In 2011, billionaire investment legend, Warren Buffett, penned an opinion piece in the New York Times whereby be revealed that he pays a lower rate of tax than most of his employees.
The article highlighted how there are tax breaks that are available only for the rich with resources to take advantage of them. What followed was a 2012 proposal from former President Barack Obama to introduce a minimum tax rate to ensure that a person does not pay less than a specified percentage of their income in income tax. The proposal, which was later shot down by the US Senate, would have applied to households that earn more than $1 million and set a minimum tax rate of 30% of household income.
Yesterday, it was reported that the Australian Labor Party’s left faction has proposed a 35% ‘Buffett Rule’ be applied to people with a gross income of more than $300,000, which it claims would potentially raise some $2.5 billion a year in additional Budget revenue. From The SMH:
That would mean the richest 30,000 households would be forced to contribute an average $79,000 a year more in tax than they currently do, according to research by the National Centre for Social and Economic Modelling…
The idea has been dismissed as “class warfare” by advocates for corporate Australia but senior figures in the union movement believe Labor must respond to the rise of right-wing populism and its focus on inequality with policy positions that until recently were considered “outside the political orthodoxy”…
There was widespread anger in 2015 when Tax Office figures showed 77 Australians who earned more than $1 million paid no income tax, due to aggressive tax minimisation.
Already, the proposal has been slapped down by opposition leader Bill Shorten as well as shadow treasurer Chris Bowen. From The Canberra Times:
“This approach isn’t the best way to address inequalities in the system. A Buffett rule won’t be something we take to the next election,” Mr Bowen said…
The shadow treasurer said it was better to work on existing concessions that favour high-income earners.
“Labor has shown we’re serious about cracking down on tax concessions that benefit high-income earners. We have policies on superannuation, negative gearing and capital gains that ensure our tax concessions are made fairer and sustainable,” he said.
Reportedly, the ‘Buffett Rule’ is likely to have support from the majority of Labor Party members, thus potentially setting up an interesting showdown between the rank-and-file and the Party’s leadership.
Personally, I am with Chris Bowen on this one and believe that Labor should instead aim to broaden the tax base, for example via closing costly and inequitable tax concessions.
