Greg Jericho 

People want fairer taxes – even high-income earners believe they pay too little

A report details people’s preference to close taxation loopholes on big business, reduce negative gearing and increase taxation on the wealthiest
  
  

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Thirty-five per cent of people surveyed were in favour of cutting negative gearing. Photograph: Bloomberg via Getty Images

You would think there is nothing surer in life than death and taxes – and the belief that people think they pay too much tax. But the latest annual survey on attitudes towards taxation by the progressive thinktank Per Capita reveals that people are mostly satisfied with the amount of tax they pay.

The survey also found that the number of people who believe they are taxed too high has fallen dramatically from 2012 and there are now more high-income earners who believe they pay too little tax than those who believe they pay too much.

Taxation is a vexed issue for governments. It is needed to pay for services and yet increasing taxes is considered a politically risky move, especially when applied to income tax. In the early 1990s Paul Keating infamously advised then UK opposition leader, Tony Blair: “Don’t ever put up income tax, mate. Take it [money] off them anyhow you please, but do that and they’d rip your fucking guts out.”

From the results of the 2015 Per Capita tax survey it would appear Keating knew what he was talking about.

When the 1,413 people in the survey were asked about collecting tax for “quality public services”, raising income tax was the least favoured way:

The only response less popular than raising income tax was the suggestion the government should borrow more. As the report’s author David Hetherington notes, the Abbott government’s “unequivocal message that further debt is unhealthy for the Australian economy” appears to have struck a chord with the public.

Not surprisingly, respondents were most in favour of the government raising revenue in ways which wouldn’t directly affect their income. Sixty-five per cent of respondents were in favour of cutting corporate tax avoidance, while 44% were in favour of increased income tax – so long as it was only on the richest 5% of income earners.

Should the government wish to tinker with the GST, it would seem people are most comfortable with the range of items which already receive tax. Whereas 15% suggested they would be happy to see the current 10% GST rate increased, only 9% would prefer to see the GST broadened to include private education and health.

Somewhat confusingly, 13% want to see it broadened to include all items – such as food.

But changing the GST is much less popular than cutting negative gearing. Thirty-five per cent surveyed were in favour of such as move – suggesting the Greens latest policy to phase out negative gearing for new housing investments could find some broad support.

This is also supported by the responses to Per Capita’s specific question about negative gearing and what changes should be made to the system. Only 16% of respondents suggested it should not be changed at all.

Fifty-eight per cent of those surveyed wished to see some restrictions placed on negative gearing –from 19% who wanted it abolished completely to just 8% who wanted it restricted only to new buildings.

That a number of respondents answered “don’t know”, however, suggests this is still a debate there to be won by either side. Clearly the impetus is with those arguing in favour of change.

One debate that clearly has been won is on the GP co-payment. Per Capita found while 32% were in favour or either a $5 or $7 co-payment, a majority were against any co-payment at all:

A majority also agreed they were paying the right level of tax; 50% believed they paid “about the right amount”. This was down from 53% in 2014 but well above the mere 35% content with the amount of tax they paid in 2012:

But while most believe they themselves pay the right amount of tax, there is a strong belief that the wealthiest pay too little. Sixty-seven per cent of people believed high-income earners paid too little – this was down from 72% last year but well up from 55% in 2012:

Now while it’s perhaps not surprising that a majority believe the richest should pay more tax – given most people are not high-income earners – what is surprising is more high-income earners believe they pay too little tax than too much:

Thirty-eight per cent of those who earn more than $200,000 believe high-income earners pay too little tax, and only 35% believe they pay too much.

Similarly, while 57.3% of those who earn between $150,000 and $200,000 believe high-income earners pay too little tax, only 9% believe they pay too little.

Now perhaps there is a fair amount of non-self-selection going on here. Those earning above $150,000 but less than $200,000 may not see themselves as high earners. Though given the top income tax bracket kicks in at $180,000, they would be suspending a fair degree of disbelief about their wealth.

People’s views of reality on taxation does not often accord with the actual state of affairs.

When asked whether compared with other nations Australia was a low, medium or high taxing nation with a small,medium or big government, a near majority, 47%, believed we have a high-taxing, big government.

This figure was down from 57% in 2012 – perhaps as Tony Abbott and Joe Hockey’s rhetoric of a big spending and debt-ridden ALP government was in full cry:

Since 2012 our tax level has actually increased. Despite this, Australia remains very much on the low taxing side of the ledger.

In 2012 (the latest complete figures) Australia was the seventh lowest taxing nation in the OECD:

The results of the survey shows the impact of the political debate on people’s views on taxation. The 2014 budget and resulting debate has put a spotlight on tax equality. People still wish to have quality public services such as health and education, but the anti-debt campaign of the past five years has had an impact.

People have little desire to increase public debt. They also don’t just want taxation in general increased. The view that the tax system needs to address equality is highlighted through people’s preference to pay for spending by closing taxation loopholes on big business, reducing negative gearing and increasing taxation on the wealthiest.

 

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