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Thursday, 31 August 1972
Page: 1098

Dr GUN (Kingston) - I should like to protest at the repeated absence from this House of the Treasurer (Mr Snedden) when any debate takes place over which the Treasurer nominally is in charge. This comment is not meant to cast aspersions on the Minister for the Army (Mr Katter) who is at the table and who, I know, has a profound knowledge of economic matters. As far as 1 know, apart from his own address when introducing the Budget, the Treasurer has not come into the House during the entire Budget debate. This time, we do not even have the Minister assisting the Treasurer (Mr Garland) in the House. 1 think it is a little rough that we cannot engage in meaningful debate with the Minister who presented the Bill or, better still, with the Treasurer himself. Most other Ministers come into the House when a Bill of which they are in charge is being debated. ] think that it is not too much to ask the same of the Treasurer.

The previous speaker, the honourable member for Boothby (Mr McLeay), posed a number of questions which I will not have time to go into in very much detail. It is interesting to note that he regards suggestions of help for urban development and public transport as being t> '

Mir Hurford - We will be drawing it to the attention of his constitutents

Dr GUN - No doubt. The honourable member for Boothby also made passing reference to the last national wage case. For some reason he tried to describe the Australian Labor Party's attitude. I do not know why he did that, because the Australian Labor Party was not a respondent or a claimant in the national wage case. I do not see what it had to do with us at all. But I do say that it is rather interesting that the honourable member refrained from mention ing the role of the Commonwealth Government in the national wage case. As everyone knows, that was a very shabby role indeed. It is small wonder that the honourable member for Boothby made no reference to it. As everyone knows, what actually happened was that the Commonwealth Government went to the Conciliation and Arbitration Commission and submitted that there should be no increase whatever in the total wage this year. It is small wonder that the honourable member for Boothby did not bother to mention that.

He asked a number of questions about where the money would come from to finance Labor's proposals. 1 suppose it is rather difficult for somebody with the wit, or lack of it, of the honourable member for Boothby to try to understand how these proposals would be financed when he thinks entirely within the framework of conservative thinking. I suppose he does not even really understand how his own Government has financed its proposals in this or any other Budget. I wonder whether he knows about the fiddle which goes on annually in the Budget Papers in respect of what is known as the Loan Consolidation and Investment Reserve. A book entry is made to convert what is in fact a large budgetary surplus into this Loan Consolidation and Investment Reserve which is lent to the State governments at the prevailing rate of interest. In this way the Commonwealth has managed to transfer all its debts, which were quite considerable at the end of the Second World War, to the State governments, which are now saddled with large debt burdens. The same applies to local governments. At the same time the Commonwealth Government has been able to finance all its public works out of revenue. By this fiddle the Government has been able to finance much of its own activities. But I doubt whether the honourable member for Boothby knows about that. I think we have to throw off all the shackles of conservative thinking. This will be possible only under a progressive government, which I hope will take office after the next election.

I shall make a few general remarks about the income tax schedule which is being amended under one of the Bills which we are debating at the moment. The Government has alleged that it gives greatest help to those in greatest need. The Treasurer produced a table which showed that the largest percentage reduction in taxation accrues to those on the lowest income. Of course, if that were the end of the story that would be very laudable. However, that is not the end of the story. If we have a closer look at the papers which were issued by the Treasurer with the Budget we see that the absolute reduction in income tax is greatest for those with higher levels of income. The same applies to the table which was produced by Professor Hogan, who is-

Mr Hurford - He is Professor of Economics at the University of Sydney.

Dr GUN - Thank you. Professor Hogan shows quite clearly that the most important parameter, namely the increase in after tax income, is greatest for those on the highest income. So, in this sense, this is a rich man's Budget.

Tonight I want to make some constructive criticisms. I will come to them in a moment. I do not want to make endless carping criticisms. I will be the first to concede that some very valuable innovations are contained in the Budget that was brought down a couple of weeks ago. The Labor Party believes that a complete overhaul of the taxation schedule is necessary. As my colleague, the honourable member for Melbourne Ports (Mr Crean), has pointed out, we believe that the people on the national minimum wage or thereabouts should not be paying any taxation.

I want to deal mainly with the question of taxation concessional deductions. I know that this matter is fraught with danger because when my colleague the honourable member for Melbourne Ports, merely mentioned as an example the sort of inequities that were taking place with deductions for life insurance, the Treasurer tried to misrepresent his remarks by saying that he would cancel those concessional deductions should he become Treasurer of Australia. Similarly, I suppose, we all remember the Treasurer having his fingers burned earlier this year when he flew a kite about taxing families rather than individual units within a family.

I believe that concessional deductions are highly repressive and must be looked at in a completely different light. I have taken out some figures which have been derived from the taxation statistics of 1969-70. I refer, firstly, to the total amount of concessional deduction claimed by various income groups - from the group earning $417 to $599 a year all the way up to the $30,000 a year and over group. According to the statistics, the greater the income the greater the amount claimed in concessional deductions. It increases with the amount of income. In other words, there is a greater total for educational, health and insurance deductions and for land tax. council rates, water rates and so on. I will not seek to incorporate in Hansard the details because there are quite a number of figures and I want to get down to more detail. For example, in the lowest income range of $417 to $599 actual income per annum, the average amount claimed in concessional deductions per taxpayer is $15. In the group earning from $2,800 to $3,000 a year the total amount claimed is $563. Those in the $20,000 to $30,000 a year bracket claimed an average of $4,453 a year which is a mighty big amount. I suggest that there is a lot of inequity and that a lot of people are getting away with perks and lurks.

Regarding medical expenses, I have taken figures out in relation to the man who earns about $60 a week - that is the person in the income range of $2,800 to $3,000 per year. In this case the average deduction for each person in that bracket for medical expenses - that is, for claims for medical and hospital fund contributions, doctors' bills and hospital bills minus Commonwealth and health fund benefits - is $113 a year. But in the $10,000 to $12,000 a year bracket the average deduction per taxpayer is $225 a year. In other words it is twice as much for the person on the lower income. 1: would seem, therefore, that the person on twice the income has twice the medical expenses. I suppose that that should mean that he is twice as healthy but, unfortunately with the medical system we have in Australia cost does not seem to be related to health or anything else. In fact, what these figures really show is that the person on a higher income can afford to go into a private ward of a hospital and pay a private specialist. I suppose we would not deny anybody the right to do that, but I wonder whether he should get this extra subsidy equivalent from the taxpayer for the right to do this.

If we go up into the very top income, bracket- that is, the $60,000 to $100,000 income bracket - we find that the average deduction foi medical expenses is $615 How can people in this bracket spend an average of $613? At that rate it sounds ti me as though everybody in that income range has had a heart transplant performed by a private surgeon, and 1 doubt whether that is the case. I think that in many cases the reason for this high figure might be that people in the higher income brackets declare, without having to substantiate it. a large amount for medical expenses ami they are not questioned by the Commissioner. 1 think this is something that could be looked at much more closely. However the position is even worse than that. I have said that the tax deduction from taxable income is twice as much for the person on $10,000 a year as it is for the person on $3,000 a year. If we look at the tax saving, the disparity is even more marked because the person on $2,800 to $3,000 a year claims a deduction of $113 and, at his marginal rate of tax, his tax saving is $24. For the person in the $10,000 to $12,000 a year bracket his $225 concessional deduction gives him a tax saving of $108. In other words, this is a subsidy from Com monwealth revenue which works out to b: 4 times as much for the person on the highe income. He receives 4 times as much from the Commonwealth government to go to a private doctor or a private ward as does the person on about $60 per week to go to a public ward or to be treated at a public hospital.

The same situation applies to educational expenses. The figures in relation to educational expenses are rather interesting because we find that there is a plateau as we go up the income range. Up to about the $4,000 a year range everybody claims between $72 and $82 per child per year. After that the rate starts to climb. I suspect the reason for that is that as people get out of the $5,000 a year bracket they tend more and more to send their children to fee paying schools and they spend more and more money on education. If we go back to our $60 per week man again, we find that he claims $79 per child per year, but the bloke on $10,000 to $12,000 a year claims $155 per child per year, which is almost twice as much. If we look at the tax saved, the person who claims a deduction of $79 from his taxable income at the lower level that I mentioned has a tax saving of $17, whereas the person on the higher income has a tax saving of $79, which is more than 4 times the tax saving of the person on the lower income. Frankly, I do not think it is politically possible for either the Australian Labor Party or the crowd opposite to do away with concessional deductions, but I do think it is possible to introduce some reform to bring about a greater degree of equity. I think what could be done is to allow a standard deduction which is something like the deduction given for dependants, except that it should be a flat deduction from tax payable.

If we look at the deductions for dependants, we find that the situation is a little fairer because everybody gets the same concessional deduction from taxable income. Everybody now can deduct $260 for the first child, irrespective of income. Unfortunately, the same inequalities arise because of the difference in the marginal rate of tax. The person with one child and earning $60 a week - that is, $2,800 to $3,000 a year - will receive a tax saving of $52. The man in the $10,000 to $12,000 a year range with one child will receive a tax saving of $125. Surely the fair thing would be to allow everybody the same deduction from tax payable, not only for dependants' deductions but also for other things such as medical expenses, educational expenses, council rates, water rates and so on. 1 think that if this were done we would be able not only to get some equity into the system but also to obtain a certain amount of extra revenue which we could use for selective benefits.

Today I have received from the Treasurer (Mr Snedden) answers to questions which I placed on notice. I have not sought leave to have them incorporated in Hansard because they will be included in the answers to questions upon notice in today's Hansard. But they point out the amount that could be saved under the type of arrangement that I have advocated. For instance, concessional deductions for children cost the revenue SI 70m a year. That estimate is based on income tax statistics for 1970-71 income year when the national minimum wage was $2,309 a year. At that marginal rate of tax concessional deductions represented a tax saving of $41.57 for the first child and $29.94 for subsequent children. What I am suggesting is that if this standard deduction from tax payable, at the marginal rate of tax for an income equal to the national minimum wage, had been allowed to everybody, it would have meant a saving to revenue of about $55m. If we applied the same principle to the wife's allowance, if we gave everybody a standard deduction from tax payable, at the marginal rate of tax for an income equal to the national minimum wage, instead of allowing a deduction of $312 for a wife, it would mean a tax saving of about $70 for the wife. If everybody received a tax saving of about $70 for the wife, based on the figures for 1970-71, there would be a saving to revenue of $18m.

I suggest that if this saving to revenue could be made we could spend the money on providing selective benefits to those most in need of them. I think that the family area is the most critical area of need. We could make a payment to large families where mothers have young children and are unable to work. These mothers could be paid a small wage so that they could stay at home and look after their young children or, if they preferred, they could go out to work. We might be able to provide selective benefits to the low income families so that their children could be sent to proper child minding centres, not just somewhere where the children are plonked in front of a television set all day. I think that this would be a very good way in which to rectify these social inequalities.

The same thing could be done in the case of tax deductions from tax payable for local government water and sewerage rates. There could be a standard deduction. The answer which I received from the Treasurer shows that $21m could be saved to revenue in this way. We could spend that money on selective benefits. We might be able to give money to the poorer sections in the outer metropolitan areas which, as honourable members know, have rate problems, or we might be able to give money to low income families or to pensioners to help them to pay their rates. The same principle could apply to educational expenses. There would be a saving to revenue of $23m a year, which I think could be used to give selective benefits to government schools or to poor parish schools in special areas of need. I think that perhaps I had better conclude on that note as I do not have time to start on any new matter.

Debate (on motion by Mr Giles) adjourned.

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