Amid the sometimes heated Covid-generated debate over economy vs lives, one thing is certain: people over 60 have a large debt to younger people. The debt should be repaid through tax and payments changes that favour the young.
Health Department figures show that 97.7% of Covid deaths were among people over 60. Essentially, Covid does not present a death risk to the young. But younger people have paid dearly in economic terms because of the shutdowns that were necessary to prevent more Covid deaths among the over-60s.
If the overall death rate for Covid were same as it is for those under 60 (less than that for the ordinary flu), no sensible government would enforce lockdowns and shutdowns. They were done to save the lives of people over 60.
People with a heart and sense of morality would agree that that was the right thing to do. Some, of course, disagree. Former Prime Minister Tony Abbott, for example, says we should think like health economists. We should open the economy (so his business mates can make more money) while “nature takes its course” and people over 60 are put in death’s way.
He even provided an equation to suggest that each life year was costing $200,000.
By the way, this is the same Tony Abbott who decried the Victoria’s euthanasia law “a sad milestone in our decline as a decent society”. It is was a strange piece of moral cherry-picking: condemning legal permission for a person with a terminal illness to end their life a few days or weeks early while applauding an open economy that would expose healthy older people to a virus which could cut years or decades off their lives.
Covid has certainly thrown up some moral questions. Presuming Abbott’s $200,000 per life year is correct, that is a big debt to repay. And it should be repaid.
But what have Coalition MPs and Ministers been proposing in the past fortnight or so? They want to impose further burdens on the younger population. Free childcare was the first concession to go. They allowed younger people to dip into their superannuation savings instead of proving more support. Now they want to stop the increase in employer superannuation contributions from 9.5% to 10%. And they want to bring forward their proposed tax cuts.
The tax cuts are an outrage against fairness and decency. They heavily favour the (mainly older) wealthy. They bring closer the neo-liberal economist’s dream of a flat income tax. Moreover, they will do very little to help economic activity because people on high incomes will put them in to savings rather than spend them. This will merely increase inequality.
Instead, Australia should upend the tax system to make it fairer to younger people.
The Coalition’s ideological attack on a fair retirement income for all comes under the guise of not jeopardising jobs and wages growth if employers have to pay a little more in super. But, in fact, anything saved by scrapping the super increase would go straight into corporate profits and not into wage and salary increases or jobs.
In any event, the amount is piddling. Just $3.5 billion. If the Coalition were serious about jobs, it would force the states to abandon payroll tax. It is a straight tax on jobs and is a nightmare to administer because of all the different state thresholds and percentage take.
Overall payroll tax reaps $26 billion a year.
Then the states should be forced to scrap stamp duty on property transfers. Essentially this is a tax on mainly young people struggling to buy a dwelling. Moreover, it is a dampener on older people downsizing, which would free up more housing for younger people. It is also a dampener of young people moving to seek better jobs or moving to a bigger dwelling instead of renovating. And duties on commercial-property transfers hurt businesses.
Overall, stamp duty reaps $16 billion a year.
Payroll tax and stamp duties are economically inefficient. They dampen employment and house moving which results in more efficient use of housing stock so their replacement with other taxes would help. However, that would be hard to quantify so we will ignore it.
So how do we pay for this $42 billion a year payroll and stamp-duty abolition?
Abandoning the income tax cuts to middle- and high-income earners would reap $30 billion a year, according to the Grattan Institute. That could be given to the states. Do we axe payroll tax or giving tax breaks to the rich? It’s a no-brainer.
Then we should reintroduce of death duties (and a gift duty to prevent avoidance) for estates over, say, $3 million. In the 1950s and 1960s when all Australian jurisdictions had death duties, they raised about 3% of revenue – about $11 billion today.
It is an ideal tax: the tax liability comes at a point where those who did have the money no longer need it, and those who are about to get the money have managed quite well so far without it. There is rarely a problem with liquidating assets to pay the tax while the estate is being administered.
It would also reduce the inequality caused by the build up of intergenerational wealth.
Those two things would almost get you there. But if the government wanted to give some income-tax relief at the lower and middle end, or even at the higher end, it could make some changes to the GST. At present the GST raises $70 billion a year or 13 per cent of revenue.
But the GST is contracting because people are spending a greater portion of their income on things which are exempt, particularly health and (private) education. Again, the well-off elderly, who spend a lot on health, are getting a free ride.
If there were no exemptions, GST revenue would double. You could also take it to 12.5%. Of course, there would have to be generous compensation for people on lower incomes.
Lastly, the government could remove a lot of the perks in the superannuation system, particularly tax breaks for people with large accounts (over $2 million) who do not really need any more help in providing for their retirement.
And no more high immigration which takes jobs and houses out of the reach of young people.
In all, the Baby Boomers have had a pretty good run and a lot of them are only continuing that run because the lockdowns have saved their lives. It is time for repayment and to give the younger generation a (tax) break.
This article first appeared in The Canberra Times and other Australian media on 12 September 2020.