Something to remember every time a Liberal or Nationals politician opens his/her mouth in 2019

With both a NSW state election and a federal general election in the first half of this year the Murdoch press and Coalition spokespersons will at some point turn their thoughts to the allegedly oppressive burden of welfare payments on Australian taxpayers and the prevalence of so-called 'welfare bludgers' that are supposedly ripping off the taxpayer.

Leaving aside the fact that every single person in Australia pays one or more forms of tax, even welfare recipients, what is the truth about who gets what from government tax concessions or cash transfers?

In 2018 Australia’s richest 20 per cent of the population owned est. 68 per cent of national private wealth, which means that they owned 80 times more in assets and savings than the poorest 20 per cent of the population.

They also received higher tax and transfer amounts from federal government coffers than welfare recipients.

Here is how that comes about......

Per Capita, The Cost of Privilege Report #7, Executive Summary excerpts, 29 March 2018:

The modelling assessed the various tax concessions and other benefits available to high-income earners and contrasts them with well-understood direct income support measures for low-income earners and those reliant on our social security safety net.

This report quantifies the annual cost to the federal budget of various measures that allow Australians in our wealthiest quintile to minimise their taxable income, thereby reducing government revenue that pays for services for all citizens.

These measures include superannuation tax concessions, negative gearing, capital gains tax concessions, the use of discretionary trusts, the exemption from the Goods and Services Tax (GST) of private health insurance and education, and the exemption from Capital Gains Tax (CGT) of the principal place of residence. All of these concessions disproportionately benefit high income and high wealth households. 

Our analysis shows that, in combination, these measures impose a cost on the federal budget that easily outstrips that of any single welfare recipient group.

According to our calculations, the cost of foregone tax revenue from the richest 20% of Australians is over AU$68 billion per annum. That’s around $37 a week from every worker in the country.¹

In contrast, the cost of income support in the 2016-2017 financial year was, by group:

Age Pension $44.468 billion ($35 a week per worker)

Assistance to families with children $36.404 billion ($20 a week per worker)

Assistance to people with disabilities $31.721 billion ($17 a week per worker)

Newstart (unemployment benefits) $10.994 billion ($6 a week per worker)

1 Calculated using the methodology outlined in Answer to Question On Notice No: 257, Taxation paid and 2016-17 Financial Year, what was the total government spend? Senate Economics Legislation Committee, Treasury Portfolio, Budget Policy Division, Supplementary Budget Estimates 2017 – 2018

Here is a practical example of the value of tax concessions to the third family above who fall within the top 20 per cent of the population:

Household Three – Michael and Gillian

Michael and Gillian have two children, Isabella, aged 12 and Max, aged 8.

They paid off their mortgage two years ago and live in a four bedroom house in a bayside suburb of Melbourne. 

Isabella and Max go to the local Catholic primary school and will go on to Catholic secondary college. The family has intermediate hospital and extras private health insurance.

Michael is a Team Leader at a large telecommunications company, and earns $230,000 per year. Gillian works 20 hours a week, during school hours, in the HR department of a major bank, and earns $60,000 per year.

Both Michael and Gillian salary sacrifice into their superannuation accounts up to the $25,000 concessional cap. While Michael can only contribute an extra $3,150 of his pre-tax income to super on top of the $21,850 in compulsory contributions already made by his employer, Gillian can contribute $19,000, reducing her taxable income to $41,000.

They own a three bedroom house in Rye, which they rent out through AirBnB as a holiday home and negatively gear, allowing them to reduce Michael’s tax by a further $9,400.

The value of the capital gains tax concession on their holiday home gives them $4,500 in concessional benefits annually, and the tax exemption of their family home in Melbourne provides another concession of $23,500 per year.

Michael and Gillian also receive GST tax exemptions on their private health and education costs to the value of $3,250.00 per year.

Their combined family income after tax is $215,446 per annum, or $4,143.19 per week.

The total amount received from the taxpayer in tax concessions for this family is $71,705 per year, or $1,378.94 per week.

This imbalance in the value of government assistance received by different groups in society, which is so strongly biased towards giving most to the affluent, is a perfect example of Prime Minister and Liberal MP for Cook Scott Morrison's social and economic policies structured to give to those who already have.

Giving to those he appears to believe are 'good' or 'worthy' because they have high levels of income and assets, as opposed to those who are 'bad' or 'unworthy' because they have little in the way of income and assets.

When I was young this attitude was simply described as the Protestant Ethic, now it appears to be known as the Prosperity Gospel.

Under either name it is not the mark of an egalitarian society or of a nation which prides itself on giving everyone "a fair go".

Something readers might care to think on as they decide who to vote for this year.