In Australia we tax income viciously but tax wealth lightly

Neither side of politics appears to have a plan to pay off the mountain of debt run up over the past two years so slugging unearned wealth might be a good place to start if we are serious about fixing our budget, writes James Campbell.

Let’s give two-and-half cheers to the mouthy Liberal MP Jason Falinski who, in three sentences last week, managed to cut across, not one but two, of the attack lines the government has been running against Anthony Albanese.

Falinski, the House of Reps economic committee, was quoted as saying Australia had a problem with its taxation system, namely that “increasingly, the people who
aren’t paying tax are the people inheriting their money, such as through trust structures”.

If that truth bomb wasn’t enough, he added: “More and more money is being accumulated by lazy capital, and that’s problematic … But if you have a go and it works, we’re going to tax the shit out of you.”

We may not have heard of Simon Holmes a Court had he not been born wealthy. Picture: Aaron Francis / The Australian

Unsurprisingly Scott Morrison and Josh Frydenberg were reportedly both furious because the government has been running hard on the Labor has a secret death duties plan if they get elected this year – a line they think is starting to bite. It’s neither here nor there that the claim is untrue, the ALP has explicitly ruled it out, because between Mediscare in 2016 and Labor’s current fantasy that Morrison wants to move pensioners to a cashless debit card, they’re hardly in a position to complain about what their opponents say about them.

The reference to trust structures was equally unhelpful as Frydenberg has been making a great deal of the fact Labor has refused to rule out revisiting its plan from the last election to tax them.

That this should have come from the MP whose electorate takes in Palm Beach, the playground of Australia’s richest people made Falinski’s outburst even more exciting. So why only two-and-half and not three cheers? Because within hours Falinski had walked it all back on twitter, saying: “Never have, never will support an inheritance tax,” later calling them “double taxation”.

I suppose it was too much to expect in the feverish atmosphere of an election year but it would have been nice if he’d stuck to his guns.

Because every word of what he said is absolutely true. In this country we tax income viciously but we tax wealth lightly and more of that wealth is passing into the hand of people who didn’t work for it.

Treasurer Josh Frydenberg was unhappy with Jason Falinski’s remarks. Picture: NCA NewsWire / Gary Ramage

We have become a nation in which money passes easily from one generation to the next.

The abolition of death duties in the early 1980s are one, but not the only reason why this has happened.

In the past people had larger families which meant that at death wealth got split up among more people.

For a long period of time in the 20th Century we also had high levels of inflation but without the high levels of asset price inflation – especially for real estate – that we have allowed the rich to show the rest of us a clean pair of heels in recent decades.

Whether you think this is a good or bad change depends on your perspective.

Personally I think it’s a change for the worse.

But I’m prepared to concede that it’s probably a boon to the performing arts community because let’s face it if you want to spend your life running a small theatre company you’re much more likely to do safe in the knowledge the bank of mum and dad will be there to pay your kids’ school fees and buy you a house.

Jason Falinski walked back his remarks in the senate. (AAP Image / Adam Yip)

It’s also been a boon to progressive politics, to the detriment of the Liberal Party.

Watching Simon Holmes a Court strutting his stuff at the National Press Club last week it was hard not ponder the chances we’d ever have heard of him if he hadn’t had the good fortune to be born rich.

Ditto Allegra Spender who is running in Wentworth.

Really when you think about the link between progressive politics and inherited wealth is so close it’s amazing that it’s not the Liberal party clamouring to bring back death duties.

The other reason I support death duties is because looking at many of the people who were with me at my – expensive – school, it is hard to not wonder if they mightn’t have worked a little bit harder and made more of themselves if they hadn’t been certain of inheriting a giant pile.

Of course death duties were always unpopular, which is why no one mourned their passing when Joh Bjielke-Peterson started the rush to get rid of them.

In the world today bringing them back isn’t going to happen.

But as we gaze at the mountains of debt we have run up in the past two years to keep the lights on, debt for which neither side of politics seems to have any plan to pay back, it’s hard not to think that slugging unearned wealth might be a good place to start if we are serious about fixing our budget.

As I said, it’s a fantasy, but one worth thinking about next time you see Simon Holmes a Court on the telly.