A Super Tax on Income

[Ferret]

Punitive taxation of high salaries goes against the capitalist model of reward for effort.

The problem occurs when emphasis drifts from the advancement of a team or group (no matter how large) towards the advancement of a smaller sub-group or individual. The effectiveness of political leadership is no different in this respect.

I don't understand your point here, Dr Smith

 

[suhm]

The tax on income is really a disincentive to work and I probably get a lot more tax deductions than most, works out to nearly half my income, I had been tossing up working some extra locum shifts as the money is pretty decent but after tax it becomes a bit meh. The system favours returns on capital so much more than personal labour.

 

[Macquack]

I don't think you got one thing right in that whole post. Allow me to educate you, since you seem to be all over the place:

Don't be so condescending, when in fact you are agreeing with me that there is no such thing as a "free market".

 

[johenmo]

Meh, the worlds been there many times before, its not the right way to see things and it never works out well in the end.
The reality is that those people are worth that price to those who pay it. Paying Michael Jordan a few mill to bounce a ball round a court is a bargain for the profit the sports industry gets in return from selling tickets and ads.

Return on investment, yes. But morals/ethics and business have never been good bedfellows.

Punitive taxation of high salaries goes against the capitalist model of reward for effort.

The problem occurs when emphasis drifts from the advancement of a team or group (no matter how large) towards the advancement of a smaller sub-group or individual. The effectiveness of political leadership is no different in this respect.

Nicely put. A good leader will get more from the "troops" than a bad one but they still need good troops to be effective (not always the same as successful).

 

[Whiskers]

Return on investment, yes. But morals/ethics and business have never been good bedfellows.


Nicely put. A good leader will get more from the "troops" than a bad one but they still need good troops to be effective (not always the same as successful).

Two essential points to remember when considering CEO selection and remuneration in the context of a particular regulatory regime.

2) The bailout was neither necessary, nor right. It's passage should have led to the imprisonment of many many politicians and officials, as well as people in the banking industry. Naturally, the bailout was framed as the government having to save 'the free market' from its reckless self. In reality, they were trying to patch over the massive economic crash they had directly caused themselves, and using a non-existent free market as a scapegoat. They should all be locked in jail for a long time.

So, how do you propose to lock these people in jail for a long time with no or minimal regulation?

As for the bailout being right or necessary, it was the best bad option to put things on a more even moral and ethical keel. For example at least in the latter part the US gov has used it huge equity stake in US bailed out companies like GM and Bank of America to block further pay rises to CEO's and senior exec's until all the bailout money has been repaid.

The US gov has also imposed Banks hold larger reserves for future losses and has recently imposed a regulation that lenders cannot on-sell mortgages with less than (if I recall correctly about) 20% equity as first class assets. Since the US subprime mortgage industry was the rug that tripped the whole world, that has to be a good thing.

The issue is not that more (or less) regulation is needed, but that 'free enterprise' finds ways around regulation that is out of touch with contemporary business practices. The US financial industry regulation had not had a decent upgrade since the Great Depression. That was the essence of cause of the GFC.

 

[tothemax6]

So, how do you propose to lock these people in jail for a long time with no or minimal regulation?

As for the bailout being right or necessary, it was the best bad option to put things on a more even moral and ethical keel. For example at least in the latter part the US gov has used it huge equity stake in US bailed out companies like GM and Bank of America to block further pay rises to CEO's and senior exec's until all the bailout money has been repaid.

The US gov has also imposed Banks hold larger reserves for future losses and has recently imposed a regulation that lenders cannot on-sell mortgages with less than (if I recall correctly about) 20% equity as first class assets. Since the US subprime mortgage industry was the rug that tripped the whole world, that has to be a good thing.

The issue is not that more (or less) regulation is needed, but that 'free enterprise' finds ways around regulation that is out of touch with contemporary business practices. The US financial industry regulation had not had a decent upgrade since the Great Depression. That was the essence of cause of the GFC.

No, I have explained the full cause of the GFC in detail. I can increase the level of detail if you wish. It was not caused by lack of 'regulation' (government control in place of a free market), but BY the regulation. The sub-prime crash, as I explained, just happened to be the area in which there was the greatest market distortion. The actions of the central bank were sufficient to create a bubble somewhere, it just happened to be in sub-prime for the reasons I detailed.

Regarding the locking in jail, we already have existing corruption and fraud laws, which would be sufficient. Law and regulation (the keeping 'regular' of things) are different things.

Regarding the bailout making for a more ethical, even keel:
:jump:
Bailing out rich and greedy businessmen because they took huge risks, which went sour, with money expropriated from the general populace, is about as ethical as kicking babies.

Regarding the increase bank reserves, this will be a band-aid on the broken leg that is central banking.

Return on investment, yes. But morals/ethics and business have never been good bedfellows.

Depends on your ethics. I would say they fit fine.

 

[Julia]

As for the bailout being right or necessary, it was the best bad option to put things on a more even moral and ethical keel.

I strongly disagree. The bailout was a perfect example of moral hazard, a phrase which has sadly disappeared from the financial lexicon recently.
To bail out so many corrupt organisations was to reinforce the message that, hey, it's just fine to be corrupt because the ramifications of what is essentially your criminal activity will produce such misery that the government will come to your rescue.
Further, it will not prosecute you for your misdeeds because to do so would be to further draw attention to their own failings.

Take off the rose coloured glasses, Whiskers.

 

[Whiskers]

No, I have explained the full cause of the GFC in detail. I can increase the level of detail if you wish. It was not caused by lack of 'regulation' (government control in place of a free market), but BY the regulation. The sub-prime crash, as I explained, just happened to be the area in which there was the greatest market distortion. The actions of the central bank were sufficient to create a bubble somewhere, it just happened to be in sub-prime for the reasons I detailed.

I presume you mean "BY the regulation" that the lowering of interest rates by the FED was the cause. I don't dissagree that was pivital in the whole GFC... BUT my point is that having made that decision, the US was lacking in updating (not necessairly increasing) it's financial regulations from the 1930's model to contempory economic models. If they'd frequently updated their accounting and financial laws to marry with their monetry and fiscal policy, the bubble could not have formed.

Regarding the locking in jail, we already have existing corruption and fraud laws, which would be sufficient.

If you mean the FED and politicans should be jailed, probably you are implying some sort of negligence (for low interest rates per se) I'm curious how you see that legally achieved?


I don't dissagree with your sentiment, but I think you miss some important legal points:

1. Unless there is a specific statute against something it's not necessairly illegal. Corruption and fraud is highly dependant on Statuatory Laws and regulations in the accounting and financial industry. Common law (caveat emptor) often precludes many things unless that are specifically covered by statute.
2. Out dated penalties under corporate law is rarely jail and often relatively miniscule fines compared to their huge salaries. In many cases the fine is considered a small price to pay for a much greater gain (if they get prosecuted).

Law and regulation (the keeping 'regular' of things) are different things.

That's an odd interpretation of 'regulation' in this context.

"Regulation" is a set of rules and administrative codes that are set to implement the relevant Statutary Law. The regulations are completely static unless and until the overiding law is ammended.

Bailing out rich and greedy businessmen because they took huge risks, which went sour, with money expropriated from the general populace, is about as ethical as kicking babies.

Again, I agree with the sentiment and I don't like patronising some of those CEO's, BUT in reality a number of them were forced to quit and give up substantial bonuses in the best interest of shareholder as well as Gov interests during and conditional upon their bailout. It's not as though it was all free grants to all those rich and greedy businessmen who took huge risks.

Remember many companies were let go bust, but their CEO's were and still are being persued for unearned bonuses taken and potential Corporations Law and criminal charges.

Also, the US gov is now in the process of reselling those bailed out businesses for hopefully some profit.

Regarding the increase bank reserves, this will be a band-aid on the broken leg that is central banking.

But, isn't that the way of the world. What country has a perfect or idealistic system?

In the meantime it's always about band-aiding up things.

 

[Whiskers]

I strongly disagree. The bailout was a perfect example of moral hazard, a phrase which has sadly disappeared from the financial lexicon recently.
To bail out so many corrupt organisations was to reinforce the message that, hey, it's just fine to be corrupt because the ramifications of what is essentially your criminal activity will produce such misery that the government will come to your rescue.
Further, it will not prosecute you for your misdeeds because to do so would be to further draw attention to their own failings.

Take off the rose coloured glasses, Whiskers.

While I do like rose coloured glasses ocassionally, on my days off ... I've just got my everyday pragmatic pair on atm, Julia.

I agree entirely that it was a moral hazard, hence I probably should have more heavily emphasised "the best bad option", because once an economy has got to that state there are no good options available.

Also, I agree that morally and ethically most people consider it 'criminal' activity... but unfortunately these CEO's are smart and as any good Lawyer will tell you, unless there is a specific law against it, it's legal... and that's just what smart, free market business people do.

They exploited antiquated Corporations, Accounting, Banking and Financial industry Laws. But they did not all necessairly commit fraud or other criminal activity (by the strict letter of the antiquated laws) in doing so, although some certainly did as is being evidenced by some prosecutions and recovery of funds.

I think if the penalties for offences under the Corporations, Accounting, Banking and Financial Laws were higher and or better linked to the Criminal Code many of those CEO's would not have chanced their arm.

Where there is inadequate law to prosecute those greedy CEO's, at least the bail out program gave the US gov some leverage as the major shareholder to impose penalties such as escrow stock holdings, salary increases and golden parachutes in some cases.

 

[tothemax6]

If you mean the FED and politicans should be jailed, probably you are implying some sort of negligence (for low interest rates per se) I'm curious how you see that legally achieved?

Jail would be for the bail-outs. The actions of the fed beforehand, and for that matter, its very existence, are a policy matter. The granting of public funds to save specific private corporations (which were framed 'too big too fail' as an excuse) from financial ruin, is a strong case for corruption proceedings.

But, isn't that the way of the world. What country has a perfect or idealistic system?
In the meantime it's always about band-aiding up things.

Alas yes, but if this is a discussion about what should be done, the obvious answer is 'stick the leg in a cast', rather than band-aid it.

 

[Ferret]

Well it seems this is what we are getting - oh, sorry, it's a levy, not a tax.

Its funny that it has come from the coalition rather than labor. I can just imagine the screams from Abbott if labor had tried to do this!

Still, I'm quite ok with the levy, even though I'm one who will face a higher tax bill. I'm not ok with the broken promise though. It would have been so easy for Abbott to have kept his mouth shut about not raising taxes during the election campaign and he still would have won by a mile....

 

[sptrawler]

I'm not ok with the broken promise though. It would have been so easy for Abbott to have kept his mouth shut about not raising taxes during the election campaign and he still would have won by a mile....

I suppose it would have been easier to have kept his promise, than fix the budget.

Depends which is the most important, I guess.

 

[sydboy007]

Well it seems this is what we are getting - oh, sorry, it's a levy, not a tax.

Its funny that it has come from the coalition rather than labor. I can just imagine the screams from Abbott if labor had tried to do this!

Still, I'm quite ok with the levy, even though I'm one who will face a higher tax bill. I'm not ok with the broken promise though. It would have been so easy for Abbott to have kept his mouth shut about not raising taxes during the election campaign and he still would have won by a mile....

I think it's idiotic that we tax hard work so heavily in this country yet reward speculation.

It would be better to have a broadly based land tax that brings in a stable revenue stream and can help lower income tax. Makes negative gearing less tax payer funded, and it's very hard to hide land from the ATO.

A land tax is also probably one of the most progressive taxes around in that generally the wealthier you are the higher value of land you will own.

Even if we hit the Greek moment I doubt such a sensible policy will be looked at.

 

[sptrawler]

I think it's idiotic that we tax hard work so heavily in this country yet reward speculation.

It would be better to have a broadly based land tax that brings in a stable revenue stream and can help lower income tax. Makes negative gearing less tax payer funded, and it's very hard to hide land from the ATO.

A land tax is also probably one of the most progressive taxes around in that generally the wealthier you are the higher value of land you will own.

Even if we hit the Greek moment I doubt such a sensible policy will be looked at.

Check out Cormann's reaction on lateline last night, when Emma Aberici asked about negative gearing.

http://www.abc.net.au/lateline/content/2014/s4004004.htm

 

[drsmith]

Check out Cormann's reaction on lateline last night, when Emma Aberici asked about negative gearing.

http://www.abc.net.au/lateline/content/2014/s4004004.htm

Essentially, watch this space.

And then the latest Tax Office figures show that more than 1,000 Australians earning more than $150,000 pay no tax at all thanks to things like negative gearing. And, in fact, 75 people earning more than $1 million pay no tax at all?

MATHIAS CORMANN: This is not the end of the journey. This Budget is the start of the journey and we have already said that we will engage in fundamental tax reform, through a tax white paper process which will commence shortly.

This is our first Budget. In this first Budget we've made significant structural reforms on the spending side. Nearly 80 per cent of the Budget repair job in this Budget comes from spending cuts.

We have ensured that there is an effort that is spread fairly and equitably through some tax measures. But beyond that, of course, there is a job to be done to ensure that our tax system is as efficient and as well targeted as possible.