Fixing Australia’s Tax Revenue Problem

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10 ways we can find more money without cuts to services:

1. Tax the undertaxed mining industry by restoring the original super profits tax on mining companies – raising $4,500,000,000 per year [1]

2. Abolish fossil fuel subsidies. In 2013-14, over $11bn of subsidies were given to the fossil fuel industry, including for fuel tax credits, aviation fuel & mining exploration. Not only does it favor some industries over others, but it is a wealth transfer to polluting companies. This would save $11,000,000,000 [2]

3. Defund private schools. In 2013-14 the Gov spent $4.5bn on public schools and $9bn on private schools. If you want to opt out of public education, you should pay for it yourself. Also private schools are less efficient – increasing their costs per student by 3.4% p.a. compared to students from public schools at 2.4% p.a. with no improvement to academic results. Many studies have shown NAPLAN scores have not improved under private or Catholic schools. In addition, private schools routinely exclude any children with a disability to keep their profits and grade averages up.  Cutting it back completely  would save $9,000,000,000 per year.  Cutting it back to a base funding per student would save $6,000,000,000 per year. [3]

4. More progressive income taxes. The real causes of the structural deficit are cuts to income tax, pushing tax thresholds too high and the disappearance of a more progressive taxation system. If 2005-6 taxation rates were still used, there would be an additional $30bn of revenue this year – let’s restore them. Addition to revenue: $30,000,000,000 [4]

5. Abolish negative gearing. Losses from so-called “negatively geared” property is income tax deductible and costs the budget $4 billion a year (estimated). This is blatant welfare for the rich and should be ended. It does not improve housing affordability, as was its initial aim, but increases wealth inequalities. With a ten year estimate of $42.5 billion This would save on average just over $4,000,000,000 per year once fully implemented. [5]

6. Remove private health insurance rebate and reinvest money in public system. Save $5.5 billion a year and have $3 billion spare after expected changes when people stop buying private health insurance. [6]

7. a “millionaire’s tax” that would require top income earners to pay 50% of all earnings over $1 million in tax. This would raise $1,000,000,000 a year [7]

8. A public insurance ”levy” on the big four banks of 0.05% of deposits that would raise $350 million per year [8]

9. A $150-per-tonne levy on carbon – yes a carbon price set at the level Sweden established two decades ago – raising $22 billion per year based on emissions taxed in 2013/14 (yes, this would be on top of the mining tax above to discourage coal miners) This should decrease over time as industry moves towards low carbon solutions [9]

10. Tax the 550,000 discretionary trusts that rich people use to hide money the same way as corporations (except those set up by farmers) – raising at least $800 million per year [10]

That represents about $82.65 billion a year in new revenue.

That’s enough to pay for the entire transition to 100% renewable energy in under a decade.  You could also repay the sovereign debt bill over four years and still have change to fund the education and health systems properly.

That extra $82,650,000,000 EVERY year can then go into national infrastructure projects we need to implement:

1. 100% Renewable Energy

2. High Speed rail infrastructure connecting cities, especially Melbourne to Brisbane to open up the country.

3. Public transport in cities

4. Education system overhaul to follow the Scandanavian examples, especially Finland

5. Healthcare system given funding to reduce all wait times to under 6 months and continue to expand 24hr community clinics to take load off emergency rooms.

6. Establish a sovereign fund like Norway to support Australia long into the future.

7. Invest in Australian industry programs to build sustainable businesses in renewable energy, electric vehicle manufacture and 3D printing.

One last change that won’t change revenue, but will change expenditure on pensions:

End the obscene superannuation tax concessions for the rich. For every $1bn we spend on concessions, we save only $200m on the old age pension, as 30% of concessions go to the top 5% of income earners.  This needs to be changed so that just 5% of the concessions go to the top 5% of income earners and the rest is distributed to raise the floor.  This would distribute the total of $10,500,000,000 per year better to the people who need it instead of hoarding for the rich who don’t.











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3 comments to Fixing Australia’s Tax Revenue Problem

  • Abe Smith

    I agree with nearly everything, the only disagreement being your interpretation of what #4 does (covered in my third question).
    Here are my three questions:

    1) How did you work out how much more would be taxed? This, I mean -> “Addition to revenue: $40,000,000,000”
    Something to do with the Australian Bureau of Statistics? Journalistic articles? Actual academic articles?
    I’d love to be test how total tax from income taxes would change if there’s something for that, say on the internet, but I don’t see how it would work unless there was a database that had all of the reported income from every individual.

    2) You mentioned using the 2006 tax system. Did you mean the 2005–06 system or the 2006-2007 system?

    $0–$6,000: Nil
    $6,001–$21,600: 15c for each $1 over $6,000
    $21,601–$63,000: $2,340 plus 30c for each $1 over $21,600
    $63,001–$95,000: $14,760 plus 42c for each $1 over $63,000
    Over $95,000: $28,200 plus 47c for each $1 over $95,000

    $0–$6,000 Nil
    $6,001–$25,000: 15c for each $1 over $6,000
    $25,001–$75,000: $2,850 plus 30c for each $1 over $25,000
    $75,001–$150,000: $17,850 plus 40c for each $1 over $75,000
    $150,001 and over: $47,850 plus 45c for each $1 over $150,000

    3) Why do you say it is more progressive? These both actually tax low income earners a lot more than the current system does and what’s more, the 2006-2007 system only taxes wealthier people about the same amount…very little extra when you look at how small the additional portion is compared to their total income and then look at the size of the extra tax you’re taking out of those on low income.
    You would be taking 80% more tax out of someone on $37000/yr, that is $2878 more and yet you would be taking just $2053 more out of someone on $70000/yr! Not only is that a lower absolute value, but that’s only 14.36% more tax from them! Just how exactly do you figure this to be more progressive?
    Perhaps you weren’t using 2006-2007, but rather 2005-2006. That would change things so that those on $37000/yr pay $3388 more, which is 94.85% more tax! The person on $70000/yr would pay $2563 more now, but that is AGAIN a lower absolute number than the increase in tax for the person on $37000/yr! This equates to a 17.93% increase in tax.
    So again, how on Earth do you manage to convince yourself that either of these would be more progressive? They would raise more taxes overall.

    Now those taxes could POTENTIALLY be put into public programs, but there’s no guarantee it would be put to good use.
    That is an unnecessary argument anyway, because it is not as if you claimed only that the changes overall were progressive, but rather this:
    “More progressive income taxes. The real causes of the structural deficit are cuts to income tax, pushing tax thresholds too high and the disappearance of a more progressive taxation system. If 2006 taxation rates were still used, there would be an additional $40bn of revenue this year – let’s restore them. Addition to revenue: $40,000,000,000”

  • Firstly, thanks for your well thought out questions, I hope we can address your very valid concerns. Your comment caused me to go and reference every point, which has caused a change to the overall revenue generated, down to $82 billion from $116 billion. There were a few that had four year estimates instead of annual values. Amazing what some rigour can achieve to firm up results. Still, that is an immense amount of revenue sourced from places that can afford it.

    1. This number was touted in the media in 2014 in many places, this article provides a good summary of the thought and sources:

    Here’s another that also references a model developed at the University of Canberra

    The IMF report that condemned Howard as the most profiligate spending living Prime Minister and the Henry Report also draw attention to this problem, but dont necessarily put a value on it.

    However, both these reports put the current shortfall closer to $30 billion per annum, so I will revise the article from $40 billion to align to this number. The original estimate would have come from another source, but these sources are more current.

    2. I am referring to the earlier one with the top tax rate arriving at $95K. I have made an edit to clarify

    3. It’s more progressive in the sense that far more high wage earners are subject to the top tax rate. I agree that the tax free range should remain around 20K where it is and evolve up from there. The point is at the top end of the range, the wealthy are not being taxed nearly enough to cover expenses. You can’t look at income tax alone to determine how people benefit, what goes in income tax routinely comes back in other benefits to low income earners. I can’t find a study that actually proposes a new tax threshold range that would raise the right revenue, that is what we need to see. The bottom line is everyone needs to pay more tax if we’re all going to enjoy our benefits. This is going to hit the rich a lot more in volume, but needs to be balanced and phased in to avoid sudden shock changes.

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