David Leyonhjelm (NSW, Liberal Democratic Party) Share this | Link to this | Hansard source

Our government extracts huge quantities of tax from the rich. It does this for no other reason than that that is where the money is, and it is addicted to huge spending. The imposition of heavy tax burdens on the rich is inherent in our progressive income tax system. It is supported by each of the major parties in Australia, and it is commonplace in the developed world. But this extraordinary taxation of the rich is immoral.

Some will instinctively disagree. They will defend tax attacks on the rich by referring to the so-called ability to pay—'the ability-to-pay principle', they will even say—but this is no more than the idea that the government should take what it can get. There is absolutely nothing principled about it. Your next-door neighbour might have the ability to pay for your lunch, but that does not mean it is moral for you to take money from his wallet when you are feeling peckish.

Some will say that taking more money from the rich is justified by the idea that money in the hands of the poor boosts social wellbeing more than in the hands of the rich. But most government spending is directed to welfare, education and health handouts that are not effectively means-tested, as well as to ad hoc interference with industry. When the government does direct money to the poor, it wastes billions on public servants along the way. Taking money from the rich also depresses charitable giving, economic growth and employment, hardly a formula for boosting social wellbeing.

Some people may harbour the idea that tax attacks on the rich are moral because the rich enjoy ill-gotten gains. This is crude and wrong. It would be rare for a rich person's wealth to be a result of corrupt acts by the person or their forebears, and corrupt acts should be prosecuted individually, strenuously and directly rather than used as a justification to tar all rich people with the same brush.

Some may say that it is moral to tax the rich because their money is the result of luck, but by this logic it is okay to take money from someone who just won Lotto. Regardless of the extent to which luck played a part in how much money rich people have, the simple point is this: it is still their money. There is nothing moral about singling out the rich for tax attacks.

The only morally defensible tax principle is the benefit principle. This is the idea that people can be taxed if they benefit from the associated government spending. It means that government services from which we all benefit—like defence, police and the justice system—should be paid for by all. After all, these services do not particularly benefit the rich. Our tax system is clearly not based on the benefit principle. It largely involves taking money from a rich person well in excess of the cost of services the person benefits from, either directly or indirectly, to fund government services that the person will never use. I challenge each politician and commentator to explain how they think this is the moral thing to do.

The Liberal Democrats would replace the existing progressive income tax system with a flat 20 per cent income tax in conjunction with a high tax-free threshold, and we have identified the spending cuts to fund it. This policy would not completely remove discriminatory tax treatment of the rich, but it would be a huge step in the right direction. In contrast, the major parties will adopt immoral policies that maintain high income tax rates and increase tax on superannuation, capital gains and property investment. I will oppose all these immoral tax attacks on the rich, and any fellow Liberal Democrats who join me on these crossbenches after the next election will do the same.