The Australian
13th January 2006

The National Party's support for lowering tax rates rather than increasing family tax benefits as favoured by Treasurer Costello is welcome. While there is a case for assisting low income families with young children, the benefits have been extended to those on middle/higher incomes including many receiving over $100,000 a year. Total assistance to families is estimated to cost nearly $27 billion in 2005-06 and is projected at over $29 billion in 2008-09.

This reflects part of the serious churning problem with the present tax and welfare arrangements. My May 2005 report to the Australian Chamber of Commerce and Industry (Commonwealth Spending (And Taxes) Can Be Cut - and Should Be) pointed out that Australian Bureau of Statistics data shows that nearly half the taxes paid by households with incomes in the top two quintiles are paid back to them as benefits. Indeed, those households receive some 30 percent of such benefits.

The reason why Treasurer Costello and his colleagues do nothing about it is simple: it provides a way of buying votes. Until Australia gets a leading politician with the courage to expose and tackle the dysfunctionality of present arrangements, we remain landed with taxes and welfare payments that are much higher than they should be.