There are now so many beneficiaries of government largesse that they may constitute a political force strong enough to bias policy outcomes, according to a new paper from the Centre for Independent Studies
In Voting for a Living: A shift in Australian politics from selling policies to buying votes? authors Robert Carling and Terrence O’Brien explore the implications of the increasing imbalance between government benefits received vs taxes paid.
“ABS figures show that in 2015-16 close to half of all Australian households received more in benefits from government than they paid in direct and indirect taxes,” Mr Carling says.
“Benefits are defined broadly to include ‘in kind’ benefits such as health and education as well as cash benefits such as pensions, while taxes include income tax and a range of indirect taxes including GST.
“When the number of public sector employees is added, there is a clear majority of voters benefiting more from government than they contribute.”
The authors say what is surprising about the figures is not that some households benefit from the tax/transfer system, but that so many do.
“If the population of households is divided into quintiles (slices of 20% each) from lowest to highest income, not only the first and second quintiles are net beneficiaries but also the third (middle) quintile,” Mr Carling says.
“Even the fourth quintile is close to receiving as much in benefits as it pays in taxes.
“This is an illustration of how skewed the tax system is, with the top 20% doing most of the heavy lifting.
“It also shows why balancing the budget has become so difficult.”
The paper outlines that such a large group of government beneficiaries could be placing pressure to swing policies towards preservation of existing benefits and creation of new benefits, while largely restricting new taxes to higher income households.
“The emergence of a large segment of the population that in a sense ‘votes for a living’ could help explain much of what has gone awry with public policy in Australia in recent years,” Mr Carling says.
“It is not just voter behaviour that’s affected. Political parties will also curry favour with this group and become more interested in buying votes than selling good policies.”
Robert Carling is a Senior Fellow at the Centre for Independent Studies. Terrence O’Brien is a former public servant in the Commonwealth Treasury, Office of National Assessments, and Productivity Commission, and at the OECD and World Bank.
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