor less to reduce inequality of outcomes – is a good idea. I wonder when that idea might just make its way across the Pacific?
For mine the big crunch is a case of those making revolutions half-way and digging their own graves. By the logic of the last 30 years we should have been well on our way to a world trade agreement that included agriculture ( the failure here traceable to noticeable rural gerrymanders in the ‘Western’ economies that include Japan) and a global Shengen travel agreement.
By allowing capital to slosh around the world while at the same time building new Berlin walls everywhere defied all logic and humanity. It was asking for trouble.
So the loan-sharks trapped themselves and started mis-trusting each other.
The result we now see is a collapse of an official ideology – libertarianism.
( Sear ‘ Hubens critique of libertarianism’ site esp left criticisms )
Now Fabian types are salivating at the prospect of a new, new deal but I would argue for a fresh look at the other Roosevelt. The one who bought in anti-trust.
There are no empires ‘ too big to fail’ so there can be no corporations either.
We don’t want state-capitalism /corporatism do we?
I thought we deserved better than that.
“says out loud that progressive taxation – that is, taxing the rich more and the poor less to reduce inequality of outcomes – is a good idea. I wonder when that idea might just make its way across the Pacific?”
Er, several generations ago?
Whilst I think there’s some merit to this argument, it’s also something of a cop out.
I used to rile at Howard’s “we’re all so much better off” and “real wages have gone up” – when I know my salary had remained either static or below inflation for more than 7 years – oh, and my employer decided that I would pay any increases in the Super Guarantee Levy because I was a “salary earner” – so in real terms, I’d gone backwards.
However, because our income hasn’t been growing, we’ve been reducing our spending for the last 7 years. Mind you – it’s been incredibly difficult. With nearly everyone around us spend like there’s no tomorrow, it’s difficult to tell yourself “no, I’m right, we don’t have the money”. However, we have, at times, buckled and splurged on the credit card (which we subsequently pay for), but I managed to resist the temptation to go into ridiculous debt levels – despite every bank telling us we could borrow indecent amounts of money.
And I think this is the real problem. When you go to a bank and THEY tell you “we believe you can repay this amount of money” – even though you’re sure you can – what are you going to do? Don’t we ALL want to think we can live like kings? Isn’t that the “Australian Dream” after all? And I can’t tell you how many credit card offerings we’ve received over the last 10 years – it would have to be 20-30 – and all for large credit amounts ($10-20K). And it irks me now to hear the MSM going on about “knuckling down” when they’ve been selling us this lifestle for years.
I’ve actually compared this to a form of peer pressure. When everyone around you is telling you about the 5 bedroom, 4 bathroom McMansion they’ve just bought or how much of a windfall they made by buying Telstra shares (well, before T2 at least) – all this really wears on your self-confidence. You start asking yourself “why aren’t we doing all these things?” and it creates an immense pressure.
So, my point is that whilst stagnant incomes are certainly an issue – the ability to say “no” is equally important – and empowering us to make these choices and to not be a pariah for saying it. Perhaps if more people had done this we could’ve avoided this mess. Perhaps the bubble would’ve burst earlier – or never became a bubble? Perhaps it would’ve pushed real wages up (once business saw a lack in demand)? Perhaps governments would’ve stepped in earlier and changed tax rates?
Andrew Norton:
I think the point I’m trying to make is that for twenty years all we’ve been hearing is that the top marginal tax rate is too high.
Maybe that song’s getting a little old.
For eons, the major spiritual traditions of the world have warned us that focusing on and becoming attached to material goods is not a cause of real happiness. Being satisfied with whatever portion fate has given you and being willing to give to others less fortunate has to be (IMHO) a major part of the solution to the current crisis.
I agree with Andrew Norton: it was the way you phrased it, Robert.
Certainly “The Australian” and other ‘outlets’ have campaigned for lowering “top” marginal rates for decades; both Labor and Liberal govts have heeded the call.
The Whitlam Govt commissioned the “Asprey Report” (circa 1975) on Australia’s tax system. As far as I recall Gough didn’t implement much tax reform.
I’ve actually compared this to a form of peer pressure. When everyone around you is telling you about the 5 bedroom, 4 bathroom McMansion they’ve just bought or how much of a windfall they made by buying Telstra shares (well, before T2 at least) – all this really wears on your self-confidence. You start asking yourself “why aren’t we doing all these things?” and it creates an immense pressure.
Oh yes, you are so spot on, GT.
While there’s a lot of condemnation around for people who live beyond their means on plastic, spare a thought for spouses, partners and children of people whose tolerance for debt and risk is higher than theirs. I’ve always had a very, very low tolerance and have tended to pay the mortgage off rather than extend it all the time (we did so once, for a necessary upgrade to the house which was falling apart, but not since) and have never used credit cards. But you don’t get to control what your partner does and unfortunately you’re responsible for your spouse’s debts if it all goes haywire. It’s a terrible bind.
Go Troppo has a good point about falling real wages. (We’ll see how easy it is to raise real wages now that so many real jobs have been globalised to other countries). The point about keeping your real situation in mind in the face of a never-ending media/advertising buy-buy-buy campaign also reminds us how important having good non-commercial information sources is – hopefully that’ll mean more funding for the ABC, CSIRO etc.
Andrew Norton’s nightmare of more government intervention in the economy etc looks a likely scenario. Remember the crowing from the right when the Soviet Union collapsed? As if the USSR had been the model for any Western democracy. Now it will be the right’s turn to hear how capitalism has led us to disaster, and we may well be looking back a generation or two for ideas. If it weren’t for the threat of climate change this could be quite a heartening time for the left … I enjoyed this article I read recently.
I’ve heard the same story from a few people and it makes you wonder which section of the population is getting the pay rises as the statistics seem pretty clear that wages are rising in real terms. Is it just that the wages in the mining sector have risen so significantly?
Re – the SGC – the same happened to me when I had my first job with my contract specifying a total package amount. I always wondered to how many other people that happened.
My link didn’t work, but Professor Rat will want to read this article: The Case for Supply Management
http://www.parl.gc.ca/InfoParl/31/3/31n3_08e_McIsaac.pdf
So in other words the drive to save costs by keeping wages down (sorry “increase productivity”) is a false economy because the workforce as a whole can then no longer afford to buy the goods and services you are offering? The old adage about a high-value-add high-paid workforce is a better way to organise society rather than the Howardista idea of minimum-wage minimum-condition serfs?
But isn’t this potentially a zero-sum game in which as costs (wages) rise, companies fail, increasing unemployment and therefore, depressing wages? Companies will have to accept lower profit margins … what is the trade-off to stop a flight of capital?
Guy Rundle’s incoherent ideological rant is not worth reading. The guy is an idiot.
Robert Reich is definitely not an idiot, but I am unconvinced by the case he is making here. Two problems come to mind:
1) If inequality is a major factor in the causation of economic downturn (recession), then periods of relatively high equality shouldn’t experience recession (or at least they should be less frequent).
During the 1950s-70s, wage equality was higher in the West than ever before or since — so purchasing power would have kept up with production, without the need for excessive debt, and the economy would just have kept growing moderately without any recession. Right?
Um, no. The 3 decades of the 1950s, 60s and 70s saw 3 major recessions in the US.
Note also that the 80s, 90s and 2000s — during which time the economy was deregulated and inequality increased — also saw 3 recessions (plus 1 to come, no doubt). So the average rate per decade was roughly the same.
http://en.wikipedia.org/wiki/List_of_recessions
I’d want to see more evidence by economic historians before I accepted Reich’s thesis.
2) As I pointed out in another thread, higher wage earners actually have higher % levels of debt than low-wage earners. I’ll try to dig up the link to the statistics again.
It appears that the more you earn, the more you want to splurge on the McMansion, the Mercedes, and the Maldives.
Robert – Politically, the main complaint has been that the top marginal tax rate was paid by people on modest incomes. That has changed in the last few years. The overall tax-welfare system in Australia is quite progressive, which is why overall inequality has not increased much even though market income inequality has increased.
Fair enough Ambigulous – next time I’ll be a little more careful in how I phrase my postings.
But I do wonder whether we might see a swing away from the idea that taxing the rich is a bad idea, particularly from the right side of Labor.
Tax the rich all you like – they never pay it. Ever.
Norton is right – income taxation simply doesn’t work on the rich, only fools pay tax in Australia apparently. Capital gains tax doesn’t work very well either when you can slop your dough around the world on a whimsy.
Consumption taxes – they might work if you could scale them, but we know from the GST that the effort increase the tax take via consumption taxes belts the poor as they consume a much larger percentage of their income.
So… hit ‘em where it hurts. Property taxes, appropriately scaled to average house pricing in your area.
There are a lot of reasons for the current financial crisis, most of them related to the systematic underestimation of risk at various stages of the chain of lending. Higher taxes on the rich would have avoided precisely none of those problems. Furthermore, raising income taxes now would exacerbate any recession that may be in the pipeline/already underway.
Andrew Norton: that’s true, as long as you ignore the ultra-rich.
The top 1% or so have been taking a much bigger share of the national pie than they did in, say, the 1970s.
The gap between the median and, say, your local GP or solicitor may not have changed much, but the gap between them and the CEO of BHP has grown like topsy.
If your salary is stagnating, it’s because your career is stagnating. There’s a reason buggy whip makers don’t get the big money. Personally, I’d rather not take it off other people out of some deluded sense of justice.
DR: Have you tried selling that idea to your landlord?
“Consumption taxes – they might work if you could scale them, but we know from the GST that the effort increase the tax take via consumption taxes belts the poor as they consume a much larger percentage of their income.”
Yes, I’m increasingly of the view that the only moral tax is a broad-based progressive consumption tax. Difficult to see how it could be implemented without a government-led transition to a cashless society, though. And how do you account for irregular spending patterns? For the time being, it’s (unfortunately) in the too hard basket.
BBB
“And how do you account for irregular spending patterns?”
.
Or well to do tight wads who don’t spend ?
“If your salary is stagnating, it’s because your career is stagnating.”
Craig Mc isn’t it the case that state governments are desperate for more teachers, social workers etc even though there are plenty of teachers and social workers working in other jobs where they get paid more, or the same for less stress. If you let the income of these middle-class occupations stagnate, you will have problems eventually.
Craig Mc says:
The landlord is me. I’d happily swap PAYG income taxation for property taxes in moderation. It’s got nothing to do with a “deluded sense of justice” and everything to do with the rich (who overwhelmingly extract large benefits from stable society) paying their way. At the moment, they don’t.
murph, if they make their capital available for others, and don’t use it to consume, why should we tax them highly? I don’t think we should. However as soon as they actually begin to live the high life, they get stung with higher marginal tax rates. Inter-generational accumulations of wealth would probably be exacerbated and so there may be an argument for broad-based property taxes as an adjunct. But this all pie-in-the-sky. It’s just fantasy.
BBB
Robert – But the point of progressive income tax is not to cap the market earnings of the rich, but to rely disproportionately on those earnings to finance government expenditure, which in Australia is more targeted on the poor than other countries (eg the upper middle class and above here pay more of their own health, education and retirement expensese than their equivalents in Europe). Despite the cuts to tax rates, the proportion of all income tax paid by the top 25% of earners increased in all but one year between 1996 and 2006.
BBB , no argument from me on your point – I was just pondering on the idea of a GST that targets some consumptions more than others as a way to raise govt revenue.
Russell: As long as I can remember it’s been the rule that if you want to earn more money, then don’t work for the government. One-size-fits-all, single-employer, secure employment has its attractions, but if people want big $$$, they’ll have to stick their necks out for it.
But I’m all for competitive salaries for teachers (or other occupations) if that’s what it takes to attract them to the jobs that need doing. That’s market forces at work. I’m just not in favour of taxing others to redistribute (a nice word for steal) wealth. With 5% unemployment, shortages will always happen, just like they have in the private sector. We’ll see if that persists.
And it didn’t keep up with their increasing slice of the income pie (let alone the wealth pie…). Yes, the pie is getting bigger for everyone, but the super-rich are taking a proportionately bigger slice.
And my view is that given their disproportionate income growth, they’re not being taxed disproportionately enough.
I accept that the Australian situation is not the same as the US situation – most people have become substantially materially better off over the last couple of decades. But the fact is that those at the very top of the income and wealth tree have been gaining more than the rest of us, no matter how you spin it.
And I don’t see any evidence to suggest that this is serving a useful purpose; once you’ve got a pair of Mercedes-Benzes in the garage, the utility from a third starts to get pretty marginal.
Craig Mc is just a fount of compassion for the less well-off, isn’t he?
I reckon buggy whips will be back in style fairly soon, btw, once the petrol runs out.
BBB, re your question: “if they make their capital available for others, and don’t use it to consume, why should we tax them highly”?
Good point, but my response would be “making their capital available for others” should include “making their capital available for those that need it most”, and the only method to ensure that occurs is basically for the government to explicitly channel it in such a fashion – both directly as welfare payments, and indirectly as funding for forms of government spending that the lower-paid benefit from more than the better-paid (e.g. public educational and health facilities).
As far as a ‘a progressive consumption tax’ goes – it strikes me that luxury car taxes are a pointer to how it could be done: the GST should be higher on items that those on higher incomes are more likely to buy. There doesn’t seem to be any reason to just stop at cars: household appliances, plane tickets, restaurant meals, hotel accommodation, wine etc. are all goods/services with sufficient base expense and market segmentation to be candidates for progressive consumption taxes.
And of course in many Scandanavian companies, fines for traffic infringements etc. are scaled according to ‘means to pay’, which there’s surely something to be said for.
David: Compassion would be giving people your own money, not someone else’s.
David: Compassion would be giving people your own money, not someone else’s.
It is their own money. This is, after all, a Commonwealth.
“Despite the cuts to tax rates, the proportion of all income tax paid by the top 25% of earners increased in all but one year between 1996 and 2006.”
That’s because the top 25% been getting a bigger and bigger slice of the pie. But only some of their bigger slice is paid in tax.
Zarquon: Can I have yours then?
wizofaus, when I say “make capital available for others” I mean to save it, not contribute it to the state’s coffers. So your point is more directed at the uses to which we would put post-consumption taxation revenue. As for compiling a list of things that higher-income people buy and taxing those more highly, it’s difficult to conceive of a system more likely to have unintended consequences, more likely to be corrupted by the processes of liberal-representative government, or more likely to impose crippling administrative costs (which, as you know, always fall most heavily on small business). A consumption tax that attempts progressivity by treating certain goods or services differently from others is, without question, a bad idea.
BBB
Zarquon: Can I have yours then?
You already get some.
The trouble with such schemes is that you end up back where we were with wholesale sales taxes; bureaucrats making endless value judgments on the social worth of various purchases.
Should microbrewery beer attract a higher rate of sales tax compared to VB? Should Italian racing bicycles receive the luxury tax? If so, what about motocross bikes, given that they appeal to a rather more working-class demographic?
I don’t think we should be going back down that road, thanks.
Robert: sorry, didn’t mean to be picky.
Seems to me quite difficult to make a consumption tax progressive. Whereas income taxes, targetted (means-tested) welfare payments, capital gains taxes are tailor-made for progressive scales.
I recall only SOME Democrats opposed the GST because it was close to being a “flat tax” (a chap on 10 times my income is unlikely to buy 20 or 30 times as much petrol, or ciggies, or wine,…..).
I don’t think all high-income Australians pay zero income tax, but how would we know if may of them did? Doesn’t the ATO already pursue such grubs with vigour?
37 Ambigulous “I don’t think all high-income Australians pay zero income tax, but how would we know if may of them did? Doesn’t the ATO already pursue such grubs with vigour”
That’s a very good question.
I wonder what the answer is.
I believe, but could be wrong, that the ATO conducts relatively few audits each year, some thousands in number. Which, if true and taken into context of the millions of tax returns lodged is a relatively very small number indeed.
Anybody got full and complete accurate figures…in context?
I do remember reading that the gap between rich and poor, above median and below has been growing substantially during the Howard Coalition years.
It also depends on inflation rates too. Does anybody know what is included and NOT included in calculations, the criteria that is, for ‘inflation’ and ‘cost of living’?
I do recall that recent calculation by the [Coalition] government for the costs of children specifically excluded costs of housing, medical and clothing which makes me wonder just how valid they actually are.
We get to hear a lot of numbers, indices etc chucked around [the really really really low unemployment figures spring to mind] but when we delve a little into the detail of what is actually being measured the rosy picture sometimes turn a little darker.
All the obvious ways of broadening the tax base are either too unwieldy to design or too politically unpalatable. But something has to be done.
The fact is all the positive factors working to boost public finances in recent years are now going into reverse.
First, the one-off gains from privatisations are over. Indeed, the trend now is back toward nationalisation (who wants a bet on a re-nationalised Qantas and CBA within the next five years? Where will the money come from?
Second, the magic pudding for government tax revenues that is the commodities is looking a little less, er, magical.
Third, rising unemployment now looks a certainty, a negative for the budget balance. Allied to this is the aging population and pending retirement of the baby boom. The savaging of super this past year will increase pressure for greater support of non-self-funded retirees.
Fourth, every other Anglo-Saxon economy has had a property crash. Australia must surely be next. The rivers of gold from stamp duty that have fed state government finances will dry up.
Governments either get smaller (anyone fancy scrapping the states?) or we start to reverse the trend of recent years in which the tax load on capital gains has become progressively lighter.
BBB, “A consumption tax that attempts progressivity by treating certain goods or services differently from others is, without question, a bad idea.”
I’m only suggesting doing on the basis of purchase price, presumably how it’s done for luxury cars. No moral judgments (as per RM’s concern) necessary. Yes there’s an administrative cost, but I have no idea how anyone could be sure that it’s higher than the current administrative costs of tax collection, especially the costs of chasing down tax avoiders. And the point of my suggestion is for it to act as a *replacement* for the highly complex income tax/benefit system we currently have. Indeed, I’m quite happy to support something not too dissimilar to the LDP’s flat-tax policy if combined with other measures (such as pseudo-progressive consumption taxes) to ensure that effective taxation is still at least as progressive as it is today.
wizofaus – one problem I can see with your idea is that it effectively penalises sensible quality purchases. I’m a well-below average earner with fairly refined tastes – should I be priced out of the market for my fortnightly scallops and single malt? Or for buying something well-made and long-lasting (thus resource-efficient and encouraging of innovation) with my scrounged-up cash rather than whatever crap will briefly do the job?
Ones ability to pay cannot be adequately measured purely by what one pays for.
FDB, sure, I thought of that myself when proposing the idea. The scallops I don’t think are an issue – assuming they fall into the product category of ‘fresh food’, they would remain GST free anyway.
But as far as products like single malt scotches go – yes, I would expect them to become somewhat more expensive. You might, unfortunately, be priced out of your favourite brand, but if there’s one thing the “free market” is good at, it’s determining that there still is demand for a particular quality product at a particular price range, and it’s almost certain there’d still be a profit to made by retailing a good single malt scotch at a price you could still afford.
I’d also suggest that most items that average-earners would see as “sensible quality purchases” wouldn’t increase in price very much. It’s really only goods/services that are priced far above the average price for others in the same category that would be significantly affected – e.g. your 10K+ bottle may well double in price, but your $100 bottle would probably only go up 10%.
When our current GST replaced the previous liquor excise system, single malt scotch became cheaper. The cheap-&-nasty whiskies became more expensive.
This is before GST is added.
(Also put out my hand for some of this redistribution largesse which is going on….. )
Whatever the solution it has to be an effective simplification.
This is my attempt – Fairly Flat – a little outdated now but still pertinent
O I long for the day that’s probably true.
US middle class income doesn’t look as bad once you take family size and immigration into account: http://www.marginalrevolution.com/marginalrevolution/2004/10/what_is_the_nat.html
wizofaus wrote:
Why don’t you float that suggestion over with those big hearted libertertarians. John Humphreys would welcome the words “progressive” and “flat tax” with that expansive sense of inclusion he usually displays.
(oh lord the sarcasm).
Opportunely, the OECD is releasing a report today on income distribution in OECD countries that provides the most up-to-date analysis of trends between the 1980s and 2005. See http://www.oecd.org/document/45/0,3343,en_2649_201185_41502445_1_1_1_1,00.html
One of the most notable findings (to me at least) is that trends in earnings distribution in the USA differ markedly from most other countries (with the exception of its neighbour to the north). It is not just that average earnings are stagnant in the US. In fact, real earnings have fallen in the USA for the bottom 30 to 40% of the earnings distribution since 1980.
To some extent this will have been offset by the rising cost of employer-provided health insurance in the compensation package of American workers – but probably not so much for the bottom 30% of wage earners who are less likely to have employer subsidised health care.
I don’t know how important this has been for the explosion of debt that Reich refers to, but it is a pattern that is not shared by Australia or the majority of rich countries.
On the idea of progressive taxes, I’m with Andrew Norton on this. The OECD report shows that Australia has either the second or third most progressive system of direct taxes in the OECD – this is based on income taxes and employee social security contributions actually made and recorded in income surveys. So contrary to David Rubie, rich people – or at least upper middle income groups – do pay their income tax.
Australia is the third most progressive overall but moves into second place if you adjust for underlying inequality in private incomes – this is because progressive taxes will be measured as more progressive if income inequality is higher, the point made by Robert Merkel – but note that making this adjustment actually increases Australia’s ranking in the progressivity scales.
As Andrew points out Australia also has the most progressive system of cash transfers in the OECD, by a wide margin.
However, the country with the most progressive distribution of direct taxes in the OECD happens to be the United States. It not only has the most progressive tax system it also has the most redistributive system – that is the US reduces inequality through direct taxes more than any other OECD country. This is primarily due to the fact that low income groups in the US pay a very low share of direct taxes, because of features like the Earned Income Tax Credit, and other refundable tax credits for children.
However, the US has one of the least redistributive social security systems in the OECD, mainly because of their low level of spending, but also because their benefit system is not particularly progressive (compared to other countries). The low level of redistribution through the benefit system means that overall the US redistributes less between rich and poor than most other countries, despite its very progressive tax system.
So my conclusion is not that the US has to achieve a more progressive tax system if it wants to achieve greater equality, but it has to develop more redistributive social spending – less guns, more butter.
Peter Whiteford wrote:
Nope – average person on $1,000,000 in Australia pays 22c in the dollar. They’re paying a larger proportion than they used to, but not as much as they should.
David, where do you get that figure from?
Right here wizofaus
Now, your Nortons and Whiteheads of the world will sniffily suggest that trying to tax rich people who don’t want to pay their taxes is a negative sum game (i.e. the costs will get eaten up in the chasing) but that’s half a billion dollars in forsaken revenue we’re talking about.
It’s a pity we can’t simply revoke the citizenship of people who make that kind of dough but refuse to pay even a remotely plausible amount of tax.
David @ 52 – that report is by the Australia Institute, so I’d be a bit suspicious of it, although no doubt for those on very high salaries its worth it for them to invest quite a bit on minimising (legally) the amount of tax they pay. As for solutions, if I understand the US system correctly, they have the concept of a minimum percentage of gross income that you have to pay in tax, regardless of deductions, to stop very high income earners from avoiding too much tax.
Chris (a different one) wrote:
How about credibly disuputing the figures rather than making a kneejerk rejection? Even Norton doesn’t sink that low.
David @ 54 – *shrug*, only have so much time in a day. Not saying that they’re wrong just saying its worth looking into detail before believing the numbers. Their ideology is quite clear.
So since you’ve obviously had a good look at the report, do they treat stock options as income even though you’d pay tax later on them, and how do they take into account donations reducing tax?
How can we dispute the figures without access to the report and its methodology?
Now I’m really getting confused. Was that the same different Chris or a different different Chris?
adrian @ 57 – sorry same Chris logged in from a different computer and but didn’t get the name right. Too many computers!
Chris (a different one) – why not register a gravatar to your email address? Then we’ll always know when it’s you?
It’s free, it only takes a few minutes to upload the image of your choice and then a day or two for them to approve it, and you’re set.
This argument has been given solid weight by a just released OECD report (I haven’t read it) which comments on the expanding divide in wealth between retirement age and young families. The commercial world has reacted to the unfairness of this by offering “low doc loans” which had the effect of pushing callamity into the far distant future, now (for corporate business long term is 18 months or 6 months short of the average CEO tenure). So the “low doc loan” or “sub prime” mortgage had the effect of hiding the inadequacy of wage levels, which was both politically (GDP growth) and corporate executively (share returns and executive income growth) convenient. So it seems that when the banks tried to distance themselves from their risk exposure (mainly in the US) to a growing number of possible foreclosures the creative commercial people
http://www.smh.com.au/news/technology/biztech/rise-of-the-machines/2008/10/20/1224351155344.html
did the job far too well. And so here we are financial collapse.
tigtog @ 59 – good idea! Hopefully working now.
Now, your Nortons and Whiteheads of the world will sniffily suggest that trying to tax rich people who don’t want to pay their taxes is a negative sum game (i.e. the costs will get eaten up in the chasing) but that’s half a billion dollars in forsaken revenue we’re talking about.
It’s a pity we can’t simply revoke the citizenship of people who make that kind of dough but refuse to pay even a remotely plausible amount of tax.
I agree David. I heard yesterday on ABC radio that Bob Brown and Nick Xenophon are calling for higher rates of tax on incomes of $1 million plus. Totally agree there.
The reporter made a comment to the effect of well most people on these incomes pay minimal tax anyway so what is the point.
Xenophon responded that some of the loopholes these people use to minimise their tax should be closed, again totally agree.
I am not really suprised that people minimise their tax if the Govt allow it, who wouldn’t? But why do the Govt continue to let it go on especially these days of such nauseatingly excessive payouts to company executives – whether they succeed or fail.
Obviously there would be self interest involved, but I think ‘ordinary’ people (for want of a better term) would be heartily sickened by these ongoing legal rorts, especially in light of the current financial debacle and the subsequent need for taxpayers to now have to bail out these self serving, greed driven schmucks.
The ATO should also crack down on tax avoiders, and people caught out utilising tax haven should be named and shamed – as in the US. There was an excellent 4 Corners program recently about a certain bank in Liechtenstein and how the Lowy’s had used this institution to avoid large amounts of tax. It would appear we only get to hear about it at all because Peter Lowy is a US citizen and was mentioned as one of approx 9 US citizens caught out in the scandal. The US have no qualms about naming these people so why should we?
Don’t we the public have a right to now when these so called ‘pillars of society’ are rorting the system to make themselves even more gluttenously rich? Instead what happens apparently is these miscreants are allowed to make secret deals with the ATO (usually having to pay back much lower sums than those withheld in the first place). Some penalty.
Some are even rewarded with appointments to the Board of the Reserve Bank (a la Tip’s good friend Gerald Henderson).
As Xenophon said (paraphrased), after Rudd’s ‘Greed is Bad’ speech it is time he walked the walk. Let’s really clean up the system.
People who don’t pay tax (ie, do not contribute) should certainly be named & shamed.
Perhaps they could be put into stocks, so that people who DO pay their fair share can get equal for being taxed to subsidise these freeloaders.
I don’t think the average LP reader is thinking of the same people we are Steve.
This discussion appears to be predicated upon the notion that the middle class is a good thing.
Average readers Craig? So where do you place Steve and yourself?
Quite obviously, the answer is: Above average.
The alternatives? Feudalism with its lords and serfs? Or socialism with its all-wise Party and the ever-grateful proletariat, which worked so well in the late, lamented Soviet Union and its satellites, as we all know.
But obviously you of know a third way in which the middle class isn’t a good thing. Please share it with us so that we may be instructed.
How could I refuse such a gracious invitation?
If there is no “upper class” and there is no “lower class”, how can one speak sensibly about a “middle class”?
No it is a matter for rejoicing that the traditional “upper classes” have all but disappeared from the world.
Therefore, by ineluctable logic, the only class that remains to fill in the role of the “upper class” in today’s world is the erstwhile “middle class”. Ergo, the old “middle class” is the new “upper class”.
It is regrettably true that far from disappearing, the “lower classes” are still well and truly with us. Indeed, it is argued that in the United States this section of the community is actually growing in size.
Now, according to many who claim to be fans of the “middle classes” have long argued that this social division would not happen under a regime that supported middle class values.
There seems, therefore to be a bit of a crisis of confidence about the role of the middle classes in bringing about a classless society.
If the above is true, then a cloud hovers over the sunny prospects of a society founded on middle class values.
Some may think that this is a good thing.
“Ergo, the old “middle class” is the new “upper class”. It is regrettably true that far from disappearing, the “lower classes” are still well and truly with us. Indeed, it is argued that in the United States this section of the community is actually growing in size.”
So, if the lower classes are growing in size doesn’t it suggest that the old middle class is becoming the new lower class – they’re sliding down, not rising up.
Correct.