As each week passes by it seems the tax policy debate in Australia becomes even more outlandish, with some interest group or politician canvassing another way to shake more cash out of our purses and wallets.
During the ALP national conference Labor frontbencher Anthony Albanese pushed, and won endorsement, for a minimum average tax rate of 35 per cent for those on incomes in excess of $300,000 per annum.
This proposal has been referred to as the ‘Buffett tax rule,’ named after US billionaire Warren Buffett (pictured) who proclaimed he shouldn’t pay less tax than his personal assistant (as an aside, if Buffett wants to donate more of his own income to the IRS, he is free to do so).
An Australian version of this high‑tax lock‑in proposal has been mooted by, you guessed it, the pro-revenue lobby group the Australia Institute, which estimates that it would raise an extra $2.5 billion a year.
This revenue gain estimate is economically unreliable, because the results do not countenance the prospect of behavioural responses on the part of those slated to pay minimum taxes. However, an interesting aspect of the study is that people in their fifties will be hit hardest by the Buffett rule.
The AFR reported this week that three out of four people aged over 50 are seeking to remain in the workforce longer to boost their retirement savings. The imposition of a minimum income tax rate, coupled with limiting tax deductions that cover things such as the costs of investing in loss‑making start up firms, investing in financial assets, and so on, would surely frustrate the preparedness of older Australians to supply more of their labour to the market.
The fact of the matter is that the progressive income tax load is already shouldered by too few, with fifty per cent of income tax paid by ten per cent of the working population. The present income tax system is hampering our position as an attractive destination to work and invest and, through that, to grow more strongly.
We should dissuade tax authorities, and for that matter the federal Treasurer, from even thinking about indulging in a Buffett tax buffet.