May 2nd 2020


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Articles from this issue:

COVER STORY Gearing up to ditch free-trade policy

EDITORIAL Post-covid19, create a national development bank

CANBERRA OBSERVED Keelty water report misses the point on water shortage

ENERGY Pandemic has exposed our overreliance on imports

CARDINAL PELL Locating the golden thread

CARDINAL PELL High Court practically shouts 'not guilty'

FAMILY Dismantling myths around family tax benefits

REFLECTION Covid19 and the Church past, present and future

OBITUARY R.I.P. Bruce Dawe: poet of the people

FOREIGN AFFAIRS Doctors of WHO let the covid19 dogs out

INDUSTRY POLICY The rise and fall of Australian manufacturing and covid19

ASIAN AFFAIRS Politics done by stealth in the UN: China and the WHO

HUMOUR Get them hug-dealers off the streets

MUSIC Farewell to an Aussie jazz legend: Don Burrows

LOCKDOWN TV CLASSIC Unique, unsurpassed: The Avengers

BOOK REVIEW ENTIRE GENERATIONS ALONE

BOOK REVIEW WARNING TO THE WEST

POETRY

LETTERS

NATIONAL AFFAIRS Crucial to get Virgin Australia flying again

Books promotion page
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FAMILY
Dismantling myths around family tax benefits


by Staff Writer

News Weekly, May 2, 2020

The family is the linchpin of society, both economically and socially.

William Bennett, former United States secretary of education

Prime Minister Scott Morrison’s announcement of a stimulus package of $750 for eligible Australians has been met with criticism – most vocal is the cry that “dole bludgers” do not deserve another handout.

“What about the people who actually work hard?” “Why give it to people who will spend it on cheap goods and not invest in Australian businesses?” are a sample of the comments garnered.

The popular narrative is that anyone receiving Family Tax Benefits A&B is receiving welfare. But are they really?

Let’s imagine there’s a family, the Browns. They have three pre-school-aged children, all of whom require an output of funds in the form of food, electricity use, clothes and activities.

Their parents receive an income of $90,000 a year – all earned by Mrs Brown, with Mr Brown acting as stay-at-home parent.

According to the calculations prepared by the Australian Tax Office, Mrs Brown has an after-tax income of $69,203. Mr Brown and Mrs Brown then use this to feed, clothe and raise their young family. This equates to $13,840 a year per family member.

This means that the Browns currently contribute $20,797 a year in income tax, not to mention up to $5,000 in GST, and more in fuel and other taxes.

Therefore, to redress this imbalance, and to acknowledge the great investment the Browns are making to the country by way of raising three future citizens and taxpayers, the government gives them back some of their money in the form of Family Tax Benefit Part A & Part B.

 

FAMILY TAX BENEFIT

PART A: Paid per child per fortnight. Base rate $59.78 (dependent on various factors)

PART B: Paid per family. $158.34 per fortnight (dependent on age of youngest child)

 

Part A is meant to assist families with the general expenses of raising a child. That’s why it is given per child – since the more children you have, the more expensive it is.

Part B is designed to assist families where one parent stays home full or part time to raise pre-school-aged children. That’s why it goes down once the youngest child reaches school age.

The word “benefit” here is misleading. It conjures up families sitting around doing nothing, waiting for a government handout, whereas it is just the opposite: families in greater need have less ability to pay income tax, so the “tax benefit” is really an income-tax corrective measure introduced some 20 years ago to make up for the unfair income tax.

You would think it would be simpler just to let the Browns keep that money, so they could spend it directly on the grocery bill. But governments are not known for their ability to cut bureaucracy.

Let’s change the narrative, and instead see that those who are contributing to the country deserve to pay less tax – because the tax they get to keep is still being directly invested into the country by way of their children. Probably more productively than any government could.

As Thomas Jefferson said: “I predict future happiness for Americans [or, indeed, Australians?] if they can prevent the government from wasting the labours of the people under the pretence of taking care of them.”

The new narrative calls for a focus on the distribution of wealth away from individuals to families – the building blocks of a thriving society.

It’s rather like a tax return. At tax time, the Tax Office calculates how much tax you’ve paid, and then determines whether you have under or overpaid according to your income and, in some cases, your expenses.

If you’ve overpaid, the balance is returned to you in the form of a tax rebate. We don’t hear many people complaining about this – nobody calls this “welfare”. Indeed, the complaint is that every person receives a smaller tax return than they deserve, and that indeed the ATO should leave people alone altogether.

Of course, the claim could be made that the Family Tax Benefit is welfare, since it is only “given” (or rather, returned), to certain people. But the same is done for all tax returns. The more you earn, proportionally, the less you receive back after tax.

FAMILY: A LUXURY OR AN ESSENTIAL?

We should make the case here for families receiving back more of their income. Who will more wisely spend their income, whether it is a large or small amount, than families busy raising children?

The insistence that children are a personal luxury that should not be “subsidised” points to a wider cultural problem where children are seen as personal luxuries – perhaps even a selfish indulgence – that “people should pay for themselves”.

In reality, economists agree that those children, who will grow up to be future taxpayers and workers, are the very best investment in the future of the country.

Plus, we’ve seen that families on higher incomes are less prone to societal ills such as school dropout, health problems and academic underperformance. Healthy, happy families are less likely to require the myriad of government-funded services that seek to remedy these problems.

And this is even before considering the billions of dollars (estimated $8.6 billion for the 2019–20 financial year) given to child care and other services directly from the taxpayers’ pocket (once again something you don’t hear many people complain about). If families could care for their own children, there would be many savings here, even when only the raw dollar is considered.

So, if a government wants to inject money into the economy, it is both wise and compassionate to give it to individuals and families who are most in need, and who will most wisely invest it in the form of their growing children (and even their other vulnerable family members – where are tax breaks for those who invest their time in caring for elderly family members?)

The argument could be made that this payment should be made to every Australian, regardless of their income. While this would certainly assist the economy (provided that it was spent and not saved), Treasury may not be so keen to face this even greater monetary imbalance.

A “gift” from the government can also carry with it unpalatable conditions. By way of example, in April 2015, the Turnbull government announced that families who did not follow federally mandated vaccination requirements would lose their Part A portion. In this way, the benefit is not only marketed as welfare, but as a bribe for you to raise your family according to the government’s dictates.

There is a whole other discussion when we come to higher-income families – those who may not be eligible for Family Tax Benefits at all, and indeed contribute a large portion of their income to tax benefits for their poorer neighbours. But that’s a discussion for another day. Today, we are focusing on those lower-income families who are receiving ScoMo’s handout.

The question can be raised: why should families keep more of their own money? What about the myriad of expenses the Government has? How else to balance the budget?

It behoves us to consider the many programs and schemes into which the Government currently pours taxpayer funds – the demand for which would substantially decrease once more families were able to undertake their care at home.

Consider our elderly. With both partners out of the home during the day, who is going to care for Grandma? This leads to the necessity for government-subsidised aged care, another sizable expense – and one that is riddled with risk and lower-level care as is illustrated by the Royal Commission into Aged Care Quality and Safety.

It is impossible to have strong social capital if there is no flexibility in the home for people who are stuck going to work each day.

So, rather than hitting up the “dole bludgers”, perhaps it is time to consider how we can further empower families to have their own cared for by the most suitable people – themselves.




























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