Thursday 23 June, 2016

by Dr John Falzon.

Wealth does not trickle down. It's the job of the tax system to make sure it gets shared around. That is why we need governments to do what markets cannot, namely to ensure a fair go for all rather than a sumptuous banquet for some.

Tax cuts to large corporations do not help the wealth to trickle down. Current policy settings for negative gearing, capital gains tax discounts and superannuation tax concessions do not help the wealth to trickle down. They help keep it at the top by rewarding people and corporations who have already benefited from the prosperity generated by economic growth. Australia, which is the sixth lowest taxing country in the OECD, goes without more revenue through tax expenditure than all other advanced economies.

A progressive society would tax those who have much rather than taking away from those who have little.

But today we have a society and an economy more closely aligned to the principle that to those who have much, more will be given and from those who have little, even the little they have will be taken away. As things stand people who need services and income supports are being punished in the name of deficit reduction.

Taxation is an important means of redistributing wealth and opportunities. We should be using it to make Australia more equal; something we should actually strive for rather than fear. Treasury's own modelling shows that the trickle-down economics used to justify corporate tax cuts are illusory.

Tax cuts for larger companies might be good for profits but, at the cost of $48 billion over the next 10 years, they will do nothing to create jobs or to secure the revenue for social housing, education, health or social security.

Superannuation tax breaks are estimated by Treasury to cost $32 billion annually; by comparison, $20.3 billion a year is spent on Medicare. Negative gearing and the discount on capital gains tax cost over $11 billion each year, and the benefits are overwhelmingly skewed towards higher income earners.

Housing is a human right. But negative gearing and capital gains tax discounts have turned it into a speculative sport. We're subsidising the wealthy while leaving people homeless. Maintaining these tax concessions and giving big business a company tax cut ultimately comes at the expense of the education, health and social services that ordinary people rely on.

Those who are left out are usually blamed and punished for their own exclusion. The message they receive is that if only they tried a little harder all would be well, whether it's breaking into the housing market or into the labour market. But when we talk about the unfairness of cuts to social expenditure, we're not just talking about the effects on people who currently experience poverty or homelessness; we're talking about the majority. And we're talking about a continuum where financial stress and housing stress are only a few steps away from homelessness; where underemployment and insecure employment are only a few steps away from unemployment.

It's a deeply offensive to suggest that it's only the recalcitrant few who can't look after themselves and that if we taxed less and spent less, then most of us would be able to just purchase the goods and services we need, as we need them, putting the premium, of course, on choice rather than equal access.

The truth is that it is only a few who benefit from this formulation; those who have no need, and perhaps even no desire, for universal healthcare or public education; those who believe they will never need income support as a carer, or due to a disability, or age, or unemployment; those who feel there is little, if any, value in anything being held in common for the common enjoyment of all, perhaps with the exception of the odd public park or beach.

Universal healthcare is a precious thing – we need to protect and extend it. We need to make sure that nobody says they cannot take care of their health because they need to put food on the table. If you want build a strong economy, it doesn't make sense to deny your population access to high quality healthcare.

Likewise, investing in Gonski, in TAFE, in apprenticeships, in universities and in social and community services should not be seen as charity or welfare; they should be seen as a common good that belongs to everybody, from Australia's First Peoples through to our most recent arrivals. None of these goods should be dependent on the depth of your pockets. And none of these goods should be denied to ordinary people on the basis of the fervent but misguided dogma that if they are patient, the day will come when the wealth will trickle down.

Dr John Falzon is chief executive of St Vincent de Paul Society National Council of Australia. This opinion piece first appeared in Fairfax Media