Allegra Spender's tax hike plan to turn us into wage slaves

Why Spender’s tax white paper is anti-worker

Allegra Spender released her tax white paper with much fanfare. It is pitched as rebalancing the tax system in favor of workers by cutting income taxes by 2.5 percentage points while dramatically hiking investment taxes, including on superannuation.

There is just one small problem: Spender’s policies are profoundly anti-worker, despite spin to the contrary.

To see this, consider the life of a wage slave.

You work at a company to see anemic wage growth and negligible promotion prospects. You burn yourself out, but to no avail. You save a little money, but not enough. Inflation is growing faster than your after tax salary. You consider moving jobs, but industry-wide bargaining means it is simply more of the same: employers have a de facto buyers’ cartel over labor. This should be familiar to anyone who has ever worked at a large corporation.

So, how do we make life better for a wage slave? I am a wage slave. You probably are too. Would you like autonomy and hope? Or would you like to work more for a job that you don’t like for rewards that never come?

I know what I would choose: freedom and autonomy. But, how do you achieve that? Well, the answer is investing. Investing is how you “own the means of production”, to paraphrase Marx. And, this is achieved by owning assets, whether they be shares, property, or any other entity.

Allegra Spender’s tax white paper would undermine this autonomy.

She proposes a significant high in Australia’s CGT rate. This is despite the fact that Australia’s CGT rate is already one of the highest in the world, coming in at 47%. She wants to reduce the long term discount from 50% to 30%, meaning long term gains would be taxed at 32.9%, an eye watering amount. By contrast, the CGT rates in NZ, Hong Kong, Singapore, Vietnam, and the UAE are all 0%. If Australia is serious about attracting capital, it must be serious about its CGT rates.

Allegra Spender would kill negative gearing. She would ‘ring fence’ investment losses to investment gains, meaning that one could not offset income gains with investment losses. This is despite the fact that negative gearing is simply a twee term for what corporations do as standard practice: If you make a loss selling apples you can offset it against the gain you make selling oranges.

Allegra Spender would propose a minimum tax rate on investments of 27.5%. There would be no tax free threshold for investment earnings. So, if you are unemployed or retired, you are hit with the 27.5% from the start. No getting ahead for you.

Spender would dramatically high superannuation earnings. She would tax superannuation even more than the government’s proposed Division 296, imposing a 40% tax rate on balances over 3m (as opposed to the government applying that at 10m). So, if you have saved to make a life for yourself in retirement, Allegra Spender is coming for you.

And, to add insult to injury: Spender’s tax white paper dooms Australia to uncompetitiveness and poor growth. As indicated, Australia’s CGT rate is already absurdly high, being on the wrong side of the Laffer curve. But, by hiking CGT, she would deter capital from going to its best use as people will need to consider the transactions costs involve in moving assets. In turn, this would undermine growth. But, more than that, by reducing transaction volume, you reduce tax take. This is why the UK saw CGT revenue fall when it hiked CGT rates to 24% (which is notably below what Spender is proposing).

The short of it: Allegra Spender wants you to keep working longer and harder. She does not want you to achieve autonomy or independence. She wants you to be wage slave. The proposals are profoundly anti-worker and anti-freedom.