The Monday essay: Will super-profits and wealth taxes unlock a fairer future?

The rewards – in terms of electoral success and societal benefits – make the challenge of super-profits and wealth taxes worth pursuing.

The growing calls for the introduction of a super-profits tax and wealth tax in Australia reflect a wider discontent with the existing taxation system, which disproportionately favour large corporations and the wealthy. These proposals are becoming a focal point in the broader conversation about economic equity, as more Australians begin to question whether the burden of taxation is being shared fairly. The fundamental issue at stake here is whether those who benefit most from the economic system are contributing enough back into it, especially when so many individuals and smaller businesses continue to shoulder a disproportionately high tax burden.

The idea of a super-profits tax is not new to Australia: in 2010, the Labor government introduced a similar concept, although it was quickly diluted and applied only to the mining sector and this limited application resulted in a policy that failed to address the broader structural imbalances in the taxation system. The current debate surrounding a wealth tax has gained further momentum in recent years, even receiving cautious endorsement from unexpected quarters such as the CEO of the Commonwealth Bank, Matt Comyn, where he pointed out that Australia’s reliance on income tax is outdated and inefficient, calling for a shift toward taxing wealth more substantially.

The Australian Greens have been the most vocal advocates for both a wealth tax and a super-profits tax, but their proposals have been met with skepticism from the major parties. The Labor government, wary of being perceived as too aligned with the Greens, has dismissed these ideas as “attention-seeking” measures, while the Coalition, traditionally pro-business, has offered little appetite for reforms that would impose greater taxes on the wealthiest individuals and corporations. This political deadlock reveals a deeper problem within Australia’s tax policy debate – one that prioritises short-term political gamesmanship over long-term structural reform.

Australia’s tax system is one of the most complex in the world, and this complexity benefits those who can afford to navigate it. A super-profits tax, if implemented properly, could begin to address many economic issues by targeting extreme concentrations of corporate wealth. The concept is straightforward: once a company reaches a certain and significant threshold of profit, its tax rate also increases significantly. Such a policy would ensure that companies benefiting from Australia’s economic landscape are contributing their fair share to the public good, without placing undue strain on smaller businesses or individuals. Similarly, a wealth tax could serve to level the playing field by taxing the accumulated assets of the richest Australians, rather than relying solely on income taxes, which often miss the vast sums of wealth that sit untaxed in investments and property.

Yet, the resistance to such reforms is deeply ingrained, especially within the neoliberal framework that has dominated Australian economic policy for decades. The narrative, often propagated by powerful media moguls and corporate interests, is that taxation is an undue burden on wealth creators – but this is not only about redistributing wealth; it is about ensuring that the public infrastructure, services, and institutions that allow businesses to thrive are adequately funded.

Complexity is a barrier to reform and an advantage for the wealthy

The complexity of Australia’s taxation system is one of the most significant barriers to meaningful reform, particularly when it comes to implementing taxes that could address wealth inequality. The existing structure, with its sprawling 14,000 pages of tax law, is symptomatic of a system that is both cumbersome and opaque, allowing those with access to the best legal and financial advice to exploit loopholes and minimise their tax obligations. This complexity doesn’t serve the broader public interest but instead benefits a small, wealthy class that can afford to navigate its intricacies.

For large corporations and wealthy individuals, the complexity of the tax system becomes a tool for tax avoidance and this ability to structure earnings in such a way that they are either taxed at a lower rate or not at all is a privilege that most Australians don’t have, making the system inherently unequal.

This imbalance has led many economists, surprisingly, to support the introduction of a wealth tax and, to a lesser extent, a super-profits tax, as tools to level the playing field. However, these ideas face substantial barriers, not just in terms of political will but in aligning the various interests that influence the taxation debate. Corporations, legal professionals, lobbyists, and politicians all have a stake in maintaining the status quo, or at least ensuring that any reforms do not significantly disrupt the current balance of power and wealth. Governments, too, tend to act based on political instincts, opting for policies that are more likely to secure their re-election rather than those that might introduce meaningful but difficult reforms.

One of the major proposals to overcome this political inertia is to take taxation out of the hands of politicians altogether, much like the Reserve Bank operates independently to set monetary policy. The idea is that an independent body could be tasked with redesigning the tax system in a way that promotes equity and simplicity, without the short-term political calculations that often undermine reform efforts.

However, this approach is not without its own risks. The Reserve Bank of Australia, once a model of independence, has recently come under fire for decisions that seem to align suspiciously with the political cycle, and this has led to concerns that so-called “independent” institutions are not always free from political influence. Any independent taxation body would need to ensure that it remains genuinely impartial, representing the interests of all Australians rather than the wealthy elite or corporate sector.

The other consideration is that taxation is not just an economic issue; it’s inherently political, and decisions about who gets taxed and how much they pay are tied to broader questions about the kind of society Australians want to live in. Should the wealthy contribute more to the public good, or should they be allowed to retain the bulk of their earnings? Should corporations be required to pay higher taxes on extraordinary profits, or should they be allowed to reinvest those earnings in ways that they argue benefit the economy?

A truly independent body might be able to overcome these political hurdles, but it would have to be carefully constructed. It would need representation not just from economists and business leaders but from a broad cross-section of society, including those who understand the impact of taxation on low-income earners and vulnerable populations. Without this balance, any reforms are likely to be seen as either overly technocratic or, worse, as a continuation of policies that favour the wealthy.

The Labor Party’s experience in the 2019 federal election is also a cautionary tale of how politically charged tax reforms can be. After proposing to reform capital gains tax, negative gearing, and franking credits, Labor suffered a surprising defeat, largely attributed to a scare campaign that framed these proposals as an attack on retirees and middle-class Australians. This loss has made the current Labor government risk-averse when it comes to tax reform, despite growing public support for changes that would make the system more equitable.

What is clear is that the current situation is unsustainable. Australia’s taxation system is not only inefficient and complex, but it also fails to address the growing wealth inequality that is eroding social cohesion. Without significant reform, the country risks entrenching a two-tiered system, where the wealthy can continue to avoid their tax obligations while ordinary Australians bear an increasing share of the burden.

A path toward fairness and economic restructuring

The challenge of implementing a super-profits tax or a wealth tax in Australia is undoubtedly complex politically, but governments should not shy away from pursuing these reforms, particularly given the significant potential benefits for the broader population. Despite the knee-jerk reaction from conservative parties, who label such proposals as part of a “socialist” or “communist” agenda, these taxes are fundamentally about fairness and equity, not about antiquated ideological battles. They aim to ensure that those who can afford to contribute more are doing so, especially during times of economic difficulties experienced by many people in the community. In the current landscape of growing national debt and underfunded public services, governments have a compelling narrative to justify the introduction of these taxes: the need to raise funds for essential services that will benefit all Australians. So why don’t they push these narratives that would allow them to implement these reforms?

The role of government should be to improve the quality of life for as many people as possible. Taxes on wealth and super-profits provide a clear path toward this goal, unlocking much-needed revenue for infrastructure, education, health care, and other critical areas. By framing these reforms as necessary steps to restore balance to the system, governments should be able to win public support for these measures.

Accusations of populism are often leveled at such proposals, with conservative critics suggesting that they appeal to voters’ base instincts without delivering real solutions. But if right-wing populism, driven by promises of tax cuts and deregulation, can dominate the political landscape, why can’t a form of left-wing populism do the same? It’s not populism for the sake of it – it’s about acknowledging the reality that Australia’s wealth is concentrated in the hands of a few, and that the tax system should reflect this.

Contrary to the argument that higher taxes on the wealthy would disincentivise entrepreneurship or wealth creation, the levels being discussed would affect only a tiny fraction of the population. Would Gina Rinehart’s ability for further wealth creation be damaged if her wealth decreased from $28 billion in 2020, down to $14 billion, after the application of a super-profits tax? She certainly has enough excess profits to sponsor Australia’s Olympic swimming team and other sportswashing activities.

Those impacted by a wealth tax or super-profits tax would largely be people who have already accumulated significant fortunes or companies generating extraordinary profits. These taxes would not stifle economic growth or innovation but would ensure that a fair share of the wealth generated within the country is returned to society in the form of public services and social welfare programs. And by redistributing some of the nation’s wealth, the government would also be better able to support those who are struggling, especially in areas where private-sector solutions have failed.

In sectors such as private childcare, early education and aged care, the inadequacies of privatisation have become increasingly apparent. The profits being made in these industries are not being sufficiently reinvested in the services themselves but are instead funneled upwards to boards, executives and shareholders. This leaves workers – educators, aged care workers, and others – underpaid and overworked, while families struggle to afford basic care. In such cases, it is clear that the private sector has failed to deliver the outcomes that it promised. Instead of reducing costs and improving quality, privatisation has driven profits into the hands of a few while leaving the services themselves underfunded and inefficient. This is a prime example of how an unchecked focus on privatisation and a brazen pursuit of profit can harm society as a whole.

Ultimately, the introduction of a super-profits tax or wealth tax is not just about raising revenue; it is about reshaping the economy to better serve the needs of the entire population. It would signal a shift away from the failed policies of neoliberalism that have dominated Australian politics for the past 40 years, toward a system that values fairness, equity, and social responsibility. While implementing these changes will be politically difficult, the potential rewards – both in terms of electoral success and societal benefits – make the challenge worth pursuing.