- The Guardian
- Issue #2153
Tax is in the news again. Since there’s a productivity summit coming up this August, the usual suspects are agitating for what they call “reform.” Naturally this includes tax reform.
People who own the businesses the rest of us work for are a minority, but they can make a lot of noise, thanks to sympathetic media outlets and politicians who know where the donations come from. What they’re making noise about lately is tax “reform.” For the corporate class and their mouthpieces, reform means only one thing. Lower taxes for the wealthy, higher taxes for workers and the poor.
Taxation can be progressive or regressive. ‘Progressive’ means that the more money you have, the more tax you pay. Regressive is the reverse – the less money you have, the higher percentage of it you pay in taxation.
The classic example of this is very relevant to the “reform” business mouthpieces are calling for: GST. This tax which we pay on goods and services is very regressive. If you buy a microwave oven and Gina Rinehart, currently Australia’s richest woman, buys the same brand of microwave oven, you pay the same price. That’s fair enough. You also pay the same GST, which represents a much higher percentage of your income than it does of Rinehart’s.
(We’re assuming that our readers have less in the bank than Australia’s richest woman does. If any of you have more, please donate to the Press Fund.)
So far, so unfair. The country is used to it, although we shouldn’t be. This is where the ‘reform’ comes in. There is a push for the government to charge less in income and business taxes, and take in more from GST to make up the difference. They can do this in two ways; lifting the rate, and/or broadening the base.
Lifting the rate is self-explanatory. GST is 10 per cent now. The Australian Financial Review wants it raised to 15 per cent.
Broadening the base means charging GST on more products. GST is not charged on basic food products, education, some medical products and services and a range of other things. Either way, the Gina Rinehart test applies – the more GST comes in, the more regressive it is.
It’s not a coincidence that the people arguing for an expanded GST also argue that reasonable taxes on business and personal income are “incentive blunting.” The laughable argument they use is that taxes on wealthy people discourage the rich from trying to be richer. So people who own businesses just give up employing people and we’re all out of a job.
There’s more wrong with that idea than can be contained in one editorial, but here’s the thing about “incentive blunting” – have you ever seen a wealthy person who didn’t want to be wealthier? We can’t think of any. Here’s a thought experiment for you. There have been a lot of tax cuts over the last 30 years. Have a look at one tax cut and ask yourself what the rich were doing before it was introduced. Were they trying to be richer?
Of course they were! Incentive blunting is a myth, a story the wealthy tell to make paying less tax sound like something we should admire.
Capitalist governments like GST because it’s hard for people to avoid. People with deep pockets like it because it hits working people harder. The Communist Party of Australia’s position on taxation is this: taxation should be based on ability to pay. Those with high incomes, and those who make big unearned profits from shareholdings should pay more tax.
Support the Party for a society that’s progressive all round – a socialist society!
