When the government announced it was going to spend $8.5bn over four years to fund an increase in bulk billing, it did not take long for journalists such as David Speers on the ABC’s Insiders to ask “what about the money here, $8.5bn, where will that come from?”
Never mind that we are talking an average of $2.15bn a year out of a budget which in four years’ time is expected to spend $826bn. It is hardly a big impost, more the question should be why, given how little it will cost, hadn’t it been done already?
Talk of how we will pay things always comes up when the government intends to spend money on things that helps low and middle-income earners.
We don’t seem to worry as much when it comes to spending on things such as defence, or things that only serve to make the rich richer.
This brings us to Peter Dutton, who according to Nine newspapers has owned 26 properties over the past 35 years.
Dutton has said that he is proud of what he has achieved and that he “didn’t grow up with a silver spoon in my mouth”.
But the reality is that the overriding reason anyone born before the mid-1970s got into the housing market was they were born before the mid-1970s.
The Nine report suggests that he bought his first property in the Brisbane suburb of Yeronga in September 1990 for $93,000. At the time, the average male full-time earnings in Queensland was equivalent to $33,820 a year. This means that the property cost 2.75 times the annual average full-time wage.
Currently, average male full-time earnings in Queensland are $112,200 a year. So a property 2.75 times that amount would cost just $308,527.
I will now pause while you go searching for a three-bedroom apartment in Yeronga for that price, where the median three-bedroom apartment is now $877,500.
From 1970 to when Dutton entered parliament in 2001, property prices across Australia rose just 1.3 times faster than housing income. Since then they have risen 2.3 times faster.
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This is, of course, not an accident.
In September 1999 the Howard government changed the way capital gains (ie the profit you make on an investment) was taxed – giving those who sold the asset after more than a year a 50% discount on their tax.
Make a $2m profit? Great you only pay tax on $1m.
It turned the housing market into a casino with the added benefit of making negative gearing work because it made it easier to make up for the “losses” you incurred while negative gearing.
We don’t know precisely how many members of parliament and senators negative gear, because the ATO only provides data for “legislators” which mostly count local councillors who have an average total income of $84,413.
But as MPs have an average income of $288,973, it would be very unusual if they were not big time negative gearers:
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And this costs the government a lot of money.
The Parliamentary Budget Office estimates that the CGT discount and negative gearing cost $12.2bn a year – $7.2bn of which goes to the richest 10%:
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But the issue is not just negative gearing and the capital gains discount, it’s that the entire tax system is geared in such a way that benefits the rich.
Company tax is lower than the top income tax, and at 25% the tax on a small business is even lower than the 30% paid by big businesses, and superannuation funds have now become tax reduction vehicles.
An AFR reader this week wondered how she and her husband were going to cope in retirement with just $2m each in their superannuation funds – “what should our annual expenditure be to ensure our money doesn’t run out? We are debt-free.”
While you scream bitter tears of rage, remember that the government’s attempt to reduce the tax break on earnings in super balances above $3m from 30% to 15% is currently blocked in the Senate by crossbenchers. And even if those laws passed, that couple writing to the AFR would not be affected as neither of their super balances is above $3m.
That is the perfect encapsulation of the glorious horror of Australia’s tax system.
A system that refuses to lower the tax breaks to a couple with $2m each in their super, but where nearly a quarter or retirees live in poverty and where more than half of Australians in their early 30s do not own a home, and where cries of how will you pay for it are made when a government spends just over $2bn to increase bulk billing.
The superannuation benefits, as with capital gains tax discounts and negative gearing, mostly go to the richest and are very costly:
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As for trusts, the Treasury does not calculate how much revenue is foregone due to their use, but they know who uses them – and again, it is overwhelmingly the richest.
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So you are worried about how the government will pay for $8.5bn over four years? How about the fact the richest 10% will get $27bn this year in tax breaks from the capital gains tax discount, negative gearing and the superannuation tax concessions:
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It’s a broken system and it is high time we started asking what is the cost not just to the budget but to society when the richest are helped to get richer, housing affordability declines and any attempt to provide services to those on low and middle incomes is painted as a big cash splash.
Greg Jericho is a Guardian columnist and policy director at the Centre for Future Work
