Government = poker machine

[brendan]

http://www.theaustralian.news.com.au/story/0,20867,19067120-7583,00.html

The Government takes with one hand and gives back less with the other, writes Peter Saunders
May 09, 2006

AUSTRALIA contains one-third of 1 per cent of the world's population. But it contains something like 20 per cent of the world's poker machines. In pubs and clubs across the country, people sit on stools for hours on end feeding the pokies in the hope that they will end up taking more money out than they put in. Most of the time they lose.
Few of them take any interest in politics. The debates about tax reform will almost certainly have passed them by. They're not interested in policy ideas or political principles and the Government knows they're not.

The Prime Minister knows what makes them tick. He has what Rudyard Kipling called "the common touch". Last month he said "the average Australian" was not interested in "some long academic speech" about tax reform. He knows their concerns are limited to how much money the Government is planning on giving them.

These voters regard government finance in much the same way as a poker machine. All they really want to know come budget night is what the payout is likely to be. This Government has proved adept at giving these people what they want. That's why welfare spending has continued to escalate even at a time of low unemployment. John Howard has made a Faustian pact with his battlers: you keep voting for me and I'll keep giving you more money.

This deal requires a high level of tax-welfare churning; to hand the cash out to people as benefits, the Government first has to take it away from them in taxes. The Government thus operates on much the same principle as the pokies: punters keep putting in their money and now and again they get some back. In an election year they may even hit the jackpot.

The Government has no interest in weaning people away from the giant Canberra poker machine. Politically, there is little to be gained by allowing people to keep more of their own money rather than relying on the Government to support them. Voters who keep money for themselves have no reason to feel grateful to politicians. Gratitude comes from voters who receive handouts, even if it is their own money being churned back to them. This explains why the Government has no interest in rationalising our absurdly complex tax system, which drives three-quarters of Australians to employ accountants to prepare their annual tax return.

In countries that have scrapped petty deductions and reduced marginal rates, basic rate pay-as-you-go taxpayers never have to fill in a tax form, let alone employ an accountant. But our Government isn't interested in reform such as this.

Ask ministers why we can't simplify our system and you'll be told that ordinary Australians are wedded to their end-of-year tax rebates. But all they get back at the end of the tax year is cash that should never have been taken from them in the first place.

We see the same thinking in Howard's fierce defence of the family support payments system.

Nearly nine out of 10 families receive government payments, but in most cases they are financing these themselves. They pay tax every fortnight to the Australian Taxation Office and get a great chunk of it back every fortnight from Centrelink.

It's the same story again with the financing of childcare services. Working parents pay tax on every dollar they earn over $500 per month, but if they put their children in child care they can claw some of their tax back by asking the Government for a childcare benefit (which reduces the charges they have to pay) and for a childcare rebate (to recoup some of the remaining balance).

Today's budget promises more of the same. There will be no tax reform, but look for plenty of handouts and lots of churning. Why do we put up with this? The Government expects us to be grateful when it puts its hand deeper and deeper into one of our pockets to transfer our cash (less overhead costs) into the other. It believes we will continue to reward it with our votes. The really depressing thing is that we probably will. Just ask the punters sitting on their stools shovelling coins into the pokies if they feel happy when the machine pays out. Of course they do. Trouble is, they forget how much of their money they put in to get it.

Peter Saunders is social research director at the Centre for Independent Studies in Sydney.