Dismantling the myths around Family Tax Benefits
The Prime Minister’s recent 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 just a small sample of the comments garnered recently.
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 a significant 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 a stay-at-home parent.
According to the calculations prepared by the ATO, Mrs Brown is taxed at a rate that leaves her with an after-tax income of $69,203, to be used by Mr Brown and herself to feed, clothe and raise their young family. This equates to $13,840 pa per family member.
This means that the Browns currently contribute $20,797 per year in income tax, not to mention $4-5,000 in GST, and more in fuel and other taxes.
Therefore, to address 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.
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’s 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 doing nothing, waiting for a government handout, whereupon it is just the opposite: families in greater need have less ability to pay income tax, so the ‘tax benefit’ is really a income tax corrective measure introduced some 20 years ago to make up for the unfair income tax.
You’d 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 sack bureaucrats.
Perhaps it’s time to 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 — perhaps even better than the all-knowledgeable Government could do it.
As stated by Thomas Jefferson:
“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.”
It calls for a focus on the distribution of wealth away from individuals to families — the building blocks of a thriving society.
“The family is the lynchpin of society, both economically and socially.”
~ William Bennett, former United States Secretary of Education
It’s rather like a tax return. At tax time, the ATO calculates how much tax you’ve paid, and then determines if you have under- or over-paid 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 question could be raised: this ‘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.
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 that “people should pay for themselves” — perhaps even a selfish desire.
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 drop-out, health outcomes and academic performance. 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 childcare 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 the 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?)
Of course, 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 it was spent and not saved), the Treasury Department may not be so keen to face this even greater imbalance of the books.
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 requirements.
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 with more families able to carry out their own 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 sizeable expense — and one that is riddled with risk and lower-level care, as is illustrated by the ongoing Royal Commission into Aged Care Quality and Safety.
It is impossible to have strong social capital if there’s no flexibility in the home for people who are stuck going to work each day.
So perhaps it is time for us to stop hitting up ‘dole bludgers’, and instead thank them for their great input and investment into our country. Perhaps it is time to consider how we can further and empower our families to have their own cared for and managed by the very best people — themselves. Let the dole bludgers rise up.