So a huge argument has broken out in the first Evicting Nana thread with everyone, in fine libertarian tradition, labelling everyone else a socialist. I am reminded of a comment made the previous time we had this argument by “MemoryVault”.
Can we clear up a misconception you both seem to be suffering? In Australia, Age Pensions, bona-fide Widow’s Pensions, bona-fide Invalid Pensions (now Disability Payments), and Orphans Payments are NOT “welfare”. Okay?
Many, many decades ago, politicians more intelligent than the ones we have today, legislated for the introduction of a compulsory superannuation scheme to cover these payments. Every working Australian had 9% of their gross wages deducted, along with their income tax, from every pay, which was forwarded along with their tax, to the Australian Tax Office.
Up until and including 1971, the annual tax return form was titled “Income Tax and Compulsory Superannuation Scheme Return for the Financial Year xxxx-xxxx”, or words to that effect, in much the same way as today’s forms reference the Medicare Levy. In 1972 the reference to the compulsory Superannuation Scheme was dropped from the form, but TO THIS DAY that 9% compulsory “contribution” continues to be part of what is deducted as “income tax”.
At the time I tried to follow up on that argument – but only found this explanation of the pre-1980s/1990s position:
Traditionally, the main source of government provision for retirement income in Australia has been a flat-rate age pension, which provides a means-tested payment generally indexed to 25 percent of average weekly earnings. This pension has existed for several decades and will remain in place as a safety net for those who do not accumulate sufficient private provision under the new system. The pension is funded from general government revenue and has never been contributory or related to an individual’s previous income. Although the pension is means tested and, in that sense, regarded as a safety net, it is currently the main source of income for more than 60 percent of retirees.
That does seem to contradict MemoryVault’s version of events, but I suspect there is some fiscal illusion going on. I have heard the “I’ve paid my taxes all my life and now the government is paying me back” argument from too many people to simply dismiss it. Peter Saunders described this as being the “piggy bank” theory of welfare. Can anyone provide further information on this point?
So I’m wondering if that sort of argument was historically common in Australia to justify high marginal tax rates?
The other thing that I have found is that the primary residence has been excluded from means testing since, at least, 1947.
In the computation of the value of property for the purposes of this Part-
(a) there shall be disregarded-
(i) the value of any property which is owned by a claimant or pensioner or by his spouse and is
the permanent home of the claimant or pensioner
It isn’t clear why that exemption was first introduced – but I suspect politicians were sensible enough not to want to be evicting the elderly from their home then. At the same time the age pension may have been more tightly targeted than it is now.
Update: Squirrel draws our attention to the 1988 ABS Yearbook.
There was a further development of specific relevance to social security in 1945. The Commonwealth split the personal income tax into two components. One, the social services contribution, was to be used exclusively to finance social security cash payments. Revenue from the contribution was paid into the National Welfare Fund, from which all such cash payments were to be made, but there was no link between personal contributions and entitlements. The fund was supplemented by subventions from payroll tax and general revenue. In the event, the social services contribution was again merged into a single personal income tax in 1950. All cash payments are now made direct from general revenue.
I have also found a One Nation document (that may or may not be accurate in its detail) that corroborates MemoryVault’s version of the story:
1945 also saw the introduction of PAYE and the Social Services Contribution Assessment Act 1945-1947.
This collection was made easy by inclusion on the Income Tax Return Form. This procedure was followed until 1965 when the Social Services Contribution was dropped. The Levy was not. Incomes were rising towards 1950 and minor changes were made which allowed the decrease in the rate of progression on several occasions whilst the maximum of contribution was raised in July 1949.
Under Menzies tax reform package, the contribution and tax collection merged. This was brought about by Act #52 of 1950. The government could now impose taxation as far down the income scale as the Social Services Contribution.
The National Welfare Act#65 of 1954 decreed that appropriation would be made out of consolidated revenue which would be equal to the amount paid out of the National Welfare Fund. Thus it put to rest the idea that people were contributing to their age pension which was to be paid as their right without any means test.