Jul 28, 2015

Would the ALP’s ‘Buffett tax’ put an end to tax-rorting millionaires?

Some 55 millionaires paid no tax at all in 2012-13, and they claimed an average of $700 in benefits. Economist and freelance journalist Jason Murphy says that doesn't necessarily mean they are rorters, but the chances are pretty good ...

The viral fact of recent days is that 55 Australians who earned more than $1 million in income in 2012-13 paid no tax. That true and shocking snippet is being aired in support of a policy proposal for a “Buffett tax", which the ALP national conference adopted for consideration as part of the party’s policy platform on the weekend. Named for US billionaire Warren Buffett, it would ensure the rich pay a minimum percentage of their income in tax, perhaps 30% or 35%. In Australia, most people with a million dollars in income are actually decent, running a factory or a stock-broking firm, and paying their workers while also paying their taxes. But like a crowd at the footy or a Saturday night in the city, a few idiots ruin things for everyone. Turns out, there’s a 1% in the 1%. Those 55 millionaires (0.6% of millionaires) paid no tax. Fortunately the vast majority of millionaires are far better behaved.

The categories at the bottom of this chart show the size of millionaires' incomes after deductions. That big line on the right is the 9155 people with an income over $1 million who paid tax on more than $1 million in income. That’s 93% of millionaires. They are paying an average of $958,000 in tax each, or 43% of their total income in tax. That seems fair. They get great benefit from government services and should contribute according to their capacity. But what about those 55 zero-tax millionaires -- the little blue sliver on the left of the graph -- are they all vile tax shirkers? It’s not totally clear from the data. They could just be unlucky investors who used up all their total income in investing expenses. For some of them, this is likely genuinely the case. But there are clues suggesting some of them are tax haters -- the kind who drop Ayn Rand quotes in conversation and have Ludwig von Mises tattoos that remains unseen until they shed their Charvet shirts. Their cost of managing tax affairs are startlingly high on average. The millionaires who paid zero tax spent 70 times more on tax accounting than millionaires who paid the most tax.

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6 thoughts on “Would the ALP’s ‘Buffett tax’ put an end to tax-rorting millionaires?

  1. seriously?

    None of this is proof of rorting – or anything for that matter. It is just a series of guesses, hunches, and frankly ignorance of the law, tax, accounting, etc.

    Tax is only payable on income – it isn’t paid on “income before deductions” (that is irrelevant) and it’s the first major error every commentator, including the ALP, on the matter falls for. Commentators such as yourself confuse revenue or receipts with income, which is the net profit or loss after deducting all applicable expenses and offsets.

    This whole “Buffet” tax is a dumb idea.

  2. Bob's Uncle

    I love the “if we can’t 100% fix something there is no point even trying” attitude.

    If we can’t prove every tax-free millionaire is rorting the system, we shouldn’t take any action against any of them.

    If we can’t close every potential avoidance loophole, there is no point closing any of them.

    If we can’t single-handedly affect the climate on our own as a country, there is no point participating in any carbon reduction schemes.

    If we can’t prevent or punish all crime, there is no point in having a police force.

    Gets a bit silly by that stage.

  3. Dogs breakfast

    That’s a million dollars of income, seriously, not revenue. Just reading the report will indicate that there is a problem, even if it rightly points out that the writer is not sure exactly what the problem is.

    If it is income, this is what they received after deductions from their businesses etc. So the applicable tax laws aren’t about corporate tax, this is income tax, a much different beast.

    How do you rack up $1M in deductions in a given year unless the tax system is stuffed?

    Perhaps they are putting all their money into a political party, quite possible, but then the question is why do we allow tax deductible donations to political parties.

    The question that should be generated from these observations is ‘what is so drastically wrong with our tax system that allows this to happen?’

    You can then ask the same question of multi-national tax dodgers etc, all the way up and down the line.

    The best tax system is a supremely simple one. Perhaps a revenue/income tax set at very low rates with no deductions is the best. The current legislation has to be about the worst possible outcome.

  4. Vern Tack

    A couple of decades ago I was seconded to the ATO. The word there was that when a person is self-employed the payment of income tax is entirely optional.

    As income increases the availability of non-tax options increases as well.

    If our society is to continue in a peaceful manner then tax fairness must be managed.

  5. AR

    Not to go all F. Scott FitzG but the rich are different which is why they remain so.
    And what is the defining characteristic of the rich – spending.
    Ergo, an extra GST especially for them and their high cost tastes – hell, they might even wear it as a badge of honour, as in Japan which publishes each year the highest tax payers from they gain much social kudo.

  6. GideonPolya

    Income taxes (that are spectacularly avoided by multinational corporations and the super-rich ) are needed to be collected to pay for Governmnent services, including infrastructure.

    However infrastructure investment will increasingly have to be made in response to man-made climate change e.g. the huge cost of returning atmospheric CO2 back to a safe 300 ppm CO2 from the present damaging 400 ppm CO2 (see “ – return atmosphere CO2 to 300 ppm CO2”:—return-atmosphere-co2-to-300-ppm ), or sea walls and even closure of Port Phillip Bay to protect bayside Melbourne property from inundation with sea levels now predicted to increase by metres in the coming century ).

    Just as an increase in the Medicare Levy is seen a s a fair way of paying for increasing medical costs, so application of a damage-related Carbon Price on past and present greenhouse gas (GHG) pollution would be a fair way of paying for climate change-related infrastructure.

    Thus Jesus Christ- and science-informed Pope Francis in his 2015 Encyclical Letter “Laudato si” demands that a “fully borne” Carbon Price be emplaced on greenhouse gas (GHG) pollution in order to prevent “millions of premature deaths”. Armed with this authoritative moral and science-based advice, the billions of Humanity must save themselves and the Biosphere by demanding that the polluters must pay in full by a Wealth Tax (for historical GHG pollution) and a Carbon Tax (for ongoing GHG pollution) (for details and documentation of this crucial argument see Gideon Polya, “Pope Francis Demands “Fully Borne” Cost of Pollution (Carbon Price) To Prevent “Millions Of Premature Deaths”, Countercurrents, 29 July, 2015: ; Gideon Polya, “4 % Annual Global Wealth Tax To Stop The 17 Million Deaths Annually”, Countercurrents, 27 June, 2014: ).

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