Thursday, 4 December 2014
Family Tax Benefit (Tighter Income Test) Bill 2014; Second Reading
The Family Tax Benefit (Tighter Income Test) Bill 2014 cuts government spending by more than $270 million a year by means-testing family tax benefit part A more rigorously. Both the coalition and Labor recognise that welfare payments should be means tested. This may seem an uncontroversial idea, but we should remember that some countries have welfare payments that are not means-tested, like universal age pensions, and we should remember that Labor have a troubled relationship with means-testing. They are proud of their changes in recent years to more rigorously means-test family payments and the private health insurance rebate, but they do not want to means-test access to Medicare, and they defend concessional loans for high-income beneficiaries of higher education. The coalition too have a troubled relationship with means-testing. They have loosened means-testing for the age pension and want the private health insurance rebate to be universal. And both sides have continued tied funding to the states that bans state owned hospitals and schools from imposing fees, even on high-income users of these services.
Thanks to this inconsistency on means-testing, I have no great hope of support from either the coalition or Labor. But let me go through the process of making the case for the bill. Family tax benefit part A is a welfare payment. Do not be fooled by the mention of tax in the name. It goes to families regardless of whether or not they pay tax. Current and previous governments have decided that families with the least income need this welfare payment of up to $6,723 per child but that a family's need for it reduces when family income exceeds around $50,000. For each dollar earned over that amount, the welfare payment is reduced by 20c. This arrangement is unremarkable and is unaffected by my bill.
However, in what is a bizarre and completely unwarranted quirk, when the welfare payment reaches $2,204.60, further rises in income do not prompt further reductions in the welfare payment. The welfare payment for a family with one child remains at $2,204.60 whether their income is around $70,000 or $90,000. So, once your family income exceeds around $50,000, you are sufficiently beyond the reach of poverty that your welfare payment can fall as your income rises, but, once your income exceeds around $70,000, somehow you are back in the clutches of poverty and it would be unjust for your welfare payment to fall as your income rises. You are finally considered to be free from this spasmodic grasp of poverty only when your income exceeds around $90,000, after which the welfare payment is reduced by 30c for each additional dollar earned. This arrangement is ridiculous.
My bill will get rid of the pause in the withdrawal of family tax benefit part A when the payment reaches $2,204. Instead, once your income exceeds around $50,000, so that the withdrawal arrangement has started, it continues until your payment reaches zero. There is no policy reason for a pause in means-testing arrangements. The only reason we have such a pause in current law is that, when John Howard rejigged tax and welfare arrangements as part of the introduction of the GST, he wanted to make sure that he could say there would be no losers and, in particular, he wanted to buy off the middle class so that they would vote for him in the 2001 election and beyond. So he put them on welfare. My bill essentially starts generating losers when family income reaches around $70,000, with most of the impact concentrated on families with incomes over $90,000. This means the impact of my bill falls on middle-income families and upper-income families. Those families who are earning these amounts but who think that they are low-income families do not realise that many people are worse off than they are. It may come as a shock, but at least a third of Australian families are worse off than they are. Low-income families are best served through rigorous means-testing, as this concentrates assistance where it is needed most, and middle- and upper-income families are best served through rigorous means-testing, as any welfare they receive is paid for by the taxes they pay now—or the taxes they will pay in the future when government debt is finally repaid—and any welfare they receive arrives only after they have spent hours listening to Centrelink's crummy hold music and after the bureaucracy has taken its cut.
The economic figures released yesterday are a grim reminder of the problem we face in Australia and that the budget is not going to repair itself. Recent estimates suggest the deficit will be $40 billion this year. Despite what some in Labor and the Greens suggest, this is not a problem of insufficient taxation; it is a matter of excessive expenditure. Paying welfare to people who are capable of looking after themselves is simply unsustainable. It also deprives those who genuinely need welfare to have a decent standard of living. If welfare can be limited to the truly needy, it will be possible to be more generous.
This bill is in the interests of all Australians, but it will take leadership for it to pass into law. I commend the bill to the Senate.