En Passant

So Australia’s Prime Minister, Tony Abbott, lied to the Australian public in the run up to the Australian public. What about? Oh, just about everything. He summed it up on the night before the election when he said:

No cuts to education, no cuts to health, no change to pensions, no change to the GST and no cuts to the ABC or SBS.

In case you missed that here is the link to the video of Abbott saying that.

So far the only thing they haven’t foreshadowed in their fake Budget crisis hullabaloo is a change to the GST. They’ll wait for the tax white paper to recommend that and, depending on how on the nose they are, take it to the next election. After all, Howard ‘won’ the 1998 election campaigning for a GST, with all of 48.9% of the two party preferred vote.

Let’s be clear here. Australia’s budget deficit is around ten percent of GDP, a very modest amount compared to other developed countries, and half of it a consequence of Abbott government decisions. Australia is a low tax and a low spending country.  If we moved to the average tax rate of OECD countries we’d raise about an extra $100 billion a year.

This Budget talk isn’t about addressing a current crisis.  There is no crisis. It is about finding a justification to move even more wealth and income from workers to the bosses.  That shift began with the election of the Hawke Labor government in 1983 and its ability through the Accord, to get union leaders to cut real wages.

The history of Australia over the last 31 years of has been the history of the continuity of the 2 major parties, Labor and the Liberals, shifting wealth and income from labour to capital. It is a consequence of falling global profit rates and the understanding that Australia’s higher than average profit rate over the last decade was built on the back of mining and banking.

With the mining boom petering out (aka known as entering the production stage) and Chinese demand slowing, the profit rate in Australia will begin to fall again.

The Budget in May will be about accelerating the wealth shift to insulate capital in Australia from that fall, not just in mining but across the board as the consequences for investment, wages and consumption flow through.

That is why the main targets of the Budget cuts and changes will be the poor and working class. However, to give the impression that everyone is in this together there will be some cosmetic changes to the benefits the rich receive.

That is why the government is floating the idea of a deficit tax (what Labor calls a Deceit tax) which would apply to all of us earning income. It is not clear if it would be progressive.

Apart from the fact this is the Government which in Opposition campaigned against various great Big New Taxes, any income tax would penalise the working class for the services they currently get.  The vast bulk of the deficit tax would come from workers.

I have an alternative suggestion. Tax the rich.

For example the top ten percent in Australia own about 45% of the wealth of the country, ie a bit over $3 trillion.  The bottom twenty percent own nothing.

A one percent wealth tax on the top ten percent would yield about $30 billion a year.

The top five percent of income earners, according to Richard Denniss, receive about one third of the superannuation tax concessions. In terms of revenue forgone next year the tax concessions will be worth $45 billion. So about $15 billion of the tax benefit goes to the top five percent of income earners (by my estimation those on more than $180,000 a year, none of whom are workers.)

Abolishing this rort for the rich would raise about $7 billion a year.  It wouldn’t cost anything in the future either because these are the sorts of people who would never receive the pension.

If we cut off other loopholes like negative gearing of rental properties then that $7 billion figure would rise to more than $10 billion.

There are a range of other tax measures we could introduce like more progressive income tax scales, inheritance taxes,  increasing company tax, halving dividend imputation, abolishing the tens of billions of tax grants going to business etc etc.

None of this is going to happen under the Liberal government nor under Labor if it gets back in.

There might be some token and temporary increase in tax on the rich and capital in the May Budget. At best they’ll have to drink less Grange. Any ‘burden’ on the rich will be for show to appease the rest of us as we lie battered, bruised and bleeding from the Budget.

It is time not just to chant tax the rich but to mobilise around it as part of a wider push for socially progressive policies on jobs, the environment, indigenous Australians, asylum seekers, gays and lesbians, public health, public education, public transport, disability, pensions, child care and the like.