Welfare quarantining for the middle class

The Education Tax Rebate – whether Labor’s version or the more expensive Coalition version announced today – is the march of welfare quarantining beyond the income-support reliant lower classes into the middle class. The eligible group of FTB A recipients includes all but about the top 25% of families.

Parents can get their welfare handout, but only so long as they spend it on a list of things approved by the state.

In practice, this rebate isn’t really going to be a major behaviour changer. Most parents will spend more than maximum rebatable amount anyway, making the rebate just a paperwork intensive form of FTB A for parents of school-age kids.

But it is a bad precedent for the state seeking to monitor more of family life. How long before nanny wants receipts for healthy food, or some other paternalist preoccupation of the day?

4 Responses to “Welfare quarantining for the middle class

  • 1
    Andrew Carr
    July 21st, 2010 19:52

    It really is a disturbing direction for welfare in Australia. It’s certainly been heading that way for a while, but the shift from welfare to sustain life (unemployment/old age etc) to simply taking some of the edges off the costs is simply indulgent.

    This type of family support has no natural ideological basis. Which means those who want to challenge can draw support from the left and right. But it will take clear evidence presented that cutting the family benefits can mean substantial tax cuts to begin to shift public opinion.

    Then again, as the Rudd govt has got no respect for it’s big tax cuts, and as you noted earlier public support has dropped considerably) maybe it will need to be along the lines that such a high FTB costs spending on services. And then wait till shifting view on taxes allow that in turn to be cut.

  • 2
    M
    July 22nd, 2010 10:07

    I actually think this comes down to how people think about money.

    I see two viewpoints.

    1) Money is like a solid. It exists in discrete blocks. The money from my tax return I will spend on a holiday. The money from my bonus I spend on my hobby. Something is now tax deductible so I have some free money back to spend on iPad apps. There is potentially an emotional connection between the source and expenditure.

    2) Money is a liquid. The source of money and its expenditure are not linked. Win the lottery, get a bonus at work, get money for birthday, receive government tax rebate on expenditure. It doesn’t change the spending pattern.

    Linking tax rebates to particular items strongly appeals to people in category 1. The fact that practically everyone on family tax benefit A will get the full rebate means logically that the payment should just be increased by $X.

    I think this is why the medicare levy is called that. Rather than pay 1.5% extra tax, it’s linked to health spending. This would only make sense if public health spending was 1.5% of the budget, clearly its not.

  • 3
    Peter Whiteford
    July 23rd, 2010 10:20

    The education rebate is hardly new in principle. Virtually all tax expenditures are slanted towards spending of particular types – superannuation, health insurance, etc. You could also argue that public spending on health, education and all non-cash benefits is slanted towards achieving similar outcomes.

  • 4
    Corin
    July 25th, 2010 01:40

    Andrew, I suppose I should defend it given it was my idea! And yet, the main fault with the Coalition policy is that it’s not a true voucher because if someone chooses a public school it doesn’t go to the school. In my view though, the Libs didn’t need to increase the size of the rebate/voucher to get votes.