Messenger The Australian government is embarking on welfare reform to try and wean people off long term benefit reliance.
Timely, because since the Budget, there has been considerable focus on how we should we deal with the budget gap between government spending and revenue. The and the Budgets were controversial because of the perceived unfair impact of the mostly stalled Budget proposals on low income groups.
In considering options to either cut spending or increase taxes, it is important to have a clear understanding of the distribution of welfare spending who gets what? Effects of GST, returning to work The report provides a descriptive analysis of the flow of personal income tax and GST and transfers to households under policy settings and also examines the impact of the tax and transfer system on returns to paid work.
As they move from being students to workers and eventually into retirement, individuals pay different levels of taxation and may receive different benefits. This means that a cross section picture of taxes and benefits in a single year will not be able to identify whether people receiving benefits have either paid taxes in the past or will do so again in the future, and correspondingly whether those who are current taxpayers may need to rely on benefits some time in the future.
In addition to these fairly predictable lifecycle stages, individuals are also exposed to a range of risks such as unemployment, illness, disability or family breakdown that can cause them to have to rely on benefits either for a short or long period.
Inevitably, there are a large number of technical issues involved in research of this sort. The paper does not identify what is done with the additional taxes collected. In projecting lifetime incomes it is assumed that people live all their life under the —15 tax and benefit systems.
The lifetime simulations model direct taxes and cash benefits, but not indirect taxes and non-cash benefits, such as healthcare and education. Clearly these types of estimates are artificial: But these simulations provide important information on the split between intrapersonal redistribution across the life cycle and interpersonal redistribution between rich and poor.
Our system is highly progressive The point in time estimates confirm that Australia has both a highly progressive social security system and a progressive direct tax system.
The lifetime distribution of benefits and taxes differs quite significantly, however, particularly for social security benefits. This reflects the fact that many in this group will end up receiving a part age pension after the age of 65, that many have children at some stage of their lives and that they can also experience periods of unemployment or disability.
However, these same groups pay more income taxes over their lives while higher lifetime income groups pay lower lifetime average taxes than annual taxes. Nevertheless, the distribution of net taxes taxes paid minus social security benefits received remains progressive across income ranges.
The results also differ if households are ranked by their household wealth. The reason for this is that many of these middle wealth households are over 65 and own their own homes, but because of their low current incomes pay little in tax and receive some age pension.
More people benefit than is acknowledged Overall, these estimates reinforce support previous findings that the Australian social security system remains well targeted by income. In contrast, middle income people over their lifetime receive far more in social security benefits than do people in these income brackets at a point in time.
The implication is that a much wider range of people benefit from the welfare state and pay taxes to support it than is often acknowledged.CHEDS (Canine Hip and Elbow Dysplasia Scheme) Australian Canine Eye Scheme; Canine Research Foundation; ANKC Vision for the Health and Welfare of Pedigree Dogs.
Australia’s tax and transfer system is highly progressive and benefits more people than is generally acknowledged. Image sourced from r-bridal.com The Federal Opposition is accusing the Government of demonising people with disabilities as it responds to a review into Australia's welfare system.
Global Trade Analysis Project (GTAP) The Global Trade Analysis Project (GTAP) is a global network of researchers and policy makers conducting quantitative analysis of international policy issues. GTAP is coordinated by the Center for Global Trade Analysis in Purdue University's Department of Agricultural Economics.
Terminology. In the U.S., welfare program is the general term for government support of the well-being of poor people; likewise, the term social security refers to the social insurance program for retired and disabled people.
Elsewhere, the term social security has a broader definition, which refers to the economic security that a society offers . In making its case for welfare reform the federal government suggested there is a crisis promoting the merits of the need for the review, stating, ‘Over the past decade Australia’s welfare system has grown relentlessly and become unsustainable’.