Giving back: Of the 7.4 million adult Australians who don't pay tax, almost half are retirees or students.
Giving back: Of the 7.4 million adult Australians who don't pay tax, almost half are retirees or students. Photo: Dominic Lorrimer

Australia's richest seven people have more wealth than the
bottom 1.73 million households combined. Most people think that's a
problem. Amanda Vanstone, on the other hand, seems to think the bottom 1.73 million should be thankful.

"The politics of envy". This is Amanda Vanstone's
condescending dismissal of concerns over Australia's rapidly growing gap
between its richest and poorest citizens.

How often, she asks, have we heard that wealth inequality is
growing and that something is wrong with this?  How often? One fewer
times than necessary, it seems.


Vanstone says that 2 per cent of taxpayers pay more than 25
per cent of all income tax, and suggests this is something we should be
grateful to the wealthiest for. 

But the reason so few pay so much tax is that income
inequality is so great. That is, 2 per cent pay 25 per cent of tax
because 2 per cent earn so much more than the rest of us. The statistics
she quotes is a symptom of income inequality, and the starkness of the
figure reveals the starkness of the problem. 

With a progressive income tax system such as ours, where
those at the top end claim a larger and larger share of total income, it
is inevitable that they will pay a larger share of tax. Is she
suggesting that the wealthy should pay less tax as their share of total
income rises?

"Make no mistake", she continues, "we need Australians to get rich". 

Nobody became a teacher, police officer or nurse to get their
name on the BRW Rich List. They're not in it to "get rich".  Is
Australia really best served by having our daycare centre workers
striving to be the next Gina Rinehart? Do we want teachers and ambulance
drivers ruthlessly chasing wealth?

Vanstone relies on the stale class rhetoric of the 1980s when
she claims that "since only about 45 per cent of the population pay
income tax, it followers that, on average, taxpayers have to pay twice
that amount in tax in order to fund welfare."

Cue the pitchforks. Welfare queenism is alive and well, it
seems.  Or, at least it seems that way, until you consider this
significant addendum, curiously unmentioned by the columnist: almost
half of the 7.4 million adult Australians who don't pay tax are either
retirees – who have worked and paid tax their whole lives – or students,
who are soon to start working and paying tax their whole lives.

When Vanstone grumbles that taxpayers are being asked to
"fund welfare" to the tune of "more than a month's work for many", is
she suggesting that pensioners shouldn't be supported in their old age?

Is she suggesting that students shouldn't be supported in
getting an education? It is strange that she forgets to tell us that
university graduates go on to make substantially more income than those
without a degree. And via income tax, they more than pay back into the
system what they've received, as Education Minister Christopher Pyne is
so fond of reminding us.

If we want a prosperous Australia, we want an equal
Australia. Vanstone's defence of the 1 per cent (or is it 2 per cent?)
calls on all of us to focus less on the gap between rich and poor, and
more on social mobility. We don't want to attack the rich, we want to
create more rich!

This ignores the fact that the two are inseparable.
Nobel-winning economist Joseph Stiglitz, Standard & Poor's, and the
IMF have all released research backed by rigorous analysis that
demonstrates inequality hinders economic growth. It is now economic
orthodoxy that too much inequality makes growth volatile and unstable.

But Vanstone is not really concerned about the economics. For
her, this is an ideological issue, shabbily dressed up as an economic

Vanstone asks us to make a choice that doesn't exist. We do
not need to choose between taxing the rich more and having less rich. We
don't have to choose between having less inequality and having less
total income. If anything, the opposite is true.

Shadow Assistant Treasurer Andrew Leigh reminded us in March
that "Australia is a stronger nation when we act together than when we
pull apart". If this is true, Vanstone's derisive and inflammatory
rhetoric is out of step with Australia's sense of the fair go. 

The economic debate is over. If we want Australia to be a richer nation, we must also want it to be a fairer nation. 

Richard Denniss, an economist, is executive director of The Australia Institute.