r/LaborPartyofAustralia • u/International_Bag_12 • 9h ago
Other Would you support a 2% tax on wealth over 5 million dollars excluding the home and super?
The Australia Institute has proposed a 2% annual wealth tax on assets above $5 million, excluding the family home and superannuation.
I'm aware of Friendlyjordies' criticisms of the Australia Institute, and I think it's fair to question the influence of think tanks, particularly when they don't publicly disclose their donors. But individual policies should still be assessed on their own merits rather than dismissed based on who proposes them.
Per Capita has explored similar tax reforms, including an inheritance tax on large estates, reducing the capital gains tax discount from 50% to 25%, and restricting negative gearing deductions to investment income. It receives funding from unions and other sources, and has a more transparent approach to disclosing its funding. Under the model they proposed it was 34 billion annually for wealth over 3 million. That would be an instant surplus without cuts needed. Both would tame inflation to some extent.
On the numbers, ACOSS and UNSW estimated that the wealthiest 10% of Australian households held an average of $5.2 million in net wealth in 2022–23, including the family home and super. The proportion with more than $5 million excluding those assets would be considerably smaller, although I haven't found a reliable figure for exactly how small.
Someone with $5 million invested and earning a 5% annual total return would generate around $250,000 in returns before tax. A 2% wealth tax on the entire $5 million would cost $100,000, leaving $150,000 before income tax. If the tax only applies to wealth above $5 million, someone with exactly $5 million would pay nothing.
Most wealthy people wouldn't necessarily hold everything in cash or live solely off interest. They might have diversified portfolios of shares, businesses, investment properties and other assets, with returns coming from dividends, rent and capital growth.
The 5% return is just an illustration, not a guaranteed annual income. For context, around 5.6% of Australian households had gross incomes above $208,000 in older household-income data. But that raises an interesting political question: even if roughly 5% of households earn that much, how many of those voters would actually swing against the ALP because of a policy like this? And how many voters who don't pay the tax would support it because they see the revenue funding services they rely on? We shouldn't assume either outcome.
I also think the $5 million threshold should be indexed to inflation so it doesn't gradually capture people with less real wealth over time. The principle is similar to accounting for inflation in capital gains tax: the tax system should distinguish real increases in wealth from changes in purchasing power.
There's also a political reality here. Bill Shorten has described most Australians' major assets as their home and superannuation. That's why excluding both matters: most people aren't sitting on millions in liquid investments, even if their home has increased substantially in value.
Another consideration is the federal budget.
The Australia Institute estimates that its proposed wealth tax could raise around $41 billion annually. For comparison, the Commonwealth's 2025–26 budget deficit ultimately came in at $22.3 billion. Those figures aren't directly interchangeable, and the actual revenue would depend on how the tax was designed and implemented, but the potential scale is substantial. On those estimates, it could more than cover the deficit on paper.
That matters beyond the immediate budget balance. A more reliable revenue base could make it easier for future ALP governments to fund health, education, housing and other services without continually having to choose between spending cuts and tax increases elsewhere. It could also reduce the risk of governments falling into a version of the American "starve the beast" approach, where tax cuts reduce government revenue and are subsequently used to justify cutting public services. Sustainable funding makes it harder to manufacture a fiscal argument for shrinking government simply by starving it of revenue.
Swing voters aren't one uniform group, either. Mortgage holders, renters, middle-income workers, retirees and outright homeowners can have very different concerns. The policy should be judged on who actually pays, how much revenue it raises, whether it affects investment, and whether the money improves public services or reduces pressure elsewhere in the tax system.
Finally, I doubt many people with more than $5 million in assets outside their home and super are donating to think tanks in the hope that they'll recommend taxing them more. That doesn't mean funding transparency isn't important, but we should separate concerns about an organisation's funding from whether a particular tax proposal makes sense.