Mercurius,

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.

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.

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!

Mercurius,
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

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.

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.

Jimhaz, dont forget that these family concessions that you are so happy to axe mostly go to the "undeserving poor", who get the full rate of these benefits. As I said, some go to what may be characterised as the lower middle-class, but the amounts are quite nominal. By far the most goes to the low income or no income earners.

The FTB Part B is a replacement of the dependant spouse rebate (in situations where there are children involved). It seeks to provide some parity in taxation rates. Eg a couple earning $90,000 between them say 50/50, pays tax at a marginal rate of 31.5% (taking medicare levy into account). A couple earning $90,000, but with only one income earner, pays tax at the rate of 41.5%. And also doesnt get the benefit of 2 tax-free thresholds. So this was designed to try to bring some level of fairness into the equation, and not to penalise couples based on their relative earnings powers.

The article itself has some scary numbers in it, but it is the reaction of the posters that is even more interesting. It says much about the phenomenon of familiarity that nobody actually questions whether it makes any sense, in 2007, to have "Family Benefits" of any kind.

If we didn't already have "Family Benefits", would any political party propose them?

What is the intention here? Is it to alleviate financial hardship? If so, surely it could be incorporated into programmes that have this goal as their primary intent? In other words, focus on governing the amount of support provided, but only after the need for support is established. To simply say "here, have some more cash" to people who are already earning $90k seems just a little cavalier.

Or is the intention to encourage Australians to have larger families? That would be a different kind of policy to take to the electorate, and would be just that much harder to justify.

Or is it simply another pork barrel? In which case there will be absolutely no questioning the legitimacy of the hand-out, only on the amount that is sprayed around. There is no chance of review, on the basis that only a mug politician would be so blatant in taking money back, that had already been so visibly given...

This policy mirrors the Blair/Brown conspiracy in the UK, which has increased the number of people who qualify for "government money" (i.e. their own money, recycled through the maw of the bureaucracy) to the majority of the population.

The list includes "people on a low income (employed or looking for work), people who have dependent children, people who are sick or disabled, people who are caring for someone else, people who are aged 60 or over, people who have been bereaved, and those who are pregnant or have recently had a baby." (From direct.gov.uk web site).

For a list from just one department, Workplace and Pensions, go to http://www.dwp.gov.uk/lifeevent/benefits/atoz.asp It's mind-boggling.

Once you have created enough dependents, you don't have to worry about silly things like elections any more.

I would ask "middle class welfare" recipients to have a look around themselves and see how big a house with how many rooms, how many cars, how many stainless steel pidgeon pair fridge/freezers and home theatre systems with 6 foot plasma tellys they really need.

It's beginning to sicken the rest of Australia, hence the unabashed swing to Labour. Even the middle class themselves are becoming embarrased about their own handouts! Amazing!

If you can't raise a two child family on $100,000.00 a year you're spending way too much on things that have nothing to do with raising a family. It's called "sacrifice". They're your children, you had 'em, you look after 'em.

Massage the figures anyway you want, there are far more deserving causes in this country than "The Middle Class".

It seems to me that the term "middle class welfare" is a pejorative term applied to things you don't like. I had a great reaction from some leftie friends when I asserted that subsidies to the arts, particularly to the ABC, was middle class welfare.

On this basis I would dispute that items such as the baby bonus is middle class welfare. What it is is an incentive. The idea is that the bonus will encourage more people to have children, and the government obviously thinks that it is a good idea for people to have more children. If you don't have any children, you don't get any bonus.

Similar subsidies relating to private medical insurance, private education, superannuation, and anything else that you only receive if you take the action desired by the government, are also not welfare, but incentives. It is not a matter of whether anyone needs them, it is a question whether the subsidy will encourage them to take the action desired.

Its interesting to go back to some of the reasons behind policies and incentives/welfare to examine that the original intention was, and how that has been corrupted over time. The baby bonus was originally intended at encouraging higher income-earning mothers to take a career break to have a child (it only used to apply to the first child, so hence wasnt a "larger family" policy). It was scaled according to the income of the mother (or could be transferred to the father if he ws the main carer), so to refund the tax paid in the year before maternity leave, over a 5 year period. Everyone got the minimum of $500 a year, unless they started earning more than they did originally, but the higher income earners got up to $2500/year for 5 years. It was an equality of opportunity-type policy, so that women who had built a career and were hence earning higher incomes, didnt have to choose between kids and career. Then the yelling fits started about why we target assistance to relatively high income earners and not the poor, and why only for the first child, and why should it matter whether you go back to work or not. So now its been transformed into the baby bonus for each child, available to all. And it no longer bears any resemblance to the tax paid previously by the individual recipient. What started off as a policy about equality of choice has been corrupted into something that is easily attacked as an expansionist policy (and the government has not helped by portraying it that way). Similar would be able to be demonstrated for other such "welfare" policies (the childcare rebate is another very similar example of an equality policy being corrupted because "how dare the poor miss out").

Margate
are you aware that there is in excess of 400 million dollars spent each year on indiginious health care. Considering that the idiginious population is about 1.5 % this equates to $1,333 for each and every one. Not bad when it costs them zip!
rehctub

Umm, rehctub, not all the indigenous are "dole-bludgers". Plenty work, make decent money, and contribute to the overall tax revenue pool. Not to mention that even the dole bludgers contribute back now that we have GST and they have to pay it on what they consume (and considering how much of this is spent on grog and smokes etc (or at last is portrayed as such), they contribute a significant amount back into the revenue pool!).

See this link to online downloadable book which outlines the history of Indigenous peoples contribution to contemporary Australian wealth.

HARD LABOUR, STOLEN WAGES NATIONAL REPORT ON STOLEN WAGES by
Dr Rosalind Kidd (2007)
http://www.antar.org.au/images/stories/PDFs/StolenWages/stolenwages.pdf

I've had a period of my life (relatively short) where I was one of the 'undeserving poor'.

It was truly the most pathetic, stressful, undignified periods of my life. You can feed yourself, but not enough to keep yourself healthy. All fruit and vegies are kept for your child/ren, so that they don't suffer.

I'm now one of the middle class welfare recipients. And the comparison is extraordinary.

I can feed myself and my children. I can pay the mortgage. Our house is furnished. I don't go on holidays.

The 'undeserving poor' do not have the luxury of fruits and vegies on an everyday basis. And people don't realise that the Federal Government have craftily created a 'debt' for them, so that they're not receiving as much as they apparently are receiving on paper.

I can live a healthy existence without the Family Tax I now receive.

My life expectancy would have been shortened considerably when one of the 'undeserving poor'.

Thank God I had the fortitude to get myself out of that position, being a girl from a upper-middle class background. Many people don't have that advantage in life.