Banks: too big to fail, too rich not to socially contribute

Progressive taxation is a near universally aspect of the tax system. Hence individuals on less than $37,000 pay income tax at 15 cents in dollar; those on $180,000 (happily – at least in most cases) pay 45 cents.

Yet banks, like all corporations, pay a flat 30 cents in dollar. There are some sound reasons for this. It encourages investment in business activities and keeps Australia internationally competitive.

None of these reasons apply to the banks. Their principle business base is locked into the local economy. Moreover, when it comes to making money banks occupy a privileged position.

They are nearly essential institutions, having permeated the life of every adult Australian. Most financial transactions – even welfare payments – now involve the banks, giving banks unprecedented capacity to charge fees, charges and interest on our money.

This is in contrast to mining companies, which are the other cash cows in the economy. The return on assets by many mining companies at present is much larger than the banks (about 7 to 1), but their market is far bigger (potentially the whole world) and their business involves enormous risks.

The banks have also benefited immeasurably from the government decision to guarantee bank deposits and thereby underwrite their existence - a decision which also weakened their competitors, increasing the concentration of loans from banks to record levels.

Fairness commands that the contribution of the banks to the society which has constructed economic and social conditions allowing them to make massive profits should exceed the flat rate of tax paid by your local hairdresser and butcher.

Banks should be taxed at least an additional 5% on profits exceeding one billion dollars. This would raise approximately one billion dollars per year.

The money should not go into general government revenue – it is too easily wasted. It is a situation where funds from the mega rich should be earmarked for the worst off in the community.

There are lots of contenders here. Hundreds of thousands of Australians on the Newstart allowance are forced to endure life on $234 a week (about $100 a week less than the pension); more than 100,000 Australians are homeless and nearly one third of Australia's 2.6 million carers are suffering depression - often due to inadequate government assistance.

Ideally, the bank tax should be spent on homes for homeless. It is a project that provides an essential need, the progress can be tangibly measured and can be readily adjusted according to the amount of tax derived annually. A billion dollars could build around 8,000 apartments.

The banks will of course counter that strong banks are essential for economic prosperity. While this is the case, better still is slightly less strong banks are more real people living under roofs.

The Labor government is still nursing wounds from the imposition of the mining tax and it will have a strong aversion to taking on any interest group. Yet on the criteria of popularity and principle, taxing banks to house the homeless is something that will hopefully resonate even with our PM's newfound mysterious intuition.

In the end, the banks hopefully won't even oppose the tax. In bank world one billion dollars is apparently the equivalent of about a measly dollar – and surely no one would squabble over the cost of a small bag of mixed lollies.