Australia is a low tax country, with increasing demands for government spending. There is bipartisan support for increasing spending in areas such as defence, healthcare and housing. At the same time, there are frequent calls to reduce the budget deficit. This can be achieved by increasing taxation.

Australia has a long history of taxing wealth lightly: it taxes capital gains concessionally, it does not have a wealth tax, nor does it have an inheritance tax. This paper identifies three simple tax reforms which would raise an extra $70 billion a year without hurting low or middle-income Australians.

Key findings

• A 2% wealth tax on people worth more than $5 million (excluding the family home and superannuation) would raise $41 billion per year.
• The reintroduction of an inheritance tax would not only reduce intergenerational inequality, it would raise $10 billion per year.
• The Australian Government would raise an extra $19 billion a year if it scrapped the capital gains tax discount.

The paper proposes three ways that the government could raise revenue by taxing wealth.

1. More comprehensive taxation of capital gains.
2. The introduction of an annual tax on wealth above a specified threshold.
3. The introduction of a wealth transfer tax, that is, taxes on transfers via bequests at death and gift duties.