Moreover, wages growth has been weak and workers are on the hook for a growing share of the tax burden, a trend that will worsen as the population ages and there are more demands for spending on aged care and health for retirees.
Put together, these trends favour lightly taxed, asset-rich senior Australians, including Baby Boomers, at the expense of younger wage earners.
I have been beating this drum on these pages for the past few years, so it’s of some comfort to have Macfarlane, 75, endorse a similar view.
In comments reported by my colleague Patrick Durkin, Macfarlane said: “The people who hold all the wealth are the older people – we don’t really tax wealth.
“The people who depend on income are the young people who have no wealth, and our tax system relies very largely on taxing income, so we have a problem going forward.
“I’m surprised that the younger generation aren’t actually squealing louder.”
Cheap money from the RBA has pumped up house prices to astronomical levels.
To be sure, lower interest rates may have supported the economy to generate jobs for younger people, but the trade-off has been more difficulty saving a deposit for a home.
Moreover, personal capital, such as housing and superannuation savings, are taxed relatively lightly, including discounted capital gains for investment property and shares, compared to full personal marginal rates for labour income.
We risk becoming a more class-driven society like the United States or United Kingdom.
“This has made this intergenerational inequality of wealth so much bigger,” Macfarlane said.
Moreover, state and local governments have exacerbated the housing affordability problem through slow zoning and planning approvals that limit the supply of land to build homes on.
The system gives too much say to incumbent home owners (“Not in my backyard”) who have a vested interest in restricting the supply of new homes to keep prices high.
Rather than dealing with the root problems, the federal Coalition and Labor are pouring in more taxpayer support for aspiring home buyers via policies that add to demand for housing and increase price pressures.
Two decades of first-home buyer grants have driven house prices higher.
The Coalition will underwrite lenders’ mortgage insurance for 50,000 modest income earners with a low deposit, while Labor is now offering to become a government equity partner in the homes of 10,000 prospective buyers.
While the intentions are noble to get more first-home buyers into the market, the government subsidies for a relative few will put upward pressure on prices for the many.
Moreover, the Coalition and Labor are encouraging lower income earners into the top of the housing market just as interest rates are rising and property prices are beginning to fall.
Some argue that the intergenerational wealth inequality will even out as children inherit wealth from their parents or call on the “bank of mum and dad” to get into the property market.
Yet, this fails to recognise that not everyone is fortunate to have parents who can provide for their adult children.
It impedes social mobility and entrenches intergenerational family class structures – the opposite of “fair go” Aussie egalitarianism.
We risk becoming a more class-driven society like the United States or United Kingdom, not so much on income distribution grounds, but on wealth division.
The election is exacerbating the intergenerational inequities and the fiscal burden being placed on workers.
The Morrison government – matched by Labor – will grant an extra 50,000 seniors, including self-funded retirees, access to $6.80 prescription medicines and other discounts via the Commonwealth Seniors Health Card.
The singles income test threshold for the card will increase from $57,761 to about $90,000, while the threshold for couples will increase from $92,416 to $144,000.
Do these higher-earning people, many of whom have enjoyed massive asset price appreciation, sound like they need an extra $70 million in subsidies when government debt is on track to hit $1.2 trillion?
Former Finance Department deputy secretary Stephen Bartos says he was “shocked” by the extra concessions.
It’s on top of other election concessions for pensioners and self-funded retirees.
Before whacking more on the debt bill of working taxpayers, retirees with the means to pay should be required to tap into their superannuation and home equity.
The fiscal crunch will be exacerbated by people living much longer and paying tax for a smaller share of their lives, while putting greater calls on the public purse for aged care and health care, which are often GST-free.
Amid entrenched budget deficits and debt, the fiscal burden will fall on a smaller share of working-age people.
The ratio of working-age people to those over 65 has fallen from 7.3 in 1975 to 4 today.
It is projected to fall to 2.7 over the next 40 years due to rising life expectancy and lower fertility, according to Treasury’s Intergenerational Report.
Senior Australians who retort, “but we paid tax all our working lives”, must learn that the above maths shows the decline in the working-age population makes it unsustainable.
We must all contribute a fair share during both our working lives and retirement.