This chart in a new IMF staff working paper caught my eye:
This was the front page of our national broadsheet the day after the ALP Government announced a plan to increase the tax on the super contributions of the 128 000 Australians earning over $300 000:
There are two alternative proposals to increase the tax on superannuation contributions.
- The first proposal would raise the tax on superannuation contributions paid by the 128 000 highest-income Australians by 15 percentage points.
- The second would increase the tax on super contributions paid by the 3.6 million lowest-paid workers by 15 percentage points.
Which of these proposals would you describe as ‘class war’?
I delivered a short presentation recently at an event organised by Victorian Progress on the topic ‘Middle class welfare: What’s all the fuss about’. I spoke alongside David Hetherington of Per Capita and John Roskam of the IPA, and we were introduced by John Brumby. I don’t think it was recorded, and I didn’t read my remarks, but I thought I’d try and summarise my key points here, along with the slides I used on the night.
Imagine if everyone with a surname starting with the letter C didn’t have to pay income tax. For some arcane reason, back in the mists of time when the tax was introduced in Australia, those with a ‘C’ name were completely exempted, and the exemption remained on the books, stubbornly resistant to efforts to remove it.
I can understand why libertarians might favour a flat tax on superannuation contributions and on ordinary income. I disagree vehemently with that position, but it’s logically coherent to me. Personally, I favour a progressive tax on both of those things, and I think that position also makes sense. What isn’t coherent to me is the idea that we should tax ordinary income in a progressive way, with higher income earners paying a greater proportion of their income in tax, but we should tax super contributions with a flat tax. How does that make sense?
Malcolm Turnbull has an op-ed in Business Spectator in which he claims that:
there is evidence that increased compulsory contributions in Australia have largely been offset by falls in other forms of private saving, and by the public cost of the tax concession – leaving national saving little changed.
He doesn’t enlighten us as to what this evidence might be.