Upper class welfare

Here’s the text of a letter of mine published in the Australian today.

In the last five years, Australia has enjoyed a windfall gain of nearly 50 per cent in its terms of trade. This has added tens of billions to the coffers of the Federal Budget. Here was a great opportunity to address Australia’s huge unmet needs in health, child development, education, training and infrastructure and to reduce the high effective marginal tax rates (poverty traps) faced by many low income Australians. Yet there are few results to show. Why is this?

A good deal of the answer lies in the Government’s lavish spending on upper-class welfare well illustrated on the front page of your newspaper “wealthy score tax windfall on super” (The Australian 6/9/06), which will cost over 7 billion dollars over four years. But it’s not just superannuation. Wherever you look – in child, maternity and family payments, capital gains concessions, the treatment of trusts, the uncapped negative gearing allowance, the health insurance rebate, First Home Owners grants, the fringe benefit tax treatment of cars, deductions for work-related expenses and the funding of well-endowed private schools – we find an explosion of upper class benefits. These concessions often add to complexity and narrow the tax base. Yet they are poorly targeted: the rich do not change their behaviour on saving, health insurance home-ownership; they just shuffle their money around. If anything, the concessions distort patterns of saving and spending.

Australia has all its priorities cocked up.

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Chris Lloyd
Chris Lloyd
15 years ago

The most outrageous but of middle class welfare was the baby bonus. It was announced in March effective from July. So all those babies conceived after September were eligible even though they were already conceived!

On of my colleagues was in this group and tried to explain to his daughter that the government were going to give them $2000 for her new baby sister.

“We’re going to give her away for that?” she asked.

“No!” replied Dad. “They give us $2000 and we can keep the baby.”

“Why would they do that?” she asked. From the mouths of babes.

Droo
Droo
15 years ago

Why do you say “Australia has all its priorities cocked up”? The person who has their priorities ‘all cocked up’ is the PM of course, since its he who has been making economic and financial decisions for the country for the last 5 years. I think you’re being very mealy-mouthed in an attempt not to criticise Howard, who is of course ultimately responsible for these ‘cocked up’ decisions.

Andrew Norton
Andrew Norton
15 years ago

Fred – I would agree with everything in your second paragraph, but draw from it that the state is too wasteful and incompetent to be trusted with much of what you suggest in your first paragraph.

Yobbo
Yobbo
15 years ago

Tax Cuts are not welfare. A tax cut is giving money back to the people who rightfully earned it. The health insurance rebate also falls under this category.

The baby bonus and home buyers grants are fair game though.

Amused
Amused
15 years ago

And what’s a tax free kick for those who have a lazy mill to toss into their super fund yobbo? Reward for risk? Give us a break!

Andrew Norton
Andrew Norton
15 years ago

From the Australian Election Survey 2004, evidence that the public is evenly divided between Argyian optimism and Nortonian pessimism about taxing and spending.

Literal Question
D.13. If you had to choose, which of the following would be closest to your views? – Cutting my income tax would mean the government has less money to waste on spending that doesn’t benefit me – 1 – Cutting my income tax would mean the government has less money to spend on public services I really need – 2
Values Categories N
1 Less $ to waste on spending that doesn’t benefit me 804 50.8%

2 Less $ to spend on public services I really need 778 49.2%

-1 Missing 187

Summary statistics

taust
taust
15 years ago

Re the Andrew Norton statistics. It looks as though if we made access to public services voluntary ie a reduced tax if you opted out both sides could get what they wanted.

Nicholas Gruen
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Nicholas Gruen(@nicholas-gruen)
15 years ago

Can you opt out of spending on public goods like police, and defence? ;)

Ken Parish
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Ken Parish(@ken-parish)
15 years ago

Or prisons, the court system, regulatory departments ensuring clean air, water, environmental protection etc etc, and therefore the tax office bureaucracy that collects the revenue to fund those public goods, and the democratic elective machinery that ensures their accountability (however imperfectly). You can’t effectively opt out of any of these things, in the sense of having arrangements made so that you don’t obtain benefit from those services if you don’t pay for them. And they’re all in essence natural monopolies (although I suppose you could have competing armies and police forces – like in Somalia and Afghanistan, for instance). Moreover, the opt-out principle doesn’t even make sense for some things that are in a sense “user pays”-based. For example, do we want people living in densely packed suburbia to be entitled to opt out of connection to the sewer so they can exercise their inalienable libertarian right to save money by shitting in their backyards thereby attracting flies and polluting the water-table and local runoff?

Amused
Amused
15 years ago

Sure we do Ken,
Because those of us who have responsibly husbanded our natural human capital (value added by subsidies from the great unwashed) can pay some low skilled, feckless psychologically maladjusted misfit, aka the usual suspect, a bit of pocket money to clean up our S**T! They can take it home and go through it to pick out undigested morsals and eat them! Simple really. You simply lack the moral rectitude (if I may be so bold) to fully comprehend what a beautiful set of numbers can be produced with the Right approach!

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[…] Fred Argy reckons that Australia has too much “upper class welfare”. […]

Private: Upper-class welfare

In the last five years, Australia has enjoyed a windfall gain of nearly 50 per cent in its terms of trade. This has added tens of billions to the coffers of the Federal Budget. Here was a great opportunity to address Australia’s huge unmet needs in health, child development, education, training and infrastructure and to reduce the high effective marginal tax rates (poverty traps) faced by many low income Australians. Yet there are few results to show. Why is this?

A good deal of the answer lies in the Government’s lavish spending on upper-class welfare well illustrated on the front page of your newspaper “wealthy score tax windfall on super” (The Australian 6/9/06), which will cost over 7 billion dollars over four years. But it’s not just superannuation. Wherever you look – in child, maternity and family payments, capital gains concessions, the treatment of trusts, the uncapped negative gearing allowance, the health insurance rebate, First Home Owners grants, the fringe benefit tax treatment of cars, deductions for work-related expenses and the funding of well-endowed private schools – we find an explosion of upper class benefits. These concessions often add to complexity and narrow the tax base. Yet they are poorly targeted: the rich do not change their behaviour on saving, health insurance home-ownership; they just shuffle their money around. If anything, the concessions distort patterns of saving and spending.

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