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Thursday, 25 August 1983
Page: 278


Mr PUNCH —Has the Treasurer's attention been drawn to reports that Mr Eric Risstrom has claimed that people on an income of $15,000 per annum face tax increases resulting from the combined effect of the May measures and the Budget of up to 56 per cent this year? Do these figures give a correct indication of the effect of these measures on Australian families?


Mr KEATING —I understand that Mr Risstrom, of the Australian Taxpayers Association, asserted yesterday that the 1983 Budget, combined with the measures I announced in the statement of 19 May, would bring about large increases in tax for middle and lower income groups. He backed his assertion last night on the Nationwide program with a reference to a married taxpayer on $15,000 in 1982-83. He said that such taxpayers with a 7 per cent higher income in 1983-84 would pay a rate of tax some 16 per cent higher in 1983-84 than in 1982-83, after taking account of the loss of the rebate on health insurance and the 1983-84 Medicare levy. He was not saying that the rate will rise by 16 percentage points; rather, he was saying that it will rise by a sixth-that is, from 13 per cent, I presume, to 15 1/2 per cent.

Although I do not have the exact assumptions employed by Mr Risstrom, I have no reason to doubt the arithmetic accuracy of the calculations. However, the accuracy of the calculations is not the real issue. The real issue is the meaning, if any, of such calculations. Mr Risstrom's analysis is very unsoundly based. The first example takes account of the tax subsidy provided on health insurance payments in the first year but does not take account of the insurance payments themselves. In contrast, in the second year the Medicare levy is included in the tax estimate which is produced, which is in a sense directly comparable with insurance costs which Mr Risstrom chose to ignore in the first year. To put it simply, Mr Risstrom's computer has turned out a figure which gives a totally misleading view of the effect on families of the Government's Medicare arrangements. In fact, when health insurance costs and the tax arrangements are combined we find that there will be a decline, not an increase, in the total cost per dollar of income for a taxpayer in Mr Risstrom's example. Mr Risstrom has given other examples which take into account the alleged loss of housing loan rebates. He appears to have ignored not only the fact that many low income taxpayers will continue to be eligible for a rebate but also the benefits of the Government's first home ownership assistance scheme.

There is a general problem with Risstrom-type analysis even when more properly thought through. In short, focusing on the percentage change in tax rates or a small group of changes ignores the wider picture and can provide very misleading results. It has been Mr Risstrom's stock in trade in recent years to produce astonishing percentage changes in tax rates. Whenever the tax threshold does not move fully with incomes it is easy enough to produce enormous percentage changes at the lower income levels which in absolute terms mean only a few dollars a year. These results may look good in the Press but they do not faithfully indicate changes in tax burdens or the overall well-being of taxpayers. They do not become imbued with sense simply because Mr Risstrom pushed a button on his computer.

Real aggregate household disposable income is a better indicator of general community well- being in terms of the resources available to citizens for their discretionary use. Real disposable household income is expected to grow in 1983- 84. I hope that when Mr Risstrom decides to hit his computer button again he does so taking full account of the impact of the Government's measures and has the decency to mention the fact that changes in tax arrangements for health insurance are in fact a substitution for health insurance payments which were previously paid by people to health insurance funds.