Super Down Under

Australia goes “Full Retard” on super taxes

“The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin.”

~ Attributed to Samuel Langhorne Clemens, aka Mark Twain

Joel Bowman With today’s Note From the End of the World: Syros, Greece...

Some Notes we bring you with a cheery delight... others with a heavy heart. On Tuesday, it was the former (read “Liberty Advances” here). Today, it’s the latter.

News from another End of the World, your editor’s own country of birth, confirms our suspicion that deep thinking is no longer in vogue. In fact, even shallow thinking appears to have dried up in Australia, the self-styled “Lucky Country.” (More on that misguided moniker, anon...)

Having previously disgraced itself with world-beating covid hysteria, it seems the Australian government has decided to go “full retard” with its latest plan: to tax unrealized gains on citizens’ retirement funds (known Down Under as “superannuation”... or simply, in classic Aussie lingo, “super.”)

A brief explanation...

Death and Taxes

Since the dawn of time, rapacious politicians the world over have sought to tax everything under – and sometimes even including! – the sun. The very phrase “daylight robbery” originated from the English Window Tax of the late 17th and 18th centuries, by which taxes were levied based on the number of windows in a home. Naturally, self-respecting Brits began bricking up their windows, recognizing that their government had literally robbed them of daylight.

Most decent-minded people find such state-sponsored theft repugnant. But lo! Now the venomous vermin known as Politicus Australianus has found a novel way to bleed the nation’s hard-working citizens even more, by taking their very real pound of flesh not only from the material world... but from the realm of imaginary profits, too!

Yes, you read that correctly.

Not content with merely taxing earnings on gains that have been realized (i.e., that actually exist… as in, “are part of reality”) the shameless swindlers in Canberra have now trained their beady eyes on taxing future, as yet unrealized gains, too. (“Unrealized,” as in... “do not exist in the real world.”)

Here’s fellow Substacker,

Quoth the Raven

, with a characteristically wry description:

This isn’t just bending the rules of how taxation and private property works—it’s snapping them clean in half and using the pieces to beat your rights to death. For as long as economies have existed, the deal was simple: you sell an asset, you make a profit, and then you pay tax. You know, after you’ve actually made money. Because taxing cash that doesn’t exist yet is the kind of thing you expect from crackheads playing Monopoly, not national policy.

But here we are. Australia is now sprinting headfirst toward a future where you get billed for wealth that isn’t liquid, isn’t realized, and, if the market tanks tomorrow, might never even exist. It’s like being forced to pay income tax on the raise your boss almost gave you but didn’t, or footing the bill for the lottery jackpot on the billboard on the side of I-95 that you didn’t win.

In classic “eat the rich” rhetoric, weak-kneed apologists for the new tax grab – due to kick prudent savers in the Down Unders on July 1 of this year – argue that it only applies to super funds over $3 million. It’s merely a tax on “rich people,” they slavishly opine, citing the fact that the tax, as it stands, will impact “just” 0.5% of the population.

This brand of lame sophistry, in which envy dictates that “rich” is somehow synonymous with “greedy,” reminds us of Thomas Sowell’s old line:

“I have never understood why it is greed to want to keep the money you have earned but not greed to want to take somebody else's money.”

Despicable Them

Leaving aside the despicable notion that stealing is fine, so long as it is from people who have an “enviable” amount of money (regardless of how they made it), such an argument conveniently ignores the fact that the new super tax is not indexed to inflation.

Astute readers are doing the calculations in their convulsing craniums already...

The ruse is simple. As the value of the Aussie dollar continues to erode, thanks to the Reserve Bank of Australia’s stated commitment to “achieving” annual inflation (read: controlled currency debasement) of between 2-3%, more and more people will inevitably be corralled into the tax pen, marched down the chute and into the bloody abattoir each and every year.

Diana Mousina, deputy chief economist at Australian financial services giant, AMP, calculated that, without indexation, today’s 22-year-old Aussie worker, who earns no more than an average wage during their career, will breach the $3m by the time they retire. That gives you some idea how much less $3M will be “worth” a generation from now.

Today, it’s “eat the rich.” Tomorrow, it’s “eat the middle class.” And from there, it’s gorging governments on the road to serfdom...

And that’s provided inflation stays within the RBA’s stated bounds (it topped 7% during the great covid panic) and that the government doesn’t crash the economy by doing something schoo-pid like, say, taxing unrealized gains, manufacturing a liquidity crisis and spooking the markets... which then “requires” them to “step in and do something,” invariably code for “print more money.”

On that front, The Australian Financial Review is right in calling the onerous tax an “intrusion into the nation’s retirement funds to paper over the government’s runaway spending.”

As to why Australian politicians would want to go after retirees’ superannuation accounts? Good question! Dear readers are kindly directed to Willie Sutton’s response when asked why the notorious thief robbed banks:

“Because that's where the money is.”

Nor is inflation the only moving “footy” (goal) post. As a result of the recent federal elections in Australia, in which voters voluntarily returned this very government to power, the Australian Green Party (commonly known as Watermelons on account of their being commie red on the inside and environ-mentalist green on the outside) now holds the balance of power in the Senate. To the shock of none, The Greens have already indicated their appetite for lowering the $3M threshold to $2M.

The following chart, from AMP’s Mousina, shows when the average 22 year old worker will breach each of the thresholds – Labour’s and The Green’s – during their working life.

(Source: AMP)

The Aussie Canary

It is perhaps worth pointing out that no other major economy on the planet taxes unrealized gains in this fashion... though you can bet political parasites in capital cities around the world are watching closely, to see whether their bloodsucking kin in Canberra manage to get away with such an audacious highway heist.

Like similar “full retard” tax policies on unrealized gains that were tried – and mercifully abandoned, following their abject failure – in Europe back in the ‘70s and 80s, the Australian government’s grand larceny is likely to precipitate a whole raft of unintended consequences.

An industry research paper published by Wilson Asset Management this month addresses “the significant negative impact of this tax on profits you may never realise, and the effect it will have on the behaviour of the $4.2 trillion pool of superannuation assets in Australia, particularly the $1.1 trillion in self-managed super funds.”

The firm, which manages the retirement accounts of 130,000 Australians, underscores significant unintended consequences for the government’s “illogical and unfair” policy, including:

• negative economic impact

• loss of risk capital

• negative impact on farmers and small businesses

• capital flight

• capital flow to housing

• forced assets sales

• lack of indexation disadvantaging future generations

• increased emigration

And they’re just the “known unknowns.” Prominent financial commentator, Dimitri Burshtein, was less sparing in his remarks regarding the policy:

“It's a horrible tax. It's designed badly, it breaches transparency. The fact that it can be charged on unrealised gains is just despicable. It lays a template to go after the home, any assets, it's essentially a wealth tax.”

Unfair Dinkum

Fair-minded Aussies are fond of employing the playful moniker, “The Lucky Country,” to describe their fine shores, but too few know that it derives from Donald Horne’s 1964 book of the same name. The full quote actually runs...

“Australia is a lucky country run mainly by second rate people who share its luck. It lives on other people's ideas, and, although its ordinary people are adaptable, most of its leaders (in all fields) so lack curiosity about the events that surround them that they are often taken by surprise.”

While it is true that ordinary Aussies are, by and large, a hardy and adaptable people... labeling the country’s political leaders “second rate” would be a charitable description indeed. The “Lucky Country” is certainly blessed, as the anthem has it, with “golden soil and wealth for toil,” a land that “abounds in nature's gifts, of beauty, rich and rare,” but the parasites in Canberra are seventh- or even eighth-rate mammals only on their very finest day.

One hopes that honest, hard working Aussies come to realize they are not rich because of their government, but despite it. Then, and only then, will they truly be ready to advance Australia fair.

Stay tuned for more Notes From the End of the World...

Cheers,

Joel Bowman

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