Treasurer Joe Hockey was doing us all a favour when he tried to shift the budget debate away from questions of its marginal fairness or unfairness and back to a theme on which he has been working for ages: the distinction between the economy's givers and takers, lifters and leaners, or producers and users.
The argument is well worth having. But it is by no means clear that Hockey – or his side of politics as things stand – can win it. Just as significantly, it is by no means clear that bringing on the argument will help Hockey, or the government, in securing passage of supply, of budget measures, or what passes for a budget strategy. A very good sample reason why is that Hockey's terminology about ''takers'' embraces a good many groups the Coalition needs to keep onside, not least the groups once described as ''Howard's battlers''.
There have been times in the past when politicians have attempted to separate Australians as being ''productive'' – in the sense that they were decent hard-working people – and those who were categorised as ''bludgers'' – unemployed people and other ''no-hopers'' said to be living off welfare. This resentment and animosity against, perhaps, at most 5 per cent of the population thought to be spongers can work a political treat, not least among those whose hard work does not place them in a income category significantly higher than the welfare cohort.
But Hockey is not drawing off that animus. He is categorising half of the population, not some mere alleged dole bludgers, as ''takers'', people who have become too dependent on government for a proportion of their effective income. For Hockey, those who are supping too much at the entitlement table seem to include singles earning $45,000, single parent earning $60,000, working couples with a combined income of about $70,000 and families with two children with a household income of about $120,000. That's a lot of people to be insulting.
Hockey has been, for some years, drawing distinctions between that proportion of taxpayers – let us say half – who pay reasonably high taxes, at least as they see it, and take back from government in the form of benefits, in tax treatment for children, health, and education and pensions, considerably less. Their income after tax, including the values of the benefits and concessions received, is less than their pre-tax income.
By contrast the other half pays, on average, a good deal less tax, but, in addition, receives substantial value from government in the form of direct and indirect benefits, including family tax concessions, health, education, and sometimes housing and welfare assistance. Their real income, because of these benefits, is higher than their pre-tax income. These are the people whom Hockey means when he refers to ''takers'', to ''leaners'' and to ''users''. Their standard of living, he means, is propped up by the other half of society.
Hockey, who is fighting widespread perceptions that the budget is unfair and inequitably puts a bigger burden on the poor half of the population, was taking umbrage because newspapers had published Treasury figures which seemed to support the argument. The Treasury tables, which have usually but not invariably been in budget papers, were withheld this year. They showed that lower income families would be $842 a year worse off as a result of new budget measures, and would pay on average $2 a year more tax as well. Middle income families would be $477 a year worse off, and pay, on average, $17 more tax for the year. By contrast, higher income families would be $71 a year worse off, though they would pay an average of $446 more in tax.
Hockey suggested that publication of the figures, disclosed by Treasury after an FOI request, was part of some Fairfax plot against him. It failed to point out that higher income households paid half their income in tax, and that the tax take from an average higher income family was subsidising government benefits to four lower income households. Nor did the figures include reference to matters such as concessional payments for drugs, transport or childcare going to lower income households, he said.
Hockey was talking about the general balance between different classes of taxpayers, and the published tables were clearly expressed as representing the marginal changes to that balance caused by decisions announced in the budget. This year's budget has tilted the balance against lower income families compared with better off ones, but it's the overall balance that matters most.
The Australian Bureau of Statistics collects data about differential spending by government on health and education, and the cost, by income, of a good many concessions such as pharmaceutical benefits. A study by NATSEM suggests that the value of direct benefits for each income quintile in 2001-2002 was $248 for the lowest quintile, $240 for the second lowest, $120 for the middle quintile, $52 for the second highest and $12 for the highest.
The value of Indirect benefits (for schools, health benefits, drugs, housing benefits and childcare) was not so skewed. They were valued at about $259 a week for Q1, $298 for Q2, $265 for Q3, $206 for Q4 and $136 for Q5.
Put another way, an average person in the lowest income quintile was drawing in benefits about 10 times more than non-benefit income before tax, and had an effective income, counting direct and indirect benefits, of $490 a week. A Q2 person earning $377 a week before tax ended up receiving an effective income of $769 after direct and indirect benefits and taxes were taken into account. A person in the middle income bracket, earning $810 a week before taxes, had an effective income of $934. A Q4 person, with a pre-tax income of $1237 had an effective income, after the value of benefits received minus tax, of $1106. The top income quintile averaged $2056 in income and, after paying tax but counting the value of direct and indirect benefits received, had a final income of $1478.
But the purist will note that none of these groups has had imputed to them any value from other benefits and goods and services provided by government, including defence, law and order, assistance to industry and science, infrastructure, immigration or agriculture, or payments to the states. Nor is there any reason to think that these should be valued pro-rata, given the differential effect of such spending on different income groups.
Just as importantly, however, the figures do not count major tax expenditures on superannuation, the value of which are very heavily skewed towards people in high income quintiles. The Australia Institute says that the 646,000 Australians who make up the top 5 per cent of income distribution receive superannuation tax concessions worth $7.1 billion a year. This sum (to only a quarter of Q5) is more than the combined value of the tax concessions ($6.5 billion) to 6.4 million who make up the bottom half of the income distribution.
Put another way, the taxpayer is making an average annual contribution of $11,000 to each of the richest 5 per cent of the income distribution, while those in the bottom half of the income distribution are receiving on average $1000. Hockey has deferred reform of the tax treatment of superannuation until another day for the bottom half of the population, but would surely concede that a fair assessment of making and taking, or of the practical mechanisms of a culture of entitlement, would include this as much as it would, say, the receipt of health benefits or subsidised housing.
But even a decision to defer consideration of an annual expenditure by taxpayer of about $30 billion a year is itself a highly political decision favouring the interests of the well-off at the expense of the poor. It is time that this concession and a number of others were on the table, and in the distribution figures, so that we can have an all-in brawl between the givers and the takers about who's propping up whom.