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.”
But giving money to charities is tax deductable, so you could still have a high tax rate, and direct the money more to causes you endorse more.
Warren Buffet is much blessed: not only is he one of the wealthiest and most beneficent geezers on the planet but, compared to US politicians and assorted billionaires, he’s genuinely wise.
No surprise that there was no response from Rinehart – should really be called noheart
Bill gates had a wise quote on this that wealth isn’t generated in a vacuum or without society as a whole contributing to it in a significant way as an accelerator. He recognizes this in the fortune he has had in becoming the worlds richest individual.
Entrerprenuers, CEO’s, sports people could not prosper and generate their wealth here or in the west without the enablers of an advanced economy, an education system providing educated employees, roads and infrastructure to utilise, transport, a functioning legal system to protect patents, a health system, a pool of available consumers and high GDP… the list goes on.
To all the teaparty aligned billionares, try coming up with a patentable invention or multi-national corporation in Afghanistan and see how far your seed capital would get you. How many 10million dollar CEO jobs are on offer in developing countries?
Maybe an increased tax rate of +10% for salaries over 1 million, with an increased 80% offset for charitable causes above this rate to encourage philanthropy.
Wealth / inheritance tax also needs to be looked at here, it doesn’t seem fair that doctors working incredibly hard are taxed effectively at 60% while someone sitting on a trust fund and day-trading can freeride their way to a sub 30% or less tax rate.
It’s good to hear it from someone rich. The morality of high taxes has interesting aspects which are practically never discussed. How can it be thought moral, without queasy doubts about self-righteousness and holy humbug, for people who are just earning modest secure incomes in big corporations and bureaucracies, receiving modest but livable pensions, getting unemployment benefits etc. to use their numbers to extract a high proportion – anything above 33 per cent some would say, but let’s settle on 45 per cent – from those who earn a lot more than they do? How can it be moral for politicians to buy the votes which put them in office by offering the abovementioned non-rich rationalisations for policies which extract high taxes?
So, let’s extend the idea of “no taxation without representation” to become perhaps “no taxation without weighted or proportionate representation”. That would suggest that “the conscience of the rich” be consulted. And Warren Buffett, albeit at 80 plus, is some evidence that the rich might be relied on, if mostly to retain respect of their peers, to do the decent thing. But history doesn’t give a lot of assurance that human nature is going to make any system work with perfect fairness or justice so maybe the rich will have to settle for the influence that the very rich and those who can give their time and efforts to political parties can exercise on politicians.
What one also doesn’t hear much of is what the concept of “taxable income” did and should mean. JS Mill, or a contemporary, pointed to the sense and justice of taxing only what someone had left after setting aside an income sufficient to feed and house the family, save for old age, educate the children etc. There would be a lot to be said for re-emphasising that idea and including more in the way of educational expenses in the deductibles.
Also, one way of keeping marginal income tax rates down (preferably to no more than the corporate rate plus 5% to avoid the incentive to widely practised tax minimisation) would be to add a personal consumption tax of, say, 10 per cent, on all net taxable income not saved/invested, where the taxable income was above, say, $150,000.