Life on the West Island - Going backwards

Then there is the vexed question of the looming Stage Three tax cuts. This week, the independent think tank The Grattan Institute reported that the West Island’s income tax system will become less progressive with the implementation of those cuts.

According to the Institute, this shift to a less progressive tax system means lower and middle-income earners will pay a higher proportion of their income in taxes, while high-income earners will pay less.

They reported that the Stage Three tax cuts reduce the number of income tax brackets, to apply a single 30% income tax rate to those earning $45,000 to $200,000 yearly. For those with incomes surpassing $200,000, the tax rate would stay at the present 45%. These cuts are legislated to start in eight months’ time, on 1 July 2024.

According to the Grattan Institute, the cuts are projected to cost over a quarter-trillion dollars, and will disproportionately favour millionaires and billionaires while leaving lower income West Islanders to pay more. Put another way, they will transfer wealth away from the poor and to the rich – another step backwards.

Independent news website New Horizon outlined the case for maintaining a progressive taxation system, including that such an arrangement is vital for reducing income inequality. The Stage Three tax cuts will reduce the proportion of tax paid by the highest 1% of income earners. This makes Australia’s tax system less progressive. Consequently, the unequal distribution of income (income inequality) will rise, assuming government payments remain unchanged. The tax plan could make Australia's income tax system less progressive than it has been since the 1950s, with high-income earners paying less and low-income earners paying more. If the tax plan is enacted, Australia will transition from having a relatively progressive income tax system to become below the OECD average. This will have a profound and long-lasting impact on Australia’s income inequality and turn Australia into a “flat tax” style economy like the United States.

Then there was the surprise re-emergence of former Treasurer Joe Hockey with his claims of “an age of entitlement” for those too lazy to work, when he returned to his theory of “leaners and lifters”. This was reported (and rebuked) by Rachel Withers, writing in the periodical The Monthly:

The past couple of days have seen a conflicting set of headlines, as Anti-Poverty Week once again seeks to highlight the damning poverty that exists in Australia, and the widening gap between the wealthy and the poor. On the one hand, 3.7 million households have experienced food insecurity over the past year, up 10 per cent, with almost half the population either worried about or struggling to access adequate food. On the other, a global report suggests Australians hold more than $370 billion in offshore tax havens, with multinational profit-shifting costing us $11 billion in lost taxes in 2020.

But according to former treasurer Joe Hockey, who receives a generous parliamentary pension, which he continued to receive while making hundreds of thousands as ambassador to the US – the “age of entitlement” is worse than ever. You’d be forgiven for wondering if Hockey was referring to the entitlement of the wealthy, or perhaps the entitlement of politicians like him.

Alas, as usual, he means the poor, just as he did back in 2014, when he warned Australians it was time to start looking after them. Speaking on Monday at London’s Institute for Economic Affairs, Hockey said that politicians these days were too afraid of making hard decisions and is shunning cuts to spending in order to stay popular with voters. “That sense of entitlement, that you can give people everything they want, is a cancer in our community,” he said, arguing that societies needed to curb entitlement culture in order to make life sustainable.

Indeed, we do live in an age of entitlement. But it’s not those on welfare, the “leaners” who can barely afford to eat, who feel entitled, nor is it those politicians who are calling for spending to address the poverty that is becoming increasingly entrenched in our society. It’s those at the increasingly wealthy top end who feel they are owed their tax cuts and tax concessions, even in the midst of all this public debt. The fact that we can’t seem to raise the rate of Jobseeker above the poverty line, despite being one of the wealthiest countries in the world per capita.

Hockey is right about one thing: politicians do seem unwilling to make the hard, unpopular decisions required to rein in the debt. But it’s not “cutting spending” that is the fairest way to do that, and it’s certainly not those struggling to put food on the table who are behaving most “entitled” here, when the top 20 per cent hold an increasing share of our national wealth – 90 times that of the poorest. Perhaps Hockey and the Coalition could start by admitting that handouts for the super-rich need to go, if we are ever going to address the damaging poverty eating away at our society.

Meanwhile, the West Island continues to go backwards.