CultureWatch

Bill Muehlenberg's commentary on issues of the day...

The Family Vote

Feb 23, 1994

As the Federal election nears, both major parties are claiming to be the champion of the “battlers”. Of more importance is whether either party will do something for struggling families, the real battlers. After thirteen years in office, the Labor party has shown how disinterested it is in the needs of Australian families.

What about the Coalition? A group of about forty Coalition members known as the Lyons Forum have just released a booklet entitled “Empowering Australian Families.” The booklet comprises the findings of a number of written submissions and public hearings held last year. While a good start, it unfortunately only appears as an outline, in need of much more detail.

The recommendations and policy proposals are also fairly general in nature. In the area of macroeconomic reform, for example, two major suggestions are briefly discussed: family unit taxation and taxation concessions.

While we can be grateful that one party is starting to canvass these important issues, one wishes that greater detail were forthcoming. Perhaps it is in the works – I do not know.

Let’s consider what is being proposed, especially the Family Unit Taxation (FUT) model. While any move to bring financial equity to traditional families is welcome, there are some shortcomings to the FUT model, shortcomings which can be overcome by a Homemakers Allowance (HA).

The FUT, usually based on the French model, splits a family’s income between parents and children. The reason why so many are calling for changes to the current tax regime is that it now economically discriminates against mothers who choose to stay at home. The FUT is meant to overcome this bias, at least in part. However, it will continue to benefit two-income families with dependent children (unless both parents were on the same marginal rate of taxation, in which case no advantage would accrue). Thus FUT provides no real incentive for parents to provide full-time care for dependent children. The HA would do just that.

A similar means, Income Splitting (IS) is also defective. IS simply splits income for taxation purposes between the parents, not the children. But a number of studies have shown that IS tends to discriminate in favour of the rich. For example, one study found that a single-income family on $60,000 a year could have its tax reduced by up to four times more than a family earning $26,000.

The HA, which will pay an amount, say $130 a week, to all full time carers of children, will provide real tangible assistance for families where one partner stays at home with the children. The FUT and IS models may give money to spouses, but it can be spent as they choose, including putting their kids in day care. The purpose of the exercise is to really allow parents the choice to look after their children at home in an economically viable manner. Only the HA seems to fully cater for this.

To critics who argue that the HA is just a bribe to keep mothers at home, we reply by saying it simply gives them real choice. They do not have to take advantage of the offer if they would rather be in the paid workforce. The option of a HA simply restores choice to the equation, choice that has long been denied many families.

Hopefully when the Coalition in general and the Lyons Forum in particular starts putting meat to the policy bones, more thought about the advantages of the HA will be included. The HA may not be a panacea, but it is not competing against any other panaceas at the moment either.

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