The recent talk of tax cuts raised by various members of the Liberal party has seen a whole lot of media talk about the burden of tax on the well off.
Malcom Turnbull, Liberal party aspirant to the treasury, is suggesting that the top marginal tax rate needs to be cut and that this can be done by broadening the base (i.e., by making those on lower incomes pay more). Peter Costello has become a reluctant disparager of such a plan pointing out that only about 3% of tax payers will earn over $125,000 pa and therefore pay the top rate of 47% when new tax rates come into effect on 1/7/06.
Labor has also joined in the chorus. Labor’s federal finance spokesman, Lindsay Tanner, has said Labor will have to offer tax cuts before the next election.
Of course the wealthy in Australia do not pay the top marginal rates. A recent study by the Melbourne institute has shown that the nation’s wealthiest people only pay 25% of their income in tax and easily avoid the top personal rate of 47%.
The study shows that the wealthiest Australians, the top 2% of wealth holders covering 72,000 households has an asset base of at least $2 million. To make the top 2% in earnings requires an income of more than $200,000. This group also covers 72,000 households. Those in the top 2% of earnings get almost all income from salary and wages, whereas those in top 2% of wealth get a significant level of income from business, investment and shares.
The top 2% wealth holder typically has $2.4 million in assets, but earns $112,000 in gross income on which they pay tax of $28,000 after deductions of up to $30,000 – a tax rate of 25%. For your typical top earner their salary is $268,000 with tax paid of $92000 a tax rate of 34.3%. This household has $1.15 million in assets.
Evidence from the Australian Tax office shows that tax deductions are rising two or three times the rate of wages and salaries an indication of tax minimisation gone wild. Deductions for cars have grown more than twice as fast as wages and salaries 88% versus 38% between 1995-1996 and 2002-2003. Claims for gifts and donations during the same period have increased by 78%.
Dividends being declared have jumped 105% and capital gains by 191%. But it is not just rich individuals who are dodging tax a recent report by the British Charity Christian Aid has shown that major international companies operating in the worlds poorest countries are dodging about $640 billion a year in tax from those countries.
The only way to stop the elite wealthy and the corporations that they control is a new workers party that is committed to ensuring that working class people are put before the interests and profits of the rich elite’s and the companies that they control.
Editorial comment from the October 2005 issue of ‘The Socialist’