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The Forum > Article Comments > Family tax benefits who? > Comments

Family tax benefits who? : Comments

By Mercurius Goldstein, published 3/10/2007

Family tax benefits are a wasteful merry-go-round out of and back into the pockets of middle-class families.

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You certainly provide some interesting numbers in the breakdown of how the government spends tax dollars. You've also identified an area of welfare that certainly has some question marks about how worthwhile it is. However I think there are a few flaws in your one dimensional analysis of the "tax payer".

Primarily you've divided tax payers based on their wealth, which is a key attribute in determining their 'need' for welfare. However you haven't considered the diversity of family makeup and dependency within the population. While it is true that the family tax benefits are cycled back into the middle class, they are essentially dollars transfered from childless singles and couples to those with children. Hence it being a 'family' tax benefit rather than a 'poor' tax benefit.

If we consider an example of a reduction in family welfare of $1 for each person in the country. With children being roughly 20% of the population, and family welfare being focused on children that would be roughly $5 per child, or $10 for a 2 child family. Using a rough 60% labour participation rate would mean no more than a $2 per tax payer saving, or about $4 less tax paid by a 2 child family assuming both parents are working.

The example doesn't consider large or single parent families, or the fact that tax reduction would likely be weighted more towards the wealthy rather than the typical family and yet shows how a reduction of family welfare would harm families. Of course it equally doesn't address the merit or effect of providing financial support or encouragement to 'produce' more babies.
Posted by Desipis, Wednesday, 3 October 2007 11:45:41 AM
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Thanks Merc.

We see welfare is the biggest ticket of all. If I may be political you can only say that John Howard has created more welfare recipients than any other government.

The problem is he has done it simply as part of his election strategy, not prioritising the people and groups in most need. As you've indicated it goes like this :

1. Tax everyone way too much, particularly using the GST and windfalls from the mining boom,

2. Give only some of it back, but not to the most needy (homeless get nothing). Rather give it to specific groups where margianl seats are likely to be affected,

3. Tell everyome that people earning under $X per annum pay no tax. This of course is BS as anyone who eats, sleeps or walks pays GST. The neediest pay the most there too, using income against outgoings as a %.

Welfare should be an integral part of any civilised society but Howard uses it to buy votes. Pork barreling.

I fail to understand why those on over $100,000 need any welfare at all. My own information is that people earning up to $140,000 per annum may and do receive some form of welfare. Why?

The $ figures that stagger me are the virtual lack of infrastructure expenditure and the "lost" money. The rainy day money.

No offence to the drought affected but if that money is for rainy days then it's pouring right now for many in our society. But those people don't affect marginal seats so they can get lost. According to Howard's strategy. And get lost they do.

Prediction for the election period, should he ever have the guts to call an election that is, will be assistance for those under mortgage pressure. Yep, all of us will subsidise mortgages for others for one reason. Howard failed to meet his promises about keeping interests rates at record lows. Even those homeless will subsidise those mortgagees as even homeless people pay GST.

How are you going to feel paying other people's mortgages as well as your own? It'll happen.
Posted by RobbyH, Wednesday, 3 October 2007 11:54:56 AM
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When referring to middle class beneficiaries, the author fails to note the income tests and the effects of this. Yes, it is possible for a family that earns over $100,000 to receive a small portion of family assistance. However, it is a very small amount (say maybe around $700/year per child, tapering off to zero), as opposed to the around $8000/year for those on family incomes of around $40,000 year. Assistance to higher income earners is also based on the number of children, as it is designed to help counter some of the cost of raising children, hence it tapers off as families become more financially able to support their own children fully.

On a family income of around $90,000, I get the base rate of family assistance - $22/week - it doesnt go far towards the costs of child raising, but its better than a kick in the teeth. What really surprised me though is that in my circumstances, if I dropped our family income back to $40,000 and made some minor adjustments to living habits, famliy assistance kicks in the the tune of having the same after-tax spending power, as I have with $90,000 (and having to pay childcare due to working fulltime - I am assuming here that only one of us would work fulltime). What's more I would be entitled to rent assistance to help with the costs of housing. That's a pretty big indication that the benefits ARE going to the poorer families, rather than the middle-class. And a damn good incentive to give work away for a while and bring the kids up myself!
Posted by Country Gal, Wednesday, 3 October 2007 1:32:47 PM
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Thank you for your information. I too am surprised at how little is spent on Indigenous welfare and also unemployment help. With regards to family payment of course families with children cover the full spectrum of wealth levels.
We are all in this messy tax business together. Taxes on goods and services increase the costs of these goods and services. If you are in a position to save then of course you escape all the taxes and are rewarded with tax exemptions and the like. Margaret
Posted by Margaret, Wednesday, 3 October 2007 2:14:57 PM
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I would hardly describe the FTB Part A as middle class welfare. My partner and I have 1 child (another due in Feb 08) and our combined income is just over $90k per year, split 45/55. We are not eligible for any FTB, but we get the base rate of Child Care Benefit (being about $16 per week for my sons two days in care - we still pay over $50 per day) and the 30% Child Care rebate you get in your tax return.

There are aspects of the system that I disagree with, such as FTB Part B - if one family has a $90k income split even 80/20 they wouldn't get it but if the family has a $90k income with one income earner they do (and also save on child care costs) - if they are a sole parent there is also the parenting payment available. I just don't see the point in FTB Part B. The savings from this could be moved to FTB Part A to reduce the taper and the effective marginal tax rates that families incur as they increase their income or find themselves in the situation that CountryGal is in.

Personally I or my partner could give up work to look after our kids - and what would the nett result to the government be... they would lose the $11k per year paid in tax, have to pay about $9k per year in FTB but save about $1-2k in child care benefit and rebates. The financial benefit that my family gets from both parents working, after tax, is far less than the benefit that the government gets from us both working. But then I doubt if we did that that we would be considered middle class.
Posted by Meelamay, Wednesday, 3 October 2007 3:26:40 PM
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Yeah, thanks for that info. Nicely summarised.

I have been concerned that when the next recession hits, there will be intense pressure on the money available for the "undeserving poor" (whom in past times of higher unemployment were probably second on the cost list) - so much so that they would have to increase taxes (making the recession worse) or reduce the amounts provided for such welfare (and cause immense social problems).

The "out" seems to be that we can just remove many family concessions and tranfer those amounts to the growing numbers of "undeserving poor". Whether in these times of electioneering irresponsibility, any government would be willing to do this is another question.

Love to see a similar report for the NSW State Government - I've been pondering why it is constantly broke, while at the same time it is more or less not providing any free services anymore (except what it puts into education and health). Love to be able to compare the difference between where money was spent in the last Liberal government and the present Labor government.
Posted by jimhaz, Wednesday, 3 October 2007 3:30:27 PM
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