The prime minister has spoken – or given a speech
to the Menzies Research Centre calling Labor plans to strip
millionaires of family tax benefits the thin end of the wedge, anyway.

He says any move to take the family tax benefit B – a non-means tested
payment aimed at families with stay-at-home mothers – will hurt women.
The counter case is easy to make: that it punishes women who want to
work and rewards those who stay at home.

The Australian‘s editorial
today is sceptical of the PM’s claims. It talks about how the PM
indicated further tax relief for low- and middle-income families might
come in the Budget – less than fortnight away – but how he also
“bristled at any suggestion that such a program might be tagged as
middle-class welfare or, in his words, ‘a giant “churning” exercise,
taking people’s money with one hand and handing it back to them with
the other’.” As it concludes, “it is hard to know what else to call a
system that already allows a family of four to earn $56,000 per year
and effectively pay no tax because their PAYE payments are offset by
welfare benefits.”

Just what is going on with tax? Labor is right, the current system will
eventually cripple low and middle income earners. There is little
incentive to work harder.

But is there also some deliberate, very low setting of the bar here? The Warburton/Hendy report
is a yawn – even by Treasury standards. It looks like a cut and paste
job assembled from the files of Treasury pen-pushers who spend their
lives musing about tax and then developing ways to implement a system
that best suits them. It is full of self-justification.

Some areas it just won’t touch. The capital gains section, for example,
says nothing about how the introduction of the discount in 1999 has
fuelled the property boom and made housing less affordable. That’s
understandable. Politically, that’s just too messy.

But tax and welfare and families – and unravelling the whole knot – is
an issue the government put on the table itself. It can easily be
politically painted not just as a tax and spend government, but as a tax
and bribe operation.

Iron Mark’s “downward envy” has helped the government up to now. This
issue could be different. The pressure for tax reform is coming from
all sides. There’s got to be more coming in the Budget than we’ve been
told about. Hasn’t there? Please? They haven’t given up altogether?

Peter Fray

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