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Time to end the churn
The ‘churn’ of middle-class welfare is costing Australia around $130 billion every year, and could be significantly reduced without cutting welfare to those who need it most, says a new report being released on Wednesday.
In Ending the Churn: A tax-welfare swap, John Humphreys argues that means-tested welfare benefits matched by an equivalent jump in the tax-free threshold can reduce churn while preserving incentives to work.
‘By removing this middle-class welfare in exchange for income tax cuts, churn could be reduced by as much as $80 billion per year,’ says Humphreys.
The report proposes a mandatory minimum level of health insurance and schooling, but otherwise allows middle- and high-income earners to leave the welfare system.
Although a political challenge, the growing intergenerational debt burden makes welfare reform imperative.
Humphreys argues that if things stay as they are, ‘at some stage during the next half century the government will either need to significantly increase tax or start cutting back on government spending.’
‘Even if we doubled the GST to 20 percent, it would be unlikely to raise enough money to pay for our future Commonwealth health bill.’
Now is the time to end the churn.
John Humphreys is a research fellow at the Centre for Independent Studies.
This report is available online at http://www.cis.org.au/policy_monographs/pm100.pdf
