Sharing the budget pain without increasing taxes

Prior to the budget, the government committed itself to 'sharing the pain' of fiscal repair.

Subsequent commentary is holding the government to account, with modelling from NATSEM, for instance, showing that lower-income families will lose a higher proportion of their income than their wealthier counterparts, even accounting for the deficit levy.

Some will argue that there is no need for an urgent budget repair job which cuts close to the bone for many families. Others will say that the hit to lower incomes should be better matched with penalties for higher income earners through mechanisms such as increasing income tax or tightening tax treatments which disproportionately benefit wealthier individuals.

Another argument points out that wealthier people are ineligible for many income supplements that lower- and middle-income families receive, and progressive taxation means the wealthy already pay more than their 'fair share' – making still higher taxes unconscionable.

There is, however, another argument: cut spending in areas where it is inefficient and/or constitutes middle-class welfare, such as corporate welfare.

The majority of businesses in Australia benefit from corporate tax cuts. Yet out of $9.4 billion per annum dedicated to industry assistance, only $845 million has been earmarked in the budget for cutting. As the CIS' Emergency Budget Repair Kit argued, $8 billion in assistance programs could easily go.

Another example is charging high-income families for their children's public school education, as Dr Jennifer Buckingham argues. High-income families at present can access a higher rate of public subsidy for their children's education by choosing a government school over a non-government one. Charging $1,000 for these families would enable schools to access revenue, and per-child public assistance could be reduced for a saving of $250 million a year.

Some parts of family benefits could also be trimmed. The government's proposed paid parental leave scheme is a prime candidate, as Matthew Taylor has argued.

Another option is to reduce child care subsidies for higher-income earners. As the Child Care Rebate is currently not means-tested, all families are eligible for a 50% rebate on their child care fees up to an annual per-child cap of $7,500. Halving this cap would result in an absolute loss comparable to that which lower-income families will experience as a result of changes to Family Tax Benefits.

A fiscally-sustainable future means reconceptualising the role of government. In order to achieve this, we must all – lower through to higher incomes – go without for a while.

Trisha Jha is a Policy Analyst at The Centre for Independent Studies.