It’s a sad day when economic commentators like me have to spend so much time explaining what’s wrong or misleading about the things the federal Treasurer says, rather than backing up his efforts to educate the public on economic realities and helping him fight for sensible though unpopular policies.
To be fair, Scott Morrison did have useful points to make in his big speech last week, his first major contribution since the election.
Treasurer’s dire economic warning
There’s less than a decade to get debt under control or risk our future generations, according to Scott Morrison. Courtesy ABC News 24.
But then he veered off onto reinforcing the mythology of the greedy well-off, who resent being taxed to help those less fortunate than themselves.
He announced there was a new divide in the community – “the taxed and the taxed-nots”.
“Get it? Here are you and I, working hard all our lives, having far too much of that income taken off us in tax. Yet out there somewhere, living in suburbs we rarely visit, is a growing army of bludgers who don’t bother working, but find some way of conning the government into paying their way. Now, apparently, a lot more of them will go their entire lives without paying more in tax than they get back in benefits.
Federal Treasurer Scott Morrison issued a dire warning on federal finances last week
It’s built on a few simple tricks. It hopes you won’t remember that Australia’s social security system is the most tightly means tested among the developed countries, paying flat amounts that aren’t at all generous – which is the main reason we pay less tax than most.
And it hopes you won’t remember that we pay many more taxes than income tax. Personal income tax accounts for only a little over half the federal taxes we pay. Add in state and local taxes, and income tax accounts for 40 per cent of all taxes.
So the notion that people who don’t work don’t pay tax is silly. Even taking account of benefits received, next to no one goes through their life being “taxed-not”.
It’s true we spend almost $160 billion a year on social security – most of it going on pensions and benefits – which accounts for more than a third of all federal spending.
Official figures show there are about 5.2 million recipients of federal “income support”. So who are these bludgers? People on the dole? They account for just 13 per cent.
Sole parents? They’re 5 per cent. People at home being “carers”? Just 4 per cent.
I know, all those people faking bad backs on the disability support pension. Sorry, that’s only 16 per cent.
So where are the rest of the people not pulling their weight and expecting us to support them? Well, half the people on income support are people on age or service pensions.
Oh. You mean the people who keep saying they’re entitled to the pension because they “paid taxes all their lives”. The people whose investment advisers helped them have lots of other income, but still get the pension.
And that doesn’t count all the retired people paying no income tax on their income from superannuation, at present no matter how huge.
Nor does it count all those bludging parents getting the family tax benefit or those bludging mothers expecting us to help with the cost of childcare so they can go to work.
Family benefits and childcare subsidies account for more than a quarter of federal spending on pensions and benefits.
What, not quite so many lazy loafers as you expected?
The Australian Bureau of Statistics conducts a study where it attempts to allocate as many taxes as possible from all levels of government to each of Australia’s 8 million-plus households, while also allocating as many cash and in-kind benefits as possible from all governments.
Morrison ought to look at the most recent study, for 2009-10, particularly page 41. It shows that whether we pay more to the government than we get back in benefits changes as we move through the life cycle.
It shows that, on average, single people of working age pay a lot more than they get back, as do couples without dependent kids.
Couples with a few kids pretty much break even or get back a bit more than they pay, but the people who really clean up are the retired.
Elderly couples are ahead to the tune of about $690 a week, on average, with elderly singles getting $475 a week, mainly because they pay little income tax but get huge health benefits along with the pension.
ScoMo isn’t smart enough to know it, but in disparaging the “taxed-nots” he’s really attacking the old.
Ross Gittins is the Herald’s economics editor.