The difference between tax breaks and spending

One persistent annoyance in the current debate around taxation and spending is the conflation of government welfare spending and tax deductions — be they negative gearing, superannuation tax concessions or even just workplace deductions — as if there was no difference between the two.

For example, even if you accept the Tax Expenditure Statement figures that put the total for superannuation tax concessions as approaching the cost of the age pension, these two things are not the same.

The age pension hands out funds generated by the hard work of others, superannuation tax concessions involve the government not confiscating income people have earned.

Unless you believe that government should have absolute sovereignty over the individual, there must be a moral difference between those two things.

In the case of welfare spending, the clear moral duty of the government is to be careful and prudent with taxpayer-provided funds, and to not hand them out to people who aren’t genuinely in need. The moral duty in the case of taxation is to take as little as possible of people’s wages, letting people keep their hard earned money wherever possible.

This doesn’t mean all tax breaks are ok or that welfare should be ruthlessly lean, but that the benefit of any doubts over the appropriateness of the payment or tax break should go to the taxpayer rather than the government. 

Those who want to increase the size of government try and conflate the two because then rather than examining the purpose of a spending program, or the reasons for a tax break, they can make the recipients the focus.

‘Fairness’ then requires any ‘savings’ to come from those with the greatest capacity to pay — leading to increased taxation — rather than first examining whether the spending program should be funded by that taxation. The burgeoning cost of the age pension is testament to this way of thinking.

This approach effectively assumes earned income and welfare payments are the same thing; and they aren’t. You have a greater moral right to your own money than anyone else does — including the government.