Why millionaires want to pay more tax

The demonstrators at last week’s virtual meeting of the elite rich and powerful at the Davos World Economic Forum were instructively and decisively different from previous demonstrations.

This was not the usual anarchists in the street demanding the end of capitalism.  Rather it was 200 b/millionaires pleading mostly in writing for higher taxes to be imposed upon themselves.

You would think that millionaires demanding that they pay higher taxes could just individually pay some extra tax and be done with it. You would think that asking for extra tax be levied upon them would be against their own interests. But not so.

The b/millionaires who called for higher taxes last week were in fact acting in their own best interests.

First, they recognised that their privileged comfortable positions depend upon a civil society. Their position depends upon governments being able to provide at least defence and police, but also health and education for the masses to ensure they do not rise up in revolt at rising inequality or engage in crime sprees and remain a stable employee and customer base.

That requires taxes, especially from those most able to afford them.

Without civil society, life would be nasty, brutish and short, even for the richest. On their own they cannot provide all the essentials. Even Kerry Packer fell back on the public-health system when stricken by a heart attack on the polo field.

It also requires all b/millionaires to pay substantially more tax than they are paying now. It is not enough that just a few or even 200 b/millionaires pay extra tax. For the thing to work, they all have to. It is instructive that not even billionaires can get what they want on their own.

Second, it is a recognition that despite the arrogant boasting of a few “self-made men”, billionaires do not get there just from their own efforts. To get there, they require the massive, collective, governmental provision of the systems of civil society. Without that no-one can make a billion bucks.

Moreover, most of them inherited their fortunes.

The fact that quite a few (but not a majority) of b/millionaires see the importance of civil society and the threats to it from the inequality caused by two generations of trickle-down economics, privatisation, and deregulation should alert us to the need for radical tax changes.

Nobel prizewinner and former World Bank chief economist Joseph Stiglitz joined the call urging a 70 per cent income tax on the highest earners and a 2-3 per cent wealth tax on those with large fortunes. He says many did not get their wealth on merit, but inherited fortunes by winning the “sperm lottery”.

Australia’s highest tax rate is just 45 per cent. 

The worldwide charity Oxfam says that, since the start of the pandemic, 63 per cent of the new wealth went to just 1 per cent of the population and 37 per cent went to the remaining 99 per cent.

The growth in extreme wealth coincided with growth in extreme poverty. Those b/millionaires calling for higher taxes saw a moral dimension to their call.

Australia is on the cusp. In comparisons with the 20 developed nations with the highest GDP per head, Australia is near the bottom on several inequality measures. It can now either sink lower towards the UK and US or it can lift its game and reduce inequality as the mainly Nordic countries have.

Australia comes in at 15 th of the 20 on income inequality (the Gini measure), according to data collect by Martyn Goddard on The Policy Post (www.thepolicypost.net). It comes 17 th when comparing the incomes of the top 10 per cent to the bottom 10 per cent.

The US is last and the UK second-last on both those measures. Iceland, Norway, Finland, and Denmark are at the top. They all have much higher tax rates, even if you count Australian superannuation contributions as tax.

On gender pay gap, Australia is 16 th and on disincentives for those (mainly women) who need childcare before going into the workforce, Australia is 17 th.

Australia has the fourth highest obesity level and is in the middle on infant mortality. 

These poor measures on inequality coincide with low government spending as a portion of GDP. Australia is 16 th on that measure

Surprisingly, Australia has the second-lowest age dependency ratio of the 20 nations. Yet policy-makers in Australia seem to squeal about the ageing population in inverse proportion to the magnitude of the problem. In short, there isn’t one.

Overall, it seems that the b/millionaires have got it right. Australians would be better off overall with higher taxation at the top end.

We certainly should not go in the other direction with the Stage 3 tax cuts which overwhelmingly and unfairly favour the highest income earners. One wonders what the Voice would say about the Stage 3 tax cuts.

High GDP and low tax rates, as in the US, do not make for a long and happy life. The US is the only nation among the 20 with a life expectancy below 80.

Of course, just raising more taxes and spending more government money is not a panacea. The way the money is spent is critical, especially in health and education.

When b/millionaires cry out for higher taxes, it is a sure sign that the low-taxing, privatisation, out-sourcing model has gone too far. The question for Australia is can the Labor Government change direction and do it quickly enough so the benefits become apparent before it faces the electorate?

Crispin Hull

This article first appeared in The Canberra Times and other Australian media on 24 January 2023.