February 16th 2013


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Articles from this issue:

FREE SPEECH: Feel free to insult me!

CANBERRA OBSERVED: Gillard re-election strategy turns to mud

EDITORIAL: Why Julia Gillard faces winter of discontent

NATIONAL AFFAIRS: NCC national conference looks to federal election

FAMILY I: Is family tax relief 'middle-class welfare'?

FAMILY II: World Congress of Families, Sydney (May 15-18)

ECONOMIC AFFAIRS: Currency war unleashes new world disorder

JAPAN: Japan's policy U-turn to reverse 20-year decline

SOUTH-EAST ASIA: Winds of change sweep South-East Asia

UNITED KINGDOM: Gay indoctrination now mandatory for British schools

SCHOOLS: Time for parents to brush up on education gobbledegook

LETTERS

CINEMA: Romantic comedy looks at mental illness

BOOK REVIEW The women who brought peace to Liberia

BOOK REVIEW Defending traditional marriage against the revisionists

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FAMILY I:
Is family tax relief 'middle-class welfare'?


by Angela Shanahan

News Weekly, February 16, 2013

The Australian newspaper has often published diatribes against “middle-class welfare”, especially from its regular commentators, George Megalogenis, Judith Sloane and various employees of the Institute of Public Affairs (IPA).

Many regular readers will no doubt find themselves in agreement with these commentators’ characterisation of “middle-class welfare”, nodding and muttering all the way through.

“Why should childless people pay for other people’s children?” they exclaim. “Why should people be given a Baby Bonus, and virtually be ‘paid’ to have children? Why should the government pay for women’s maternity leave?”

And then, spluttering and red-faced, they snort: “What about those lay-about mothers paid to do nothing through the welfare system with Family Tax Benefit Part B?” And then there is Medicare and the now means-tested medical insurance rebate, “Why should rich families get that? (Of course, their kids are always getting sick, and we young fit singles never do...!)”.

As you can see, more than one ideology can apply here.

The argument about family economic support boils down to which of the following philosophical positions you accept: (a) that society is made up of families, or (b) that society is made up simply of individuals.

I am a supporter the former position, especially since we live in a ruthlessly individualist public milieu. Families need to be protected as the basic economic and social building block.

The nuclear family is the number one welfare institution — and, remember, you can’t have an extended family without a nuclear one. And, also remember, the economy and the state do not exist for themselves — it’s the family that makes up both the economy and the state.

Family policy must respond to current conditions, such as the presence of more mothers in paid employment and the need for workplace flexibility.

Demographers have noticed that in societies where women have the opportunity to do paid work, in a flexible way, the birth rate is more stable. The key here is choice and flexibility. That is because when incomes dwindle, families tend to limit the number of children. However, at the same time, interestingly, the women who provide the bulk of the nation’s children (i.e., three or more), tend not to be in paid work when their children are all young.

It is a curious fact that although the Australian birth rate plummeted when the contraceptive pill came in the 1960s, there was another big dive in the birth rate in the late ’70s. This coincided with the family being taken out of the income tax equation — and before the family-friendly workplace was invented.

One stupid mistake

Most commentators usually ignore an important period of recent history because it puts a completely different slant on the picture of so-called middle-class welfare.

As far as the family is concerned, until 1979-80 Australia had a very equitable tax system. There was acknowledgment within the income tax system that family income had to provide for a family, i.e., a group of people, not just one person.

However, ironically, during the time of Malcolm Fraser’s Coalition government, initially under his first Treasurer Philip Lynch, then under Lynch’s successor John Howard, all tax deductions for children were removed from the tax system and replaced by a cash payment, the Family Allowance. This was administered by the Department of Social Security. Thence it became a welfare payment. So, suddenly, everything the family had previously been entitled to as a deduction from their income tax became “welfare”.

Thus the previous implicit acknowledgement of income distribution within a family through the tax system was now transformed into middle-class welfare.

Later, this morphing into welfare allowed Labor’s Paul Keating to means-test family benefits. Because of this, more and more payments have had to be introduced and juggled with means-testing, simply in order to make up for this one stupid mistake.

Skewed benefits

No family can afford to rely on a single income anymore, even when, as all the ABS surveys of preferences show, they want to be. Hence, even today, few Australian mothers have full-time paid jobs, and most mums returning to home duties with a baby have fewer than 20 hours a week of paid employment.

However, the only non-means-tested benefit, the childcare tax rebate, is now confined to mothers in paid employment

So while parents as individual paid workers are recognised in the tax transfer system, and we have a non-means-tested childcare tax rebate for that reason, the family per se is not. The single-income family is now virtually unrecognised by the state.

Mothers who do not work for money are considered “unproductive”; the mere raising and having of children being relegated to a sort of pleasant — and expensive — private hobby.

One of the unfortunate spin-offs is that the care of children by their own families is being undermined, so much so that the childcare industry feels entitled to have the government support it directly by subsidising the new round of wage increases.

Meanwhile, there is no recognition in our tax system that a family’s single income is meant to support more than one person. Despite all the “working family” or “strong modern family” rhetoric (meaning mothers in paid work), this is really the triumph of arid economic individualism.

Labor’s record

Despite the blah about fairness and labour values, and of course women’s rights, the Labor government has a history of discrimination against its most natural constituent: the struggling single-income family with an unpaid mother. Look at the record.

• First, Family Tax Benefit Part B, introduced for the mother at home, was means-tested.

• Then the Baby Bonus was both means-tested and cut for second and third children.

• To cap off the government’s record, the betrayal of its really struggling base, one-parent families, is a disgrace. Struggling mothers are soon to be shoved onto the dole as soon as the youngest turns eight, and are to be treated like the great Australian bête noire, the dole-bludger.

So what is the agenda behind this apparent craziness? It has always been the same. Force more women into paid employment when their children are young by skewing all family benefits towards working women who put their children in institutional childcare.

That is why the Labor government that trumpeted “working families” has steadily cut the benefits paid to single-income, stay-at-home-mum families, while leaving untouched — not even means-tested — the childcare tax benefits enjoyed by two-income families who outsource their children’s care. And, of course, that non-means-tested “tax benefit” is considered a right, whereas what mothers who stay at home receive is a “handout”.

Even more gobsmacking is that the government has actually considered directly subsidising the private childcare industry to the tune of $1.4bn by topping up wage increases for childcare workers. It is madness.

Overall, families who have a mother doing unpaid work at home get only half the support of those who send their kids to childcare. According to some unusually fascinating research compiled using budget papers in 2010, and updated last year for the Australian Family Association, there is a clear ratio difference in total income support for families who outsource childcare and families who don’t of nearly 2:1.

So the system is not helping families in a truly flexible way which would allow for a mother’s periodic withdrawal from the paid workforce, especially to care for a second or third child.

Coalition’s response

However, despite all this and the Labor government’s political weakness, the Coalition opposition has only got one family policy, and that is a paid maternity-leave scheme.

As for Abbott claiming a convert’s zeal to paid parental leave, that is fine; but he should be very wary of falling into an ideological trap by emphasising a dichotomy of the mothers’ lot in paid work versus those who are not. That is passé. The same mothers who stay home, often for long periods when their children are very young, will also want to enter the paid workforce later.

In other words, we are not talking about two classes of mothers, either working or non-working. We are talking about the same mothers, who over time do different things.

What is to be done?

Meanwhile, almost everyone agrees on one thing — that the current system of so-called middle-class welfare is broken. It is too costly and it isn’t really helping the people it is meant to help.

Acknowledging the family in the tax system isn’t just another freebie or handout. It is basic justice.

Fourteen OECD countries have family-based taxation. The most generous, notably the French, allow families for tax purposes to split their incomes into units for every dependant. Less generous and simpler are systems, such as America’s, which in a limited way allow a form of optional income-splitting by permitting joint tax returns.

Under the Howard government, Abbott tried to get income-splitting up — more than once. The Treasurer Peter Costello, however, thought it would affect revenue too much.

Whether this is still true, with today’s excessive churning and payments for childcare blowing out, is a moot point. If the welfare system was pared back and targeted towards those who really needed it, it might still be possible to afford income-splitting. Abbott is still attracted to the idea.

What I am suggesting is a radical policy of tax and social security reform which would involve abolishing the current inequitable family payments system altogether, and putting as much as possible back into the income tax equation by a form of income-splitting.

A single family payment would be needed to top up the lower-income thresholds, and we should maintain means-tested support for flexible childcare for the less well-off by expanding the current social security-administered childcare benefit. (This is not the childcare tax rebate; it is a means-tested existing benefit.)

Only by this radical means can we cut the Gordian knot of complexity that has led to our current inequitable situation. The election year should see the resurrection of a philosophical debate on the family as the central social and economic unit, and new practical policies to address this through radical taxation reform.

Mrs Angela Shanahan is a regular opinion columnist with The Australian and a mother of nine. This article is an extract from a speech she delivered to the National Civic Council’s recent national conference in Melbourne. The complete version of her talk is available from News Weekly on request.




























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