Tax cuts to make the rich greedier
‘While the most vulnerable have been forgotten’
The federal budget may well make rich people greedier, with its move to create a flatter tax structure, according to an actuarial academic.
It also seemed unfair to plan to cut taxes to the wealthy while failing to increase Newstart allowances or rent assistance, said Anthony Asher, associate professor of the School of Risk and Actuarial Studies at the University of NSW Business School.
Tuesday night’s budget announced that 94 per cent of taxpayers will pay no more than 30 cents in the dollar from mid-2024 under Coalition plans to create a mega tax bracket, spanning those on incomes of $45,000 to $200,000. Currently people on $200,000 a year pay 45 per cent marginal tax.
Saying he was against the plan, Asher suggested that lower tax rates for the wealthy could make them greedier.
“I think a lot of people’s wealth is an accident of current economic forces rather than genuine hard work or genius.” – Anthony Asher
“It is propaganda to repeat the theory that people are solely motivated by money. Rich people can come to believe it, so they become more likely to find ways of increasing their income because it won’t be taxed away. I think the focus on greed and motivating people by giving them more money is a misdirection of society,” he said. “Many, if not most of your readers, have made decisions not to follow the money in their career choices.
“I’m uncomfortable with reducing the top marginal rates. I think a lot of people’s wealth is an accident of current economic forces rather than genuine hard work or genius.”
The move to a less progressive tax system was also not welcomed by Gordon Menzies, senior lecturer in economics at the University of Technology, Sydney.
As a Christian, he said he was in favour of spending on social justice for the vulnerable – health, education, pensions and aged care – that had been enabled by the large increase in taxation levels since the early 20th century.
“I am grateful for the continued commitment by both main parties to offer help to Australians for the ordinary concerns of life, like health, education and pensioner income, but the announced long-term flatter tax structure does seem to represent the emergence of a differing long-term agenda between the main parties.
“I am not in favour of this policy – it is poor social insurance.” – Gordon Menzies
“When I ask myself ‘what is all the GDP for?’, my own Christian answer is that it ought to be for building community and supporting the vulnerable, and a flatter tax structure seems, at best, irrelevant to that goal. At worst, when Australia receives the next unexpected negative shock, it will be harder to protect social spending if we have locked in lower tax rates. So I am not in favour of this policy – it is poor social insurance.”
Asher also expressed disappointment that the Newstart allowance for the unemployed hadn’t been increased, pointing out that God was interested in justice for the poor, the widowed and oppressed. (There were 763,677 people on Newstart in January 2018.)
“Given we are a developed economy, very few people in Australia should be doing it really tough … but I think there are some exceptions to that. It’s unfair to not increase Newstart at the same time as giving money to the rich,” he said.
He also believed there was a desperate need to increase rent assistance.
“Rent assistance for those not in public housing is based on rents of 30 years ago and there are some people who are doing it really tough as a consequence. Rents have gone up dramatically as house prices have risen and revising rent assistance really hasn’t been looked at.”
Asher said that instead of providing more benefits for the elderly – as governments tended to do because had more political influence – there should be programmes to help young families get into their own homes. (He quoted Micah 4:6 about the need to turn the hearts of the fathers to their children.)
He said the International Association of Actuaries had produced a report that suggested that people would be better off if they could withdraw from their super account to pay a house a deposit or reduce repayments on a mortgage.
Meanwhile, the frozen foreign aid budget caused deep consternation among many Christian charities.
Despite the projected $7.1 billion budget surplus in 2019-20, the foreign aid budget was frozen at $4 billion a year until 2022-23, meaning an effective 10 per cent cut after inflation.
“Surplus is here, yet the poor have been forgotten and we’ve been left wondering: ‘When will this government believe we have enough to start being generous again?'” – Tim Costello
World Vision Australia’s government relations manager, Quinton Clements, said the impact of that freeze and the step-up in Pacific infrastructure projects would hit World Vision’s bilateral aid programmes with Pakistan, Nepal and Bangladesh.
“Those have been cut in half, and that $1.4 billion diverted to the Pacific and East Timor means some of the organisations we work with on poverty reduction and empowering women and girls will suffer in those other areas,” he said. “We can do more.”
Tim Costello, executive director of Micah Australia, said the government had treated our aid programme “like an ATM.”
Since 2013, the Coalition had slashed aid to its lowest level of 0.21 per cent of Gross National Income, which would take a further dip to 0.19 per cent in 2021-2022 before indexation resumes in 2022-23.
“For years now, the Coalition has told us that aid would be restored ‘once we returned to surplus.’ Well surplus is here, yet the poor have been forgotten and we’ve been left wondering: ‘When will this government believe we have enough to start being generous again?’
“Britain’s debt is four times that of the Australian government. Yet the UK has kept their promise to fix aid at 0.7 per cent of GNI, in stark contrast to Australia’s broken promise.”
“This budget squanders an opportunity to [give] a hand-up to our most disadvantaged citizens.” – Claire Victory
The St Vincent de Paul Society welcomed additional funding commitments for domestic violence programmes and aged care, along with a small boost to mental health services.
However, its national president Claire Victory, expressed disappointment that the budget failed to address the two main drivers of poverty: soaring costs of basic housing and below-poverty-level income support payments.
“This budget squanders an opportunity to balance the benefits of lifting household income delivered through tax cuts against giving a hand-up to our most disadvantaged citizens,” she said.
The government’s announcement that it would not continue to put money into the global climate fund was cynical and disappointing, Mick Pope, professor of environmental mission, Missional University, said.
“Far from simply paying for conferences as the Prime Minister claims, it goes to helping developing nations adapt to climate change, making communities become more resilient. This decision goes hand in hand with further cuts to foreign aid, and demonstrates how little the political system seeks to love its neighbour as itself,” he said in a statement.
Anglicare Australia welcomed the announcement of $528 million being set aside for a royal commission into the violence, abuse, neglect and exploitation experienced by people with a disability. But it was very disappointed by the underspending on the National Disability Insurance Scheme.
“While the budget figures are not clear on the current underspend on the NDIS, it does appear it now sits around $1.6 billion,” it said.
“The NDIS has been underspent since inception. This is a direct result of problems with the way the scheme is being implemented. People are waiting too long to enter the scheme and, once they do, they are waiting too long for support.
“These unspent funds should be used to support people with disability and their families and to fix problems with the scheme. They should not be used to fund tax cuts or bolster other aspects of the budget.”More