The Spectre of " Death Taxes " !

Of course Australia is in election mode and that is where scare rumours originate and they can be very effective in swinging the vote.  During the last election it was rumoured that Medicare might be dismembered.  This time there are whispers that Bill Shorten and the Greens have a  secret deal to reimpose " Death Duties " !

At a time when a modest home in Sydney or Melbourne is reaching the three quarters of a million mark and CEO's are taking home multi million pay packets it is highly likely that " death taxes " are making an appearance in socialist minds.   We had them here in Australia many decades ago, and they were soundly detested across the entire income spectrum.

The tax office was notorious for raiding the home of the deceased before the funeral arrangements were completed.  They were seeking to identify and value wealth and they were looking for items of art, exotic furniture, whether the home contained a safe - and even looking for rings on fingers and any Rolex watches on the wrist of the deceased.

There is a school of thought that insists that we enter life with nothing and we should depart life with very little !   They deplore wealth passing down to the sons and daughters of the wealthy. Obviously people like James Packer would be high on their target list.

The problem is that to generate the tax rewards that make death taxes worthwhile the target range needs to be set much lower and the average citizen would fall into that tax threat.  We would find that the existing tax minimisation industry would swing into action and the wealthy would hide their money and assets overseas.  In short order this tax would fall most heavily on ordinary Australians who lacked both the wealth and the acumen to guard their assets from predation.

A much bigger threat looming on the horizon is the desperation felt by local government who are forced to provide extended state and Federal  functions but are locked out of the tax loop.  Their annual rate increases are locked into a 2.7% maximum limit and their unmet liabilities are increasing out of sight.  Local councils have a growing burden of unfunded needs and they are demanding that limit be lifted and rates rise by 7% a year for the next decade.

The problem is that wages and salaries have been stagnant since the recession of 2008 while corporate profits have lifted sharply.  We are entering an era of a shortage of skilled workers and industry is stubbornly refusing wage increases.  Industry instead prefers to invest in labour saving robotics or the installation of artificial intelligence. A sharp rise in council rates at this time will push many home owners over the financial edge.

It is quite evident that death taxes are not an option under serious consideration at this coming election, but we are facing higher food prices caused by the prolonged drought. All types of grain, meat and nuts are in short supply and under price pressure and retail prices will inevitably move higher.

The threat is a massive jump in inflation.  All the pressure is leading to a wage breakout similar to that era in the 1980's when workers were changing jobs for a few dollars a week of additional pay. A bout of inflation may be the price we have to pay to restore a predictable work/pay cycle.