The National Press Club is one of those talking head clubs that usually espouse corporate propaganda from the head of some corporation. Every now and then they allow a ‘progressive’ to speak. A few weeks ago it was Zach Smith, the national secretary of the CFMEU. The gist of the speech was for a national ‘super profits’ tax that will raise billions to go toward social housing. I let out an audible sigh and tuned out.

The aim of the campaign is noble. It is to have more available social housing. The issue I have is that the problem is viewed as:

1. An issue with supply
2. The need to ‘fund’ the project(s) through capital capturing a greater and greater portion of productivity.(increased profits)
3. Taxation is needed to ‘fund’ the project

Housing stock

I looked up housing stock in the latest census data. As of June 2021 Australia as an approximate 10,852,208 private dwellings. Divide the housing stock by the population at the time and we have an average capacity of 2.37 people per dwelling. There are obvious issues such as location that need to be looked into further.

However, we can ascertain overall, it is pretty clear – Australia has a distribution problem! On housing census night we had an estimated 1,043,776 dwellings that were empty and 122,494 people were estimated to be experiencing homelessness.

We can start looking at the unfair tax incentives with housing that are there to enrich a relatively tiny amount of people. I would start by eliminating those unfair tax incentives for investors, changing banking regulations forcing banks to take the hit when a dwelling is sold at a loss, and then have the federal government purchase those dwellings. You would then develop a scheme that placed families in those homes. All that though is currently beyond the scope of policy makers as we have state capture by housing developers and our current economic framework espouses ‘market’ mechanisms for distribution as if ‘naturally’ everything reaches an equilibrium by finding the right price.

Super profits shouldn’t be a thing

My next point is the need to ‘fund’ a social housing project based on the taxation on ‘super’ profits. This is an argument that arose as gas companies in Australia started making massive profits as a result of the worldwide gas shortage caused by the Ukraine war.

The Australian government, rather pathetically, allowed these gas corporations to increase their exports as well as charge domestic users increased prices. Despite Australia generating more gas then we could ever use. A sound policy option would’ve been to set a price cap and reservation policy to ensure domestic prices didn’t rise. I would’ve allowed gas corporations to fulfil current long-term international contracts and ban exports at the world spot price in the interest of climate change. The federal government could’ve intervened and supplied any nations that were desperate. This would’ve meant there would be no ‘super’ profits to tax. The government could’ve then developed a plan to transition away from gas, assist other nations to do the same and have a plan to shut down the industry.

Any unionist, particularly a union secretary needs to understand increased profits are derived from corporations being able to exploit their power to gain a greater share of rising productivity while suppressing workers ability to gain any increase in the productivity improvements. The aim of taxing profits or ‘super’ profits as the profit share of national income rises means labour unions have lost that distributional conflict. This has been happening since the late 1970’s. (see 10+ year old chart chart below)

Profit from an accounting perspective profits can be distributed to capital via the governments deficit spending (which could also go towards workers) Playing into a framework that taxes are needed to spend and thus government budgets need balancing. Which means the non-government sector is unable to save overall. Capital is reliant on increased debt (banks making loans) to sustain consumers ability to purchase their own output (as wages are suppressed below productivity rises), and realise profits. Add to that the capitalist mode of production is environmentally unsustainable, a labour movement should be championing using our labour power and a governments currency issuing power for social purposes, eliminating the nonsense of needing to make financial returns for social goods and services.

Furthermore, the very idea we need the profits of an environmentally destructive activity to fund a social good still means rising emissions and a heating planet. Something we need to stop!

Taxes don’t fund anything

Finally, the idea of taxation funding a governments spending is a fallacy. Logically, the entity that holds a monopoly over the currency spends first, taxes (and voluntarily issues debt) after the fact it has spent. As I alluded to above, a labour movement should not be advancing the need for capital to increase profit share of national income so we can tax it before we invest in public purpose. It means

1. The labour movement has lost the conflict over national income.
2. It plays into a framework and uses language devised by what is now called ‘neoliberalism’ that was designed to limit government spending for social need.

By all means we need to tax the elite to limit their political influence and aim to stop them making income through economic rents. Economic rents or unearned income is a term that applies to income derived from the fact the recipient has not contributed to the production of a good or service. Things like share dividends, rental income, capital gains, inheritance etc… and a labour movement should be taxing those things at far higher rates than waged labour.

The Australian government has the ability to move resources, in this case labour, from private housing developers into a public entity that build homes for the working class. It already does through its defence housing program. It could begin employing labourers needed into a new department of housing and construction and build environmentally sustainable housing. It could then offer those homes to the working class at fair prices. However, those policy options are currently not considered under a framework that seeks to balance the governments fiscal position because of a fallacy budgets need to be balanced.

Conclusion

Zach Smith needs to learn to walk before he runs. A strategy of taxing away ‘super’ profit that contribute to rising emissions is idiocy. The aim is to stop the activity that contributes to the rise in emissions. That means avoiding market mechanisms and having our government legislate to cease that activity. The Australian labour movement also fails to understand the rising share of profits and declining share of wages means they are losing the distributional conflict over national income! They have failed to understand the dynamics that allow that to play out. There are two ‘strains’ to that – the laws that suppress workers unionising and bargaining, and the understanding of how the balance sheet of the government and non-government interact.

A labour movement should be advancing the democratisation of government spending and using it to harness our labour power for social purposes.

© Jengis 2023