A grab-bag of Australia’s more progressive business leaders have backed US entrepreneur Warren Buffett’s calls for the super-rich to pay more tax.
In a swingeing New York Times op ed this week, ‘Stop Coddling the Super Rich’, the world’s third wealthiest man declared it was “time for our government to get serious about shared sacrifice”, complaining that he paid just 17.4% of his own income in tax.
Buffett was responding to the poisonous political climate in the US, where the Republican-dominated Congress has refused to let Barack Obama raise taxes to balance the budget, insisting instead on economically ruinous spending cuts. The top American tax rate is just 35% compared to 45% in Australia, inequality is at record levels, and unemployment has reached crisis point.
But despite the sunnier economic climate here, for some prominent locals Buffett’s general sentiment rings true.
Electronics wizz-turned peanut butter magnate Dick Smith, who supports a low-growth free market model for Australia’s economic development in line with the recommendations of the Club of Rome, told Crikey that he “wholeheartedly” supported an increase to the top tax rate, coupled with a bolstered culture of philanthropy.
“I like the idea of encouraging the wealthy to become philanthropists and if they don’t, charge them more tax,” Smith said.
“The top tax rate could increase but the problem might be that high net worth individuals could work around it…I mean my understanding is that Rupert Murdoch pays next to no tax.
“I think when you’re in good economic times and you’ve got such incredible wealth, the people should pay a bit more.”
Smith said that he’d been trying to get Australia’s big 4 bank chiefs, who enjoy salaries of about $10 million a year, to donate more of their salary with little success — noting that if they lived Stateside their lack of interest in philanthropy would make them social pariahs. He also threw his support behind Paul Keating’s theories on superannuation.
“The most telling point is that our superannuation should be about 15%…Paul Keating has it right. So we actually rely on a growing population to pay for the old age of the population now. But it never occurs to anyone that this is completely immoral.”
Daniel Petre, the chairman of technology company Netus and outgoing Nine Entertainment director, told Crikey that he would absolutely endorse Buffett in the domestic context, highlighting the loopholes and rorts endemic in the system.
“The reality in Australia is that many of our most wealthy don’t even pay the marginal tax rates, they don’t even pay the company tax rates, through the use of offshore trusts for example.
“If you said, people only over half a million people should pay 1% or 2% more tax graduated to say 52% for the super rich, I can’t imagine who would have a problem with that…but we should start off by closing those loopholes and see what happens.”
The debate in Australia differs from the United States where deductions are generally more exploited. In his piece, Buffett confessed that last year he gave just 17.4% of his taxable income to the government — US6,938,744 — while staffers in his Berkshire Hathaway office paid between 33% and 41%. And the destructive social inequality seen in America is also less evident here, despite increases in the gap between rich and poor over the last 30 years.
Still, with less room to move on marginal rates, the solution could be more complex.
Graeme Wood, the wotif.com founder who bankrolls a number of environmental initiatives in addition to Monica Attard’s forthcoming Global Mail project, sounded a note of caution, questioning whether the government could be trusted to efficiently spend the extra revenue.
“There’s no doubt that super rich people could afford to pay more tax but whether they’d like to is another thing,” Wood said.
“If people are taxed more will that money be well spent? I can’t necessarily agree that it will be.”
Wood, whose wealth is valued at about $370 million, said that rich people should create the changes they wanted to see off their own bats.
“Everyone can do what they like with their money, we live in a free society…the things I want done I try to finance myself. Giving that amount of money to the government and saying ‘here, you do it’, isn’t necessarily a good solution because I don’t think a lot people have a lot of faith in government’s ability to do more than they’re doing now.”
Crikey also contacted a number of high net worth individuals who based on previous statements might be regarded as anti-tax — Gina Rinehart (worth $10.3 billion according to BRW), Kerry Stokes ($2.55 billion), Solomon Lew ($1.33 billion), Andrew Forrest ($8.18 billion) and Clive Palmer ($5.05 billion) — to discuss the merits of Buffett’s piece.
However, only the media friendly Palmer replied, saying that while he was happy to pay more tax, he didn’t agree with new ones like the Resource Super Profits Tax.
His spokesperson issued the following statement: “Clive has said on the record that he is happy to pay more personal tax. What he is opposed to is new taxes like the carbon tax and the failed RSPT as taxes don’t help growth or create of new jobs. Taxes are growth limiting.”