Opinion & Commentary
Tax policy devised by party that is green with envy
More than 1.25 million people cast their first preference votes for Green candidates in the August 21 elections.
It is a fair bet that most of them did so mainly or solely in support of the Greens' environment policies and that very few voters had any awareness of other Green policies.
Third-party policies receive scant attention when elections are basically a slug fest between the main parties. But the Greens, as well as advocating far-reaching environmental policies, were offering a broad platform covering the full gamut of public policy. Parts of it, such as their tax proposals, are very worrying.
Now that the Greens are in a position of greater power, the whole range of their policies must be subjected to closer scrutiny. Of more immediate interest is their role in the next parliament. They are still not in a position to initiate policy change but they will be in a stronger position to reshape what the government serves up. Green supporters may be excited at this prospect, but the other 88% of voters should be deeply concerned. Given their druthers, the Greens would back-pedal on the economic reforms that have helped deliver 18 years' uninterrupted economic growth and greatly enhanced living standards.
A political party's tax policy says a lot about its philosophy, vision and priorities. The Greens' attachment to a carbon tax is well known and the wisdom of that hinges on the science of man-made global warming. The Greens also have policies on mainstream taxes. Their website starts by proclaiming ‘no tax cuts for the rich’. This seems a bit odd considering that none were on offer by the main parties in this election, but it is at least a slogan that sets the tone for the details that follow.
The Greens want to ‘reduce [unspecified] tax breaks for high-income earners’; introduce a new top marginal personal income tax rate of 51.5%; lift the company tax rate to 33%; introduce an alternative minimum personal and company income tax effectively to cap the aggregate deductions that any individual or business can claim; remove the 50% capital gains tax discount; allow losses from an investment to be offset only against income from the same investment (whatever that means); introduce an estate tax; limit the tax deductibility (to employers) of executive salaries to 25 times the minimum wage (at present about $700,000); and push for a global Tobin tax on currency transactions. The Greens also want a more onerous mining tax than the one proposed.
These measures go against the grain of Australian tax policy of the past 25 years and most of them go against the Henry tax review recommendations. Many of them, such as the increased company income tax rate, would deter investment and economic growth. The Greens' preferred company tax burden is one-third heavier than that recommended by Henry.
Some of their measures would raise significant amounts of revenue but others, such as the higher top rate of personal income tax on million-dollar incomes, would raise very little revenue and seem motivated more by the politics of envy than anything else.
The Greens' tax policy, if taken literally, paints them as a party of ‘tax and spend’ and as a party that is more interested in redistributing wealth than encouraging its creation. Their tax policy is green from envy. The main parties should be very cautious in courting Green support to form a government. Those 1.25 million voters may or may not have voted for less economic growth and lower living standards, but we can be confident the others did not.
Robert Carling is a senior fellow at The Centre for Independent Studies.
