Australias tax system takes from the young to give to the old

[Seeds]

Pretty good article on some of the massive problems with Australias tax system. And these problems result in young adults, especially those from poor backgrounds, paying far too much tax and older generations paying far too little.

'The rental property sector in Australia is not a net taxpayer'. Former Treasury boss Ken Henry says that needs to change

Australia's tax system is stacked so heavily against younger people that it's threatening the social compact, former Treasury secretary Ken Henry has warned.

www.abc.net.au

Far too much of Australias tax system is based on wage income while most other forms of wealth face half the tax rate of wage income or simply none at all.

• capital gains on equity or rental properties faces half the tax rate as wage income.
• inheritance (which is gained through pure luck) faces no tax at all.
• capital gains on family homes also pays zero tax as well.

we also have tax deductions for interest payments on second properties and exclude million dollar mansions from pension asset tests.

this is all absolutely mad.

its staggered me that so many young people have been arguing for higher income tax rates. Do they not realise its the young who will be earning wage income for the next four decades and paying all this tax while the old will not?

Recently retired baby boomers who no longer earn wage income, dont have mortgages, dont have young kids to support, never had higher education fees, were able to buy houses dirt cheap and have large capital income pay little tax at all. This is mad. Its intergenerational theft from the young to the old.

Those who have got lucky through large capital gains income or large inheritances should be paying tax on these earnings. In fact given the lack of effort involved in accruing their income relative to workers wage income they should be paying far higher tax rates on this income than wage income. And yet they pay far less.

ideally young people from poor families would be pay no income tax at all, regardless of income until they started to accrue a reasonable amount of wealth. Wealthy people would pay the majority of tax. Not the topsy turvey world we live in today where medium to high income earners in their thirties pay large amounts of tax despite having little assets, expensive morgages/rents and exhorbitant child care fees while recently retired baby boomers who own multiple properties outright and have low costs pay virtially no tax at all.

there is an easy solution to all of this. Replace income taxes with wealth taxes. Its way fairier to those who dont get the rich parent lottery ticket, provides far more incentive to work and makes people pay most of their tax at an older age when they have low expenses and can most afford it rather then when they are young and have high expenses.

its a win-win-win outcome for society to switch to wealth taxes.

the young need to start pushing for wealth taxes to replace income taxes.

 

[nut]

Pretty good article on some of the massive problems with Australias tax system. And these problems result in young adults, especially those from poor backgrounds, paying far too much tax and older generations paying far too little.

'The rental property sector in Australia is not a net taxpayer'. Former Treasury boss Ken Henry says that needs to change

Australia's tax system is stacked so heavily against younger people that it's threatening the social compact, former Treasury secretary Ken Henry has warned.

www.abc.net.au

Far too much of Australias tax system is based on wage income while most other forms of wealth face half the tax rate of wage income or simply none at all.

• capital gains on equity or rental properties faces half the tax rate as wage income.
• inheritance (which is gained through pure luck) faces no tax at all.
• capital gains on family homes also pays zero tax as well.

we also have tax deductions for interest payments on second properties and exclude million dollar mansions from pension asset tests.

this is all absolutely mad.

its staggered me that so many young people have been arguing for higher income tax rates. Do they not realise its the young who will be earning wage income for the next four decades and paying all this tax while the old will not?

Recently retired baby boomers who no longer earn wage income, dont have mortgages, dont have young kids to support, never had higher education fees, were able to buy houses dirt cheap and have large capital income pay little tax at all. This is mad. Its intergenerational theft from the young to the old.

Those who have got lucky through large capital gains income or large inheritances should be paying tax on these earnings. In fact given the lack of effort involved in accruing their income relative to workers wage income they should be paying far higher tax rates on this income than wage income. And yet they pay far less.

ideally young people from poor families would be pay no income tax at all, regardless of income until they started to accrue a reasonable amount of wealth. Wealthy people would pay the majority of tax. Not the topsy turvey world we live in today where medium to high income earners in their thirties pay large amounts of tax despite having little assets, expensive morgages/rents and exhorbitant child care fees while recently retired baby boomers who own multiple properties outright and have low costs pay virtially no tax at all.

there is an easy solution to all of this. Replace income taxes with wealth taxes. Its way fairier to those who dont get the rich parent lottery ticket, provides far more incentive to work and makes people pay most of their tax at an older age when they have low expenses and can most afford it rather then when they are young and have high expenses.

its a win-win-win outcome for society to switch to wealth taxes.

the young need to start pushing for wealth taxes to replace income taxes.

I’d like to introduce you to the Australian media…

 

[rank and file]

Pretty good article on some of the massive problems with Australias tax system. And these problems result in young adults, especially those from poor backgrounds, paying far too much tax and older generations paying far too little.

'The rental property sector in Australia is not a net taxpayer'. Former Treasury boss Ken Henry says that needs to change

Australia's tax system is stacked so heavily against younger people that it's threatening the social compact, former Treasury secretary Ken Henry has warned.

www.abc.net.au

Far too much of Australias tax system is based on wage income while most other forms of wealth face half the tax rate of wage income or simply none at all.

• capital gains on equity or rental properties faces half the tax rate as wage income.
• inheritance (which is gained through pure luck) faces no tax at all.
• capital gains on family homes also pays zero tax as well.

we also have tax deductions for interest payments on second properties and exclude million dollar mansions from pension asset tests.

this is all absolutely mad.

its staggered me that so many young people have been arguing for higher income tax rates. Do they not realise its the young who will be earning wage income for the next four decades and paying all this tax while the old will not?

Recently retired baby boomers who no longer earn wage income, dont have mortgages, dont have young kids to support, never had higher education fees, were able to buy houses dirt cheap and have large capital income pay little tax at all. This is mad. Its intergenerational theft from the young to the old.

Those who have got lucky through large capital gains income or large inheritances should be paying tax on these earnings. In fact given the lack of effort involved in accruing their income relative to workers wage income they should be paying far higher tax rates on this income than wage income. And yet they pay far less.

ideally young people from poor families would be pay no income tax at all, regardless of income until they started to accrue a reasonable amount of wealth. Wealthy people would pay the majority of tax. Not the topsy turvey world we live in today where medium to high income earners in their thirties pay large amounts of tax despite having little assets, expensive morgages/rents and exhorbitant child care fees while recently retired baby boomers who own multiple properties outright and have low costs pay virtially no tax at all.

there is an easy solution to all of this. Replace income taxes with wealth taxes. Its way fairier to those who dont get the rich parent lottery ticket, provides far more incentive to work and makes people pay most of their tax at an older age when they have low expenses and can most afford it rather then when they are young and have high expenses.

its a win-win-win outcome for society to switch to wealth taxes.

the young need to start pushing for wealth taxes to replace income taxes.

Wealth tax defeats the purpose of making money.

 

[Golden_6]

We’ll never be able to have proper tax reform with the Australian media in its current state unfortunately. It’s much needed.

 

[nut]

A Hawke style tax summit is needed IMO… get imput from industries, business, unions and the people…

 

[Demonic Ascent]

This is only a (small) part of the problem.

The bigger problem is companies paying minimal or zero tax while making billions in profits, particularly those raking it in by selling off the natural resources of the commonwealth.

CWB made $5b profit in 6 months, I'm sure the other big 4 banks are in the same boat.

Commonwealth Bank posts $5bn half-yearly cash profit after ‘deliberate’ shrinking of home loan book

Latest financial results show bank now targeting savers over mortgage holders, amid concerns over weakening competition among major lenders

www.theguardian.com

Australia’s big four banks may be at peak profitability but fat margins aren’t over, analysts say

Forecast to post a combined $16.2bn six-month profit, the big four are facing a looming plateau – but analysts expect strong earnings to continue

www.theguardian.com

Then there's Woolies, Coles, Hancook, BHP, Rio Tinto, Fortescue etc

 

[kimodgers]

A few things worth mentioning.
I’m 78 and have spent a lifetime paying tax in every form. I no longer work and so do not now pay tax. I live off the savings put aside from my earlier net earnings. I receive no govt or commercial benefits (except health care and cheaper haircuts). Any wealth or privileges now enjoyed is the result of a lifetime of work.
But to address your point I need to remind you and others that tax is not Govt revenue. Tax is not used for govt spending. Tax is only used as a tool to control inflation or to discourage certain activities (eg, smoking).

 

[kimodgers]

A few things worth mentioning.
I’m 78 and have spent a lifetime paying tax in every form. I no longer work and so do not now pay tax. I live off the savings put aside from my earlier net earnings. I receive no govt or commercial benefits (except health care and cheaper haircuts). Any wealth or privileges now enjoyed is the result of a lifetime of work.
But to address your point I need to remind you and others that tax is not Govt revenue. Tax is not used for govt spending. Tax is only used as a tool to control inflation or to discourage certain activities (eg, smoking).

Just expanding on that last point. Because govt spending is funded simply from the Reserve Bank keyboard and not taxes, a wealth tax will not change the method of Govt funding and spending.

 

[Balls In]

Pretty good article on some of the massive problems with Australias tax system. And these problems result in young adults, especially those from poor backgrounds, paying far too much tax and older generations paying far too little.

'The rental property sector in Australia is not a net taxpayer'. Former Treasury boss Ken Henry says that needs to change

Australia's tax system is stacked so heavily against younger people that it's threatening the social compact, former Treasury secretary Ken Henry has warned.

www.abc.net.au

Far too much of Australias tax system is based on wage income while most other forms of wealth face half the tax rate of wage income or simply none at all.

• capital gains on equity or rental properties faces half the tax rate as wage income.
• inheritance (which is gained through pure luck) faces no tax at all.
• capital gains on family homes also pays zero tax as well.

we also have tax deductions for interest payments on second properties and exclude million dollar mansions from pension asset tests.

this is all absolutely mad.

its staggered me that so many young people have been arguing for higher income tax rates. Do they not realise its the young who will be earning wage income for the next four decades and paying all this tax while the old will not?

Recently retired baby boomers who no longer earn wage income, dont have mortgages, dont have young kids to support, never had higher education fees, were able to buy houses dirt cheap and have large capital income pay little tax at all. This is mad. Its intergenerational theft from the young to the old.

Those who have got lucky through large capital gains income or large inheritances should be paying tax on these earnings. In fact given the lack of effort involved in accruing their income relative to workers wage income they should be paying far higher tax rates on this income than wage income. And yet they pay far less.

ideally young people from poor families would be pay no income tax at all, regardless of income until they started to accrue a reasonable amount of wealth. Wealthy people would pay the majority of tax. Not the topsy turvey world we live in today where medium to high income earners in their thirties pay large amounts of tax despite having little assets, expensive morgages/rents and exhorbitant child care fees while recently retired baby boomers who own multiple properties outright and have low costs pay virtially no tax at all.

there is an easy solution to all of this. Replace income taxes with wealth taxes. Its way fairier to those who dont get the rich parent lottery ticket, provides far more incentive to work and makes people pay most of their tax at an older age when they have low expenses and can most afford it rather then when they are young and have high expenses.

its a win-win-win outcome for society to switch to wealth taxes.

the young need to start pushing for wealth taxes to replace income taxes.

In the US interest paid on your primary place of residence is tax deductible and interest rates are all fixed. In Australia the deductions all go to investment properties. So it's doubly stacked. We crush younger people with high income tax and volatile interest rates caused by inflation. Ironically this is also driven largely by the discretionary spend of those who own all the assets (ie boomers), and immigration cheered on by asset owners because the serfs can no longer afford to procreate. But the same numbskulls affected most cheer on higher taxes on other "rich(er)" PAYE slaves.

 

[Demonic Ascent]

In the US interest paid on your primary place of residence is tax deductible and interest rates are all fixed. In Australia the deductions all go to investment properties. So it's doubly stacked. We crush younger people with high income tax and volatile interest rates caused by inflation. Ironically this is also driven largely by the discretionary spend of those who own all the assets (ie boomers), and immigration cheered on by asset owners because the serfs can no longer afford to procreate. But the same numbskulls affected most cheer on higher taxes on other "rich(er)" PAYE slaves.

Boomers aren't the only discretionary spenders fuelling inflation, plenty of others who have more money than they know what to do with which is another reason why higher income taxes on high earners is not a bad thing.

 

[evolved2]

Why do you think inheritance is gained purely through luck?

Surely if it's luck, it should be taxed the same way lottery winnings are in this country.

I question whether young renters want their biggest windfall and hope of buying a property to be taxed.

 

[It Just Is]

A few things worth mentioning.
I’m 78 and have spent a lifetime paying tax in every form. I no longer work and so do not now pay tax. I live off the savings put aside from my earlier net earnings. I receive no govt or commercial benefits (except health care and cheaper haircuts). Any wealth or privileges now enjoyed is the result of a lifetime of work.
But to address your point I need to remind you and others that tax is not Govt revenue. Tax is not used for govt spending. Tax is only used as a tool to control inflation or to discourage certain activities (eg, smoking).

And how much has your house (not an investment vehicle) appreciated over your life time?

A good and simple measure would be to included houses in pension asset tests. That would help the budget and increase housing supply.

 

[Bunk Moreland]

We’ll never be able to have proper tax reform with the Australian media in its current state unfortunately. It’s much needed.

I have a little more faith than I did a few years ago. Andrews was a huge example to those who ignore the LNP media and do what they want anyway. The people came along for the ride. No Australian politician in history has been the target of more media invective than Andrews during COVID. And he won the next election anyway.

The Vic LNP are a joke but honestly, the federal LNP aren’t really much better.

But it requires a strong leader who won’t give in. I don’t think there is one in federal Labor.

 

[Syd]

Surely if it's luck, it should be taxed the same way lottery winnings are in this country.

Lottery wins are generally considered Windfalls and not included in Assessable Income or directly taxed.

Interest on the winnings from being in a bank account are.

 

[schneebly111]

It fails because those over 45 outnumber those under 45.

Even though the amount of assets one has at 45 generally isn’t too flash that’s the time when one starts thinking about the assets they have and want in retirement and then want the system to favour the period of life they are headed into.

This situation would all be solved if we did a radical but I believe fair thing and removed the right to vote from those either taking the pension or drawing their super or as an upper limit age 67.

Working aged people are being outvoted and made to suffer by retirees.

 

[evolved2]

I have a little more faith than I did a few years ago. Andrews was a huge example to those who ignore the LNP media and do what they want anyway. The people came along for the ride. No Australian politician in history has been the target of more media invective than Andrews during COVID. And he won the next election anyway.

The Vic LNP are a joke but honestly, the federal LNP aren’t really much better.

But it requires a strong leader who won’t give in. I don’t think there is one in federal Labor.

Dan simps are a joke too.

 

[Demonic Ascent]

I have a little more faith than I did a few years ago. Andrews was a huge example to those who ignore the LNP media and do what they want anyway. The people came along for the ride. No Australian politician in history has been the target of more media invective than Andrews during COVID. And he won the next election anyway.

The Vic LNP are a joke but honestly, the federal LNP aren’t really much better.

But it requires a strong leader who won’t give in. I don’t think there is one in federal Labor.

He was very good on social media too which helped

 

[Seeds]

Wealth tax defeats the purpose of making money.

How Does it do that compared to income tax? I would say income tax more defeats the purpose of making money than wealth tax. The reason is that the only difference between income tax and wealth tax is people who get lucky with winning money. Which is different to making money.

 

[Seeds]

Why do you think inheritance is gained purely through luck?

Surely if it's luck, it should be taxed the same way lottery winnings are in this country.

I question whether young renters want their biggest windfall and hope of buying a property to be taxed.

Because inheritance is determined by who your parents and grand parents are. That is purely luck. No one chooses who their parents/grand parents are.

 

[Seeds]

Boomers aren't the only discretionary spenders fuelling inflation, plenty of others who have more money than they know what to do with which is another reason why higher income taxes on high earners is not a bad thing.

You cant claim high income earners are savers (as many do) and dont spend whilst also claiming they spend too much and add to inflation. It can only be one or the other.

the best thing to stop inflation is to get more people working. income taxes disincentivise that. Wealth taxes much less so.

 

[Seeds]

A few things worth mentioning.
I’m 78 and have spent a lifetime paying tax in every form. I no longer work and so do not now pay tax. I live off the savings put aside from my earlier net earnings. I receive no govt or commercial benefits (except health care and cheaper haircuts). Any wealth or privileges now enjoyed is the result of a lifetime of work.
But to address your point I need to remind you and others that tax is not Govt revenue. Tax is not used for govt spending. Tax is only used as a tool to control inflation or to discourage certain activities (eg, smoking).

Not sure what your point is. If we had wealth taxes all along instead of income taxes you would of paid much lower taxes when you were younger and had lots of expenses and paid higher taxes now if you had lots of wealth.

over your life you would of paid less tax overall under a wealth tax system if you didnt get lucky through above average inheritance or high capital gains from lucky investments. If you were lucky in your investments and recieved above average inheritance you would of paid higher overall tax then you currently have. Because you were lucky.

 

[Barrybran]

the young need to start pushing for wealth taxes to replace income taxes.

Wealth tax defeats the purpose of making money.

While there are certainly flaws with our tax system, it shouldn't come as any surprise that it incentivises wealth generation. I think the wealth gap is worrisome and more could be done to incentivise people becoming self-sufficient and less reliant on welfare but if you can feed people, house people or employ people, the government is going to look after you.

 

[Demonic Ascent]

You cant claim high income earners are savers (as many do) and dont spend whilst also claiming they spend too much and add to inflation. It can only be one or the other.

the best thing to stop inflation is to get more people working. income taxes disincentivise that. Wealth taxes much less so.

Of course you can. They are on higher incomes so can afford to do both.

 

[Syd]

I'm about to turn 64, so when does the Tax System start giving me some of this money they are taking from the young?

 

[The Punter]

I love the bank bashing on total profits - the big four are enormous companies that operate across trillions of dollars collectively.

The point was about moving the tax burden away from wages and moving to capital - that is, wealth that is just sitting there instead of working.

I'd rather see work done in structural reform than nibbling around the edges on stuff like franking credits, which is just ensuring people don't pay tax twice when they should pay tax only once (on income).

This structural reform is difficult without expanding the consumption tax in some way (higher rate, less exemptions) or implementing a broad based, all-encompassing property tax. But any creation of a new tax, even if it results in reductions in other tax, is political poison. I don't see that changing either.

The last 20 years of the 20th century were as good as it got for spending political capital in order to achieve reform - both sides did it. Not any more.