Peter Smith

Socialism success story

Just think, the higher the rate of income tax you make the rich pay, the more the bastards unfairly gain from concessions.

Perverse though such thinking may seem to the level headed, socialist sophistry has carried the day. If you doubt that read and listen to the surrounding commentary.

As part of the budget, the government apparently intends to reduce the concessional tax treatment of superannuation contributions for those earning over $300,000 per year. The envious gripe is that progressive taxation means that higher income earners gain more from the concession than do lower income earners.

This isn’t a party political thing. After all, it was Howard and Costello who introduced the infamous 15 per cent superannuation surcharge on higher income earners in 1996 after coming into office promising no new taxes. The fact is that governments of all persuasions these days act as though whatever we retain of our earnings is a gift of the government. This is not surprising.

Government is now seen as dispensing (or wilfully withholding) treasure for an interminable, and collectively unaffordable, list of worthy causes. Seldom do you hear it said by those wanting to extract more government money that other people must be made to pay? It has been sanitized. It is the government that will pay. Once this becomes the common way of expressing things, the government comes to be regarded as having the prior legitimate claim on earnings.

Of course, the very rich are targeted by rabble rousers. But facts get in the way. The Buffett rule, for example, would bring in only 0.3 per cent of the current USA budget deficit. So it usually gets back to “the government must pay” to disguise the fact that our ability to pay for things people want and demand, but can’t personally afford, is severely limited.

Ceaseless demands on government mean that whatever you keep of yours is a bonus for which you should be grateful.

Based on the current income tax scales (ignoring the progressive Medicare and special flood levies) someone on an annual salary of $80,000 pays $17,500 in income tax. Someone on $320,000 pays $117,500. Each dollar they contribute to superannuation relieves the lower income earner of 15 cents in tax and the higher income earner of 30 cents.

If they were each to contribute the current concessional maximum of $25,000 into superannuation, the lower income earner’s total tax bill would fall to $13,750, and the higher income earner’s would fall to $110,000. Okay, so maybe the lower income earner can’t afford to put away $25,000, which would move his tax contribution up a little. But the comparison is stark, however you cut it.

The higher income earner is putting a lot of his earnings into the community pot and then, to add insult to injury, is being told that he is receiving overly-generous concessional treatment. Only in a world turned upside down could this be said with a straight face.

How do you get to a point where someone who is putting into the pot seven to eight times more than another can be described as somehow being favourably treated? The higher income earner isn’t paid this much in our society because he is married to the local commissar’s sister. He is getting out what he puts in. He is getting what someone is freely prepared to pay him for his contribution.

Let’s put it in simple terms. He picks four times as many coconuts as his fellow islander and yet puts seven to eight times as many into the community pot. He is a hero of the capitalist system.

Caricaturing a benefactor as a parasite is the singular socialism success story. It dwarfs all others. Yes, Eastern European demonstrated the poverty of socialism in practise, but it has won the political lexicon battle. The government is the purveyor of largesse and woe to those unfairly rewarded rich people who would deny the government.

Peter Smith’s book, Bad Economics, will be published soon by Connor Court. You can pre-order (post free) here…

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