Who gets what? Who pays for it? The welfare state debate revisited

SHOULD we deal with the growing budget gap by cutting spending or increasing taxes – or by some combination of the two? Before we try to answer that question we need a clear understanding of the current distribution of welfare spending (who gets what?) and how spending is financed (who pays for it?). Are higher income groups already overburdened with taxes or are they actually benefiting too much from profligate spending? Fortunately for those interested in accurate answers to these questions, the Australian Bureau of Statistics has published studies of government benefits and taxes and their impact on household incomes since the 1980s, with the most recent results being for 2009–10. These studies provide the most comprehensive accounting of government spending and taxation in Australia, taking into account not only the impact of social security cash benefits and direct taxes but also the effects of government spending on healthcare, education and community services, and the impact of indirect taxes, such as the GST. The ATO statistics used by the Financial Review and others are certainly useful, but they only identify who pays income taxes and don’t include the GST or other indirect taxes. Nor do they tell us what benefits households receive from governments… Read the full article Photo: Andrew Jeffre