Australia’s wealth gap is widening, and despite promises from politicians, it seems like the issue of inequality might only get worse if we don’t change the way we tax capital. It’s a tough conversation, especially when it comes to taxing inheritances and the rich, but it’s one that’s long overdue. So, why should we focus on taxing wealth rather than income? And how can we make sure the rich don’t keep getting richer while the rest of us keep struggling?
The Growing Divide and the Need to Address Inequality
It’s no secret that income inequality is growing, but what’s more alarming is the shift that’s been happening in the economy. Over the last 50 years, the portion of wealth going to labour—basically, wages—has dropped significantly, while profits from capital (like company earnings and investments) have soared. In 1975, labour took up 62% of the economy, but by 2025, it will be closer to 54%, reports ABC News. This change is only set to get more extreme as AI and automation replace even more jobs that once belonged to humans.
The problem? Capital is not taxed enough in Australia. You see, wages are taxed heavily—no surprises there—but capital gains (profits from investments, property, etc.) get the golden treatment. The result is a wealthier class that isn’t contributing fairly to the country’s finances, while everyday Australians are left struggling to keep up with the rising cost of living. If the government hopes to close this gap, taxing capital more is the answer.
Why We Need to Tax Inheritances and Capital More
One way to tackle this growing inequality is by reintroducing inheritance taxes. Australia used to have an inheritance tax up until 1975, but it was abolished during a period of state competition to attract wealthy retirees. Fast forward to today, and it’s clear that the wealthy are passing on fortunes to their children without contributing their fair share in taxes. Meanwhile, many people struggle to get by, with wages not keeping pace with inflation or rising living costs.
Of course, this isn’t a simple fix. Proposals to increase taxes on capital gains or reintroduce inheritance taxes have faced fierce opposition, particularly from wealthy lobby groups and some politicians. But the fact remains that these taxes are necessary to reduce the wealth gap, fund vital public services, and help future generations get ahead.
The Future of Australia’s Tax System
As we move toward a future where robots and AI do more of the work, it’s becoming clear that Australia’s tax system needs to evolve. The rich are benefiting from lower taxes on capital, while the rest of us shoulder the burden of financing government programs. With a $40 billion structural deficit already looming, increasing taxes on wealth—not just labour—is crucial for a more sustainable and fair economic future.
So, what can be done now? Well, the government must take action on taxing the wealthy more, not less. This includes reconsidering policies like capital gains tax discounts and estate tax cuts, which disproportionately benefit the wealthiest Australians. It’s about creating a more equitable system where those who have the most contribute their fair share. Only then will we start to tackle the generational inequality that’s become entrenched in Australian society.
