Last weekend’s ALP conference resolution committing a future Labor government to ‘consider’ a version of the so-called Buffett tax rule capped a week of tax-raising thought bubbles.
Many thought bubbles disappear as fast as they are formed, but as these are coming from governments or alternative governments we have to take them more seriously. Even those advocating a Buffett rule admit they have not thought it through in detail, but it now sits as a threat to future wealth-creating economic activities.
As an idea, the Buffett rule originates from the US but has not actually been implemented there. It would apply a minimum average tax rate on gross incomes (before deductions) above a specified level, with the minimum being above the average currently paid by the target group.
Every major review of the tax system since the 1970s has concluded there is excessive reliance on personal income tax, and the latest review is no exception. Yet the reliance continues unabated, and a Buffett rule would increase it further.
The ALP conference resolution plays to the notion that if only the rich could be made to pay their “fair share” of tax, there would not be a budget problem. In reality, the top 1% of income earners in Australia — the approximate target group — already pay 24% of all personal income tax. It seems a warped sense of fairness to assert that this proportion should be higher.
The Buffett rule is essentially a blunt way of limiting access to deductions (including donations to charities) above an arbitrary income cut-off point. But if the tax law allows deductions for good reason, there is no case for cutting them off above an arbitrarily selected income. If there is no good reason to allow them, the solution is to remove them.
Joe Hockey has been criticised for ruling out ideas without considering their merits, but this is one he should have dismissed out of hand.
Home > Commentary > Opinion > Another unhelpful tax thought bubble
Another unhelpful tax thought bubble
Many thought bubbles disappear as fast as they are formed, but as these are coming from governments or alternative governments we have to take them more seriously. Even those advocating a Buffett rule admit they have not thought it through in detail, but it now sits as a threat to future wealth-creating economic activities.
As an idea, the Buffett rule originates from the US but has not actually been implemented there. It would apply a minimum average tax rate on gross incomes (before deductions) above a specified level, with the minimum being above the average currently paid by the target group.
Every major review of the tax system since the 1970s has concluded there is excessive reliance on personal income tax, and the latest review is no exception. Yet the reliance continues unabated, and a Buffett rule would increase it further.
The ALP conference resolution plays to the notion that if only the rich could be made to pay their “fair share” of tax, there would not be a budget problem. In reality, the top 1% of income earners in Australia — the approximate target group — already pay 24% of all personal income tax. It seems a warped sense of fairness to assert that this proportion should be higher.
The Buffett rule is essentially a blunt way of limiting access to deductions (including donations to charities) above an arbitrary income cut-off point. But if the tax law allows deductions for good reason, there is no case for cutting them off above an arbitrarily selected income. If there is no good reason to allow them, the solution is to remove them.
Joe Hockey has been criticised for ruling out ideas without considering their merits, but this is one he should have dismissed out of hand.
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