Gap between richest and poorest in our community
Time and again it is shown that the happiest and safest communities are ones in which there is not a huge difference between the top and bottom income levels.
The following information is extracted from an article by Mike Steketee in The Weekend Australian and figures from Wikipedia on the 2011 Australian federal budget.
Australia is now ahead of the pack in the the world-wide trend of a widening gap between the richest and poorest. The OECD reported on 2008 figures which had a 10 to 1 difference for Australia: the average income for the top 10% was $131300 while the average income for the bottom 10% was $13700 (presumably per person although this is not clear. It might be per person getting an income). The income share of the top 1% of Australian incomes nearly doubled in a quarter of a century while the income share of the top 0.1% tripled. Income gaps in Australia are widening dramatically fast.
Australia’s tax scheme is among the most egregious in the world as an example of a tax system departing from fairness and simplicity according to economis Saul Eslake.
For example negative gearing was abolished when Paul Keating was Treasurer as part of a trade-off for reducing top tax rates from 60% to 45%. However he was put under a lot of pressure and brought back negative gearing but the top tax rates stayed down. Capital gains taxes and fringe benefit taxes were also brought in as part of the trade-off for the reduced top tax rates but then Howard halved the capital gains tax. Australia’s landlords have gone from making a taxable profit of around $700 million to a loss of $6.5 billion reducing their tax liability by $4.5 billion. This is a very large subsidy from the working and saving people to the people who are borrowing and speculating.
Who is helped more? Low-income renters or rich negatively geared property investors? The answer is the latter. Negatively geared property investors in the top 20% of incomes get almost double the maximum subsidy available to low-income renters.
Are we getting anything as a nation for subsidizing the richest to invest in property? Apparently not. It drives up house prices and adds almost nothing to the supply of properties since 92% of borrowing for negative gearing is for existing properties. This is what our young people are having to struggle against. Their rents are going up and becoming very hard to afford and to ever save out of and the house prices are very high making it very hard to afford to buy a first home and negative gearing plays a big part in both.
Another example of our tax system handing out subsidies predominantly to higher income earners is the generosity of superannuation tax concessions. Howard’s decision to remove tax entirely from superannuation paid to people aged 60 and older is described by Saul Eslake as “one of the worst taxation policy decisions of the past 20 years.” He asks: How do you justify some people paying less tax than others on the same amount of income purely because of their age? Why are we handing out huge tax benefits to the wealthiest sector of our community?
The cost to tax payers of the superannuation tax concessions is about $31 billion this year going up to $42 billion in 2014-15. I immediately think of the National Broadband Network. The Australian Government is putting $27.5 billion into that. This is an absolutely massive subsidy to the top income earners in Australia.
To compare this superannuation tax concession subsidy to the top income earners here are some more figures. The superannuation tax concession if $31 billion this year going up to $42 billion in 2014-15. Australia’s whole defence budget is $21 billion. Australia’s education budget is $30 billion from the Federal purse. The health budget is $60 billion. Total receipts from company and petroleum resources rent taxes are $77 billion. Receipts from petroleum excises are $17 billion. Australia’s national debt that Wayne Swan is determined to get to zero next year is a relatively paltry $20.3 billion. These figures give you a sense of scale of the superannuation tax concessions that we are giving to Australia’s wealthiest. This is truly remarkable stuff.
Compare again the $31 – $42 billion superannuation tax concessions to the cost of $6 billion for a National Disability Insurance Scheme that the government has promised but not a whisker of money yet to fund any of it. A National Disability Insurance Scheme would make a fantastic difference to the lives of many people in our local community.
Or any sort of dental system for Australia. We are a nation where a big proportion of the population cannot afford dental care.
Down the bottom of our social heap at the moment are people on unemployment benefits trying to get by on $35 a day. No-one suggests this is possible for more than a short time before they start having to sell homes. It is the path to homelessness and despair.
What does all this get us as a community this subsidizing the richest income earners most heavily and massively underfunding services and safety nets at the other end? Apart from a massive dose of denial of reality and self-justification and over-consumption of world travel.
There is strong evidence that it reduces social cohesion and happiness and reduces the general safety in the community. We can expect higher crime when people don’t have enough money for basics and they are confronted by people with excessively much in the same community. It fuels division and mental health problems. As a nation we are literally subsidizing the division of our communties.