WHEN was the last time we heard someone talking about economic sustainability?
When was the last time an economist was heard talking about equitable sharing of the economic growth?
Australia “averted a recession” with 1.1 per cent growth in the December quarter. Let’s celebrate! Good news. Well, good for some. Not so good for others. Increasing disparity!
The good news: company profits are “at record levels”. In the December quarter company profits rose by a whopping 20.1 per cent. One of the big winners is mining. Mining! Those same companies who were crying doom and gloom a few years ago when they defeated the government’s attempt to apply some level of taxation on their “super profits”.
The bad news: well, that is for wage earners. While profits grew by 20 per cent, average wages dropped.
Tom Kennedy, of JP Morgan, explained to the ABC: “Some of the support for profits in the non-mining economy seems to be from weaker wage payments, which fell 0.5 per cent quarter-on-quarter (annual run rate slowed further to 1 per cent year-on-year) on the precarious combination of weaker wage growth, fewer hours and elevated underemployment.”
In simple language Kennedy could have said: business increased profits by cutting workers’ wages, reducing hours and by employing less people.
Any number of economic inquiries or reports suggest good ideas about taxation, employment and economic growth. A much smaller number examines what is equitable sharing of wealth.
Even in the current climate, where the government is constantly bombarding the community about living within our means, Turnbull’s government is determined to deliver a $50 billion tax break for the corporate sector. They have a good return on investment for political party donations.
In Australia, the bottom 3.9 million people share the same level of wealth as the top 10 individuals. And the gap is growing.
Sensible taxation measures are just one method of reducing the disparity by applying straightforward rules that are not subject to exemptions.
In a globalised environment, corporations avoid current tax measures by moving money around the world at a touch of a button. One alternative, to provide a fair way to levy the corporate sector and one that is difficult to “game”, is a tax on gross turnover within a country. Such a tax is simple. It is hard to avoid. Big business would pay their share and contribute to community infrastructure from which they draw significant advantage.
Personal income is also “gamed”. American tycoon Warren Buffett noted his secretary paid a higher percentage of income tax than him simply because he could afford better accounting advice.
The answer is to apply a “floor level” for high-income earners. It would catch the 77 individuals, identified by the Australian Tax Office in 2015, who earned over $1 million and paid NO tax.
With the “Buffett Rule”, this group of selfish leeches would not have been able to avoid their fair contribution to the education, health and infrastructure that they all use. The Australia Institute identifies an injection of $2.5 billion if a 35 per cent “Buffet Rule” level was applied to just the top 1 per cent of salary earners.
Surely good government means finding ways to reduce disparity. Inequality is fodder for populist movements around the world. A disparity index is just one way to remind our politicians of their responsibilities.
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Ian Meikle, editor