'High Flyer' Taxes

An extraordinary suggestion from the Rudd Government this morning: The Australian newspaper and Sky News are reporting a proposal to tax those earning above $1 million per year at a rate of 50 per cent.

It has the support of the usual suspects that are opposed to the notion that people should be encouraged to earn more, to do better and to ‘have a go’.

The populists, the socialists and those desperate for relevance are quoted as speaking in favour of this ‘fat cat tax’.

What they forget is that the high earners also spend more and thus pay a lot more GST than the rest of us. That is why a consumption tax like the GST is actually the fairest form of tax.

The proposal this morning is certainly not fair.

I cannot think of a greater incentive for people to embrace tax-minimisation schemes, for our best and brightest to move offshore or disincentive for ex-pats to return home than this daft idea.

A fair and equitable tax environment would include a significant tax-free threshold (it could be as high as $30k) and a flat rate of tax thereafter. This would provide incentives for those who do well to do even better as they would keep more of their hard-earned income.

Of course, such a proposal could only work with a comprehensive review of our welfare system to ensure that everyone was better off for every dollar they earned.

If this type of class-warfare is the vision the Rudd Government has for the future of Australia we should be very worried.