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Wealthy Australians earning above $300,000 per year could be hit with a new minimum income tax rate under a Shorten Labor government after the ALP agreed to consider implementing the so-called "Buffett rule" for the first time.
The change, promoted by key left-wing frontbencher and former leadership aspirant, Anthony Albanese and adopted unopposed, is designed to ensure that high wealth individuals who use creative accounting to minimise taxable incomes are subject to a flat rate - perhaps as high as 35 per cent of their "total incomes" - which would not be negotiable.
The Buffett rule gained that name when the philanthropically inclined multi-billionaire US investor Warren Buffett discovered he was paying less in income tax than the middle-income staff he employed.
Mr Albanese told Labor's National Conference in Melbourne that the Australian Taxation Office had found in 2011-12 that 75 Australians earning more than $1 million a year had paid no tax at all.
US billionaire Warren Buffett.Credit: AP
He said the combined annual incomes of those millionaires was $195 million, but through elaborate accounting tricks, the super-rich 75 had been required to stump up just $82 in total.
"That's a disgrace in a nation where Tory governments are ravaging services with spending cuts and demanding higher regressive taxation through an increase in the GST," he said.
The idea of a minimum deduction has previously been floated by South Australian Labor Premier Jay Weatherill who drew on modelling showing it could raise as much as $2.5 billion a year.
What is the 'Buffett rule'?
- According to the White House, the "Buffett rule" is the "basic principle that no household making over $1 million annually should pay a smaller share of their income in taxes than middle-class families pay".
- Named after US businessman and billionaire Warren Buffett, who famously stated that he shouldn't be paying a lower income tax rate than his secretary.
- Stemming from this principle, President Barack Obama proposed that no millionaire pay less than 30 per cent tax.
- In 2009, 22,000 US households making more than $1 million paid less than 15 per cent and 1470 paid no federal income tax at all. The average tax rate paid by high-income earners in the US is the lowest in 50 years.
- This tax minimisation is achieved through concessions and lower rates for income from investments.
- A Democratic Party attempt to pass the "Buffett rule" into law failed in Congress, opposed by Senate Republicans.
- The proposal appeared again in February this year, as part of Obama's budget plan, but faces even stiffer opposition as Republicans now control both houses of Congress.
- An April 2012 poll found 60 per cent support for the "Buffett rule" and 37 per cent opposition.
Anthony Albanese (left) with other Labor frontbenchers at the conference.Credit: Alex Ellinghausen