Australia takes from the poor to give to the rich
Last year, as the government prepared another round of welfare crackdowns, Minister Michaelia Cash said she expects “that those who can work should work and our welfare system should be there as a genuine safety net, not as something that people can choose to fund their lifestyle.”
The subtext was clear – those who need help are a drain on the rest of us.
This rhetoric is familiar, but it is wrong. It is the wealthiest Australians who enjoy the most support.
Research commissioned by Anglicare Australia shows that each year, a staggering $68 billion is spent keeping the wealthiest households wealthy. That is greater than the cost of Newstart, disability support, the age pension, or any other single welfare group.
The Cost of Privilege report, prepared by Per Capita, models four household types to show how these concessions and tax breaks work. One of the couples we modelled, Tim and Michelle, own their own home. They have two children in private schools, top health insurance, and two investment properties. Michelle doesn’t work, and Tim runs a small business. Each year, Tim and Michelle get $99,708 in concessions from the taxpayer, or $1917 per week. That is well over twice as much as a couple with two children on Newstart, and nearly three times as much as a family with one parent on the Disability Support Pension. Tim and Michelle do this by getting concessions on their superannuation, negatively gearing their investment properties to minimise their taxable income, and getting tax breaks for private schools and private health insurance. They also get generous Capital Gains Tax exemptions.
Each year, thousands of Australia's wealthiest households profit from these loopholes and subsidies. Our report finds that tax exemptions on private healthcare and education for the wealthiest 20 per cent cost more than $3 billion a year. Superannuation concessions to them cost over $20 billion a year, and their Capital Gains Tax exemptions cost an astonishing $40 billion a year. Compare that to the annual cost of Newstart, which comes in at just under $11 billion a year.
Importantly, nothing that Tim and Michelle are doing is wrong or illegal. This is not a broken system. It is a system working exactly the way it was designed to work, supporting the wealthiest at the expense of the rest of us.
These numbers tell us that something has gone badly wrong. The eighties were the decade of trickle-down economics, where taxes were cut for the richest with the promise that everyone else would soon feel the benefits. But now it’s worse – we’re in an era of trickle-up economics where subsidies, tax breaks and concessions for the richest are paid for by everyone else.
At the same time as some people are enjoying generous support because of their wealth, those who have the least are being targeted. Parliament has just passed a set of welfare crackdowns that will include a demerit system for Centrelink recipients, expanding the cashless welfare trial, penalising job seekers who miss appointments, and forcing people to run down their bank account before they can seek help.
Other changes mean that personal crises, like relationship breakdown or a family death, can’t be considered when people have problems completing their paperwork. And to top it off, hundreds of millions of dollars is being cut from social security.
All of this shows us an uncomfortable truth. We have become a country that cuts from the poorest to give to the richest – a fact borne out by the government’s obsession with corporate tax cuts.
Some parts of the media have taken issue with the report, but they have missed the point. Anglicare Australia has never said that we should abolish all concessions and subsidies. We are simply making the point that if we can afford to forego such staggering amounts of money to support the very wealthiest people, then we can afford to support those doing it tough too.
If we want to tackle inequality in Australia, the answer is simple. First, we need to end the trickle-up economics by winding back some tax breaks to the very wealthiest people. Next, we need to lift income support. The OECD has already warned that our income support payments are far too low. They are being outstripped every year by the cost of living.
And finally, we need to stop demonising people who need help. Cutting from the poorest must stop.
It is well past time that we end the trickle-up economics, and build a tax system that works for everyone.
Kasy Chambers is the executive director of Anglicare Australia.