Wednesday, April 05, 2006

How the Australian government subsidises families

A great article in today's Australian by Janet Albrechtsen highlights the outcomes of our current tax system:

So, for all the talk about tax reform, don't expect Howard's family welfare junkies to lead the charge. A couple with two children on a single income of $60,000 will pay $14,760 in tax but the Government hands back $10,568 in family tax benefits and $4193 in child care subsidies. Net result? Nil tax.

It's not surprising then that whenever tax reform is on the table, the Prime Minister and Treasurer Peter Costello point with pride to increased family payments under the Coalition Government as the equivalent of a tax cut. But churning tax dollars into family tax benefits creates a sense of entitlement that fuels a self-perpetuating welfare state in an era when welfare has outlived its reason for being.
Unfortunately, there is no sign of cutting top tax rates in the next budget. Howard's focus is again on the "average bloke" - by which he means the average bloke, his wife and two kids. Last week Howard said: "The average bloke, when you start talking about tax reform, tends to say 'Well, what's in it for me and my family?"' And Peter Costello, too, is focused on the lower to middle-income families. So expect more of the same - tinkering with taxes and family entitlements to prop up the Coalition constituency.