I recently stumbled across the BRW list of the richest 200 people in Australia for 2014. What lucky people I thought, at least in terms of their financial security.
Even the person who is number 200 out of 200 on that list has the wealth that would take someone on average earnings about 4,000 years in after tax income to accumulate, and that is only if they did not spend any money over that time.
So even being number 200 on this list is a hugely fortunate position, and shows how numbers 199, 198 and those above are extraordinarily rich.
As I was pondering the wealth of these rich people, I was also thinking about the Commonwealth budget and looking at the difficulty the Abbott government is having with its struggle to contain the budget deficit as it spends money that it simply does not have.
Now this is in no way, I repeat no way, a serious suggestion, but what if the government decided to impose a wealth tax on, say, the top 200 wealthiest people in Australia?
Based on the BRW numbers and assuming a 10 per cent flat tax on the wealth of the top 200, government revenue would be boosted by about $18.5 billion. Do it for two years and the revenue is around $37 billion, all of which could be used to address the budget deficit and directly reduce government debt.
If the government did this over two years, the on-going interest saving on public debt would, assuming a long run average bond yield of 3 per cent, would be over $1 billion a year, every year in perpetuity.
The bottom line is $37 billion to the budget over two years and an on going saving of over $1billion a year, every year, from a simple policy initiative.
Now I can hear you all saying, “how unfair and dastardly it would be to take 20 per cent of the wealth of the richest Australians. After all, they have worked hard, innovated, taken risks and inherited all this money and to take it away would be downright un-Australian”.
That is true, and is why it is not even a vaguely serious suggestion, just something one thinks about while Antiques Road show is on.
For even the least wealthy person on the BRW 200 rich list, after this tax blast, they would be left with around $200 million, while Gina Rinehart would still have around $16 billion of personal wealth or the amount it would take someone on average earnings about 250,000 years to accumulate without spending any of that money.
Its effects on economic growth and consumer demand would be next to nothing. Having $200 million in your back pocket instead of $250 million is not a consumption distorting change unlike taking $20 from someone who spends all the money they earn.
Back to Antiques Roadshow…
Anyway. It’s back to Antiques Roadshow for a while…
