Yesterday the ABS released the latest of its surveys of the winner and losers of Australia’s taxing and spending, covering the 2003-04 period.
And the winners are…unemployed single parents with children under 5, taking in on average $878 more a week in income transfers and welfare services than they pay in tax, most of which is indirect tax (it has a statistical caution on the number, but despite low overall tax this group scores the highest payment on ‘tobacco products’, consistent with previous research showing the poor pay a disproportionate share of ‘sin’ taxes).
And the losers are…the top 20% of households by income, who pay on average $571 a week more in tax than they receive back in benefits and services.
As with previous surveys, this one finds that the bottom 60% of households are net beneficiaries of the tax and welfare system, ie they receive more in income transfers and welfare services than they pay in tax. The Australian gave this aspect its lead story, with the heading ‘Tax take helping Howard battlers’. The poorest 20% get more than 40% of all social assistance, and the richest 20% only 9%.
But the redistributive aspect of policy is driven by income transfers rather than government services. Before adjustment for household size, the households with the highest gross private income also receive the highest ‘social transfers in kind’ – though overall these are distributed fairly evenly across income groups. They do particularly well in relative terms out of tertiary education (presumably because children of affluent families are most likely to attend university), acute care institutions, and ‘community health services’. The latter two items suggest that this group probably includes more households with elderly members than the third and fourth quintiles.
Consistent with comments I have made previously on familist policies, couples with kids are not, on average, poor. The weekly private income of the lowest-earning of them, those whose eldest child is under 5, is still $270 a week above the average for all households. Because their private incomes are fairly high, and therefore incur high income taxes, they are not significant net beneficiaries of the tax and welfare system.
That’s not to say that they miss out on substantial government benefits. Especially once kids start school they get far more than average. What we see is the large-scale churn that CIS Peter Saunders writes about. For example, couples with an oldest dependent child aged 15-24 on average pay $583 a week a tax and receive $578 in benefits, mostly education.
Politically, what these statistics tell us is that reforming the welfare state is very difficult. It’s not just that a majority of the population are net beneficiaries of the tax and welfare systems. Even among those groups that on average come out even or as modest net contributors there would be lots of losers as well as winners. Somehow I don’t think a coalition of the biggest losers – the top 20%, single adults, and couples without kids – will ever be enough to secure reform.