News & Current Affairs
14 October 2014
by Amanda Vanstone
A rich right wing piggy, a former minister in the Howard government, lectures us...
Rich versus poor is the wrong debate
I wish I received a parcel of shares in The Big Australian every time I saw or heard a story about the rich/poor divide in Australia. All this stupid rich-versus-poor debate does is stir up the politics of envy.
How often have you been told that the gap between rich and poor is growing, and directly or indirectly invited to believe that something is therefore radically wrong? Have you, like me, heard the stereotyping of the sons and daughters of wealthier people as "the cream" – as in, rich and thick? What about stories of businesses evading their tax or treating workers badly?
Daily we are invited to assume that wealthier people are creeps, tax cheats and the cause of others among us being poorer. It is undoubtedly true that some wealthier people are creeps, tax cheats, selfish and carry any number of other unattractive traits. Equally there will be poorer people who are bash-up artists, druggies and thieves. In both cases, they are the exception rather than the norm.
Nonetheless, the so-called rich get a pretty rough deal in terms of media coverage. One way to get some perspective on just what load these people are carrying is to look at which groups pay what proportion of tax.
Starting at the top end of town, just 2 per cent of taxpayers pay more than 25 per cent of all income tax. The rest of us should be delighted these people have done so well economically.
In terms of company tax, 1 per cent of companies pay 62 per cent of company tax. There are about 12 companies paying about a third of all company tax. Those who rant and rail against the so-called rich, or big business, would do well to reflect on these facts.
Of course there are a few changes the government could make which would tighten up access to government money by those who can manage without it, including in the pension and superannuation area. No doubt there are some in the corporate tax area, too. All strength to their arm if the government goes for these changes. People who have already got a lot shouldn't be at the front of the queue to get more. But make no mistake, we need Australians to get rich, and the sooner the better.
When I first became interested in politics, Labor people were forever lecturing the world on the evils of big business. For a while they saw the light and focussed on the need to increase the size of the pie rather than just demanding a bigger slice of the existing one. Labor men such as Martin Ferguson were all about building the economy so that everyone could get more. But sadly, the old anti-rich and anti-big-business mantras have crept back into the Labor lexicon.
The plain truth is that if business is not going well there are less profits, fewer jobs and less tax paid. Here's another reality: when the economy slows down and things get tough, the rich or better off among us sell a beach house, divest some shares or cancel overseas travel plans. It is those at the lower end of economic luck who really suffer. They might lose their job, their livelihood, their house.
To do something effective for those at the lower end of the economic luck spectrum you need to keep the economy vibrant. If you are offended by the side effect of that – namely, that some people make a motser – then you are stuck in a quandary. The people you want to hate are the ones who help the people you want to help.
If you divide the welfare spend in Australia by the population, it comes out at about $6000 for every man, woman and child. Since only about 45 per cent of the population pay income tax, it follows that, on average, taxpayers have to pay twice that amount in tax in order to fund welfare. That is, about $12,000 per taxpayer goes in welfare. More than a month's work for many.
Of course, when wealthy people and companies are caught out they should be dealt with – and swiftly. But it is a mistake to assume their conduct is the standard, and to judge all others to be equally bad. That is as stupid as assuming every poor person wants to rob you.
While the size of the gap between rich and poor tells us something, it is not the only relevant information. Social mobility would be a better focus of our attention. Can a young person born into less fortunate circumstances climb out of them?
As it turns out, Australia rates extremely well in social mobility rankings. Nonetheless, it is worrying that the poorest 20 per cent of households in Australia get about 70 per cent of their income from welfare – which is much higher then the OECD average – and only about 17 per cent from wages.
It is a shame that the philanthropic organisations, funded by private wealth and the private families and companies that are so generous in supporting such a wide range of tremendous Australian endeavours, generally avoid grandiose publicity. That's to their credit, but sadly it prevents young Australians learning from their generous example.
It might provide some counterbalance to all the anti-rich rubbish that gets thrown at us.
Amanda Vanstone is a columnist for The Age and was a minister in the Howard government.