The LDP supports replacing all current welfare with a negative income tax that provides a basic standard of living and assistance to the working poor.
The LDP supports a society that fosters individual responsibility and civic institutions in preference to government funded welfare.
People who are healthy and capable should as far as possible provide for their own material needs through personal effort, thrift and financial independence. Where people are genuinely unable to provide for themselves they should be supported primarily through social institutions such as family, friends, their local community, religious groups and private charities.
Australians already demonstrate an enormous level of goodwill towards those in need through numerous voluntary organisations including institutions such as the volunteer bush fire services and surf life saving clubs.
Over successive generations the role of government welfare has shifted from being an ancillary service that supplements and supports community and family-based efforts, to full scale intervention that in many instances completely displaces civil society. In the process it has created many perverse incentives and dependencies that in some instances exacerbate problems rather than provide assistance.
There are currently 700,000 Australians of working age on the disability support pension. This number does not include those on unemployment benefits or over the age of 65. As a proportion of the working age population, the percentage of people receiving the disability support pension has more than doubled in the last 25 years in spite of improvements to work safety and general health trends.
Respected aboriginal leader Noel Pearson has complained that welfare dependency has in fact been destructive of aboriginal culture, society and self respect. Welfare handed out by government, without obligation from the recipients, was described as sit down money.
The criticisms of welfare mentality in the Aboriginal community ring true of the wider community. What started out as a system for assisting people in need has mutated into a system that prepares people for nothing except welfare dependency. The welfare system has grown into a self serving industry with whole government departments, consultants, lobbyists and companies all depending on large numbers of “clients” to justify their existence.
In more recent times political expediency has seen the expansion of so called middle class welfare through initiatives such as Family Tax Benefits and the baby bonus. In response to an expanding welfare budget, governments have at the same time found it necessary to means-test such benefits and phase them out as incomes rise.
When combined with the income tax system, effective marginal tax rates (EMTR) now commonly exceed 50% and in many instances reach 75% (even before considering other taxes like GST). Some families that take the initiative to earn an extra dollar will find that they get to keep just 25 cents or less. Whilst this problem has received lip-service recognition from the major political parties there has been decidedly little in the way of action to fix the problem.
Under the LDP 30/30 tax policy, for every dollar an individual earns over $30,000 they pay 30 cents in income tax and for every dollar they earn under $30,000 they receive a low income subsidy of 30 cents. Hence the LDP tax policy forms the core of the approach to government funded welfare support. What follows are the supplementary reform details specific to current welfare recipients.
Disability Support Pension
The existing disability support pension would be replaced with the general low income subsidy as outlined in the 30/30 tax policy. The LDP would use any savings from this simplification to provide grants to better fund existing private charities working in the area of disability support.
Existing unemployment benefits would be replacing with the general low income subsidy as outlined in the 30/30 tax policy. This subsidy would end the current process of harassing the unemployed. At the same time the LDP would increase the incentive for employers to create jobs by eliminating the minimum wage and allowing the labour market to operate freely. Combined, these measures would allow some wages to fall in areas of high unemployment whilst protecting the actual income level of workers.
The existing Family Tax Benefits part-A and part-B as well as the Child Care Tax Rebate and Baby Bonus would be replaced. However the LDP tax policy would recognise the additional cost of raising children with an increased tax free threshold of $6,000 per child for the nominated parent (usually the primary income earner) and a corresponding increase in the low income subsidy for families.
The aged would be eligible for the low income subsidy along with everyone else. Those that prefer to continue working will not be confronted by disincentives from the taxation system.
For those of pension age with no income apart from the low income subsidy, the low income subsidy will be topped up to the current pension level. However, in recognition of the introduction of compulsory superannuation in 1992 and of the increasing health and physical capability of older Australians, eligibility for this would be raised over time. For those born prior to 1945 there would be no change in the eligibility age. For each year of birth after 1945 the pension eligibility age would rise by one year. Thus, for example, somebody born in 1950 would be eligible for the top up when they turn 70.
For any individuals that suffer hardship, the LDP would support tailored assistance delivered by private charities and state governments in preference to blanket policies delivered by the Commonwealth..