Update on Australia's new banks tax

Hi Professor, and greetings from a listener in Australia.

Several episodes ago you spoke about a new tax being levied by our Government on big banks.

It may interest you to know that Australia's unique (and terrible) tax arrangements mean the taxpayer will likely pick up the entirety of this new levy, rather than the banks themselves.

(Ref: http://www.theaustralian.com.au/business/financial-services/tax-deduction-rules-mean-bank-levy-wont-raise-62bn/news-story/20d484723266cf0db48fe7d382404808)

Many wealthy Australians take advantage of a system called 'negative gearing', which allows property owners to lose money on their property and then claim the loss on their taxes, vastly slashing their taxable income.

(Ref: http://theconversation.com/why-we-should-topple-the-sacred-cow-of-negative-gearing-1565).

This system is one of the (many) reasons why property ownership for the lower classes in Australia, particularly young people, has become an unattainable dream that the majority have given up on.

Our Governing Liberal Party (who are actually conservative, despite the name!) are staunchly in favour of negative gearing as a policy because their supporters benefit from it (and indeed the electorates with the most negatively geared properties are those of major Liberal politicians and ministers!).

Thanks again for your show. I'm a trade union officer here in Australia, but when America sneezes Australia catches a cold as they say, so I'm always keen to hear sharp, accurate analysis of what's happening over there.


Official response from submitted

Dear Tim,

Much obliged for your enlightening clarification of Australia's bank tax incidence. I will more carefully check such implications of reports in the future. Sadly, the tax structure of Australia as you explain it replicates closely the comparable class structures in most capitalist economies. And the logic is clear: as wealth and income inequality deepen, so too do the incentives of the rich to protect themselves from the people and from governments subject to universal suffrage by buying politicians, political parties, and government agencies so as to nullify what little democracy might be left. We live in a capitalist system spinning out of control in the supreme confidence that it needs to observe no limits. This has often been the recipe for system self-destruction. POssibly this time too.

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  • Tim Colwill
    commented 2017-05-24 01:00:02 -0400
    Thanks for the reply, Professor!
  • Tim Colwill
    tagged this with good 2017-05-24 01:00:00 -0400
  • Richard Wolff
    responded with submitted 2017-05-23 12:56:45 -0400
  • Tim Colwill
    published this page in Ask Prof. Wolff 2017-05-22 21:04:44 -0400