If you spend a lot of your time reading tabloid newspapers, you could be mistaken for thinking that Australia is a country full of ‘dole bludgers’ and leaners, with many people receiving more income from welfare than they pay in tax.
But does that assertion stand up to proper scrutiny?
Apparently not, according to a report from the Australian National University (ANU), which found that many of the welfare claims used to justify the introduction of austerity measures have no real basis in fact and pay little heed to the working lives of retirees.
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The analysis from the ANU’s Professor Peter Whiteford found claims that a growing share of Australians now receive more in government benefits than they pay in taxes were not true and overlooked age pensioners who had spent a lifetime paying taxes.
“Over the last decade we’ve seen a real ratcheting up of this kind of rhetoric from many of our political leaders, as well as large sections of the media and think tanks,” Prof. Whiteford said. “It includes claims that in Australia more than half of all workers pay no net income tax. A lot of this rhetoric is used to justify austerity measures.
“But, if you actually look at the statistics behind these kinds of claims, the data doesn’t mean that welfare is unsustainable or that there are a lot of freeloaders.”
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The study examined statistics comparing the number of people who pay more tax than they receive in government benefits versus those who receive more in benefits than what they pay in tax.
The report refers to them as the ‘taxed’ and the ‘taxed not’ and found very little difference in Australia’s situation when compared with other countries in the OECD.
The share of people who were taxed and taxed not was similar, regardless of how progressive a country’s tax and welfare system was.
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“For example, the share of the population who are net taxpayers is about the same in Sweden as it is in the United States and Australia, even though social security spending is nearly 3.5 times as high in Sweden as in the USA and household taxes are nearly twice as high in Sweden as in Australia,” Prof. Whiteford said.
He said claims that Australia’s tax and welfare system were too generous came down to commentators failing to understand what the statistics actually meant and how social security and taxation systems were designed to work.
“The statistics are reliable. What we can’t rely on is people interpreting them correctly,” he said.
Prof. Whiteford said any progressive system of taxes and spending must produce a ‘cross-over’ point where increasing taxes for higher incomes are greater than benefits received.
In addition, the statistics also reflect people’s changing life circumstances and journeys.
“Most people aged over 65 were net taxpayers when they were of working age, so classifying them as taxed nots fails to take account of any contributions they made earlier in life,” he said.
“It makes little sense to classify retired households as taxed nots, since by definition they have contributed taxes in the past.
“In fact, some of the wealthiest people in Australia could be considered taxed not. For example, people who receive franking credits. By definition, this very small group of high-wealth individuals were paying no income tax and getting a credit for company tax.
“These examples reinforce the conclusion that those using these numbers do so because they perceive them as convenient to their arguments, rather than understanding the practical realities of the design of social security and taxation.”
What do you think of politicians who constantly try to portray those receiving welfare as ‘leaners’ or ‘freeloaders’? Do pensioners deserve more respect in retirement? Why not share your thoughts in the comments section below?
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