Quotes of the Day

You'll see them on school days in the pricier parts of cities, reversing people-movers and four-wheel drives into the tightest of parking spots. Their little Lachlans and Ellies have been dropped off at school; the cleaner has the run of the house. Baristas awake! Half a dozen of John Howard's welfare mothers, some with prams and pre-schoolers, are squeezing around a couple of tables joined to hold the double-shot lattes, banana bread and babycinos that will in due course rest on six separate bills. They are an exclusive club, to be sure; some 3,000 wealthy stay-at-home mums—married to bankers, doctors or entrepreneurs who make $A250,000 or more a year—receive Family Tax Benefit (B). It's not as if they're desperate for the $A3,300 Howard channels their way. But they'll take it nonetheless, because "it's not welfare." Even housewives deserve a tax break. And we all know it takes a fortune to raise a child these days.

Labor wants to introduce an income test, denying such families the handout that has proven so versatile and so costly to the Budget's bottom line. Howard sees family payments as an important symbol (and a terrific way to rain money on key groups of voters). The Prime Minister describes Labor's proposal as "the thin edge of the wedge." Future Labor Treasurers, he warns, would define down definitions of "rich" and "wealthy." On the government's own figuring, lowering the eligibility limit to annual incomes under $A125,000 would save "less than $100 million." Each year the FTB system grows, as revenue is churned back into middle Australia. Rather than adjusting the tax scales, so that everyone gets a share of so-called "bracket creep," FTB has become a very conspicuous component of family accounting. This financial year, according to the Treasury, 40% of families will receive more in cash benefits than they pay in personal income tax.

For Howard, as he told the Menzies Research Centre last month, the FTB issue represents the great philosophical divide in Australian politics, between "a Labor party which thinks government should direct people's behavior and a Coalition which sees its role as letting families make up their own minds." That's strange, because Howard's policies have been quite prescriptive when it comes to certain families, such as those headed by sole parents.

The tightening of welfare rules means single mothers are obliged to work when their youngest child turns eight. As Labor's Tanya Plibersek points out, if Australian society chooses to pay mothers —including millionaire mums with 15-year-olds—for the full-time care they give their children, we can't choose only to pay mothers with partners. Or consider the many disincentives to work that have become entrenched in the tax and welfare systems. The withdrawal of certain (means-tested) benefits as income rises leads to high effective marginal tax rates. For some families in the middle-income tiers, it means they lose 70¢ for each extra dollar earned. So a second earner, usually a woman, is discouraged from seeking work. That may be O.K. for Howard's coffee mums, but for many women with education and skills, there is no effective choice at all. A tight labor market and an ageing society need their talents; if they don't return to work within a few years, even via a marginal attachment, they tend to be lost forever.

A new study of the tax treatment of families under the Howard government—and of the general thrust of two decades of tax reform—by Professor Patricia Apps from the University of Sydney is revealing. She found that the combination of tax cuts and additional family payments in recent years has produced a dual shift in the tax burden: the largest income gains are going to single-earner families and to those at the top of the earnings tree.

"In terms of real tax burdens," she writes, "a low- to middle-wage family with both parents employed full time now effectively works many more hours for the government than a higher-wage single-earner family with the same family income." Apps documents the squeeze on Middle Australia—paying for the increased benefits of those at the bottom and the tax cuts of those at the top. According to Apps family taxation now closely approximates so-called "joint taxation," a long-held policy ideal of the P.M.

The measures in Peter Costello's 11th Budget—particularly better child-care arrangements—show that the Howard government isn't completely deaf to concerns about female workforce participation. But the inadequacy of the changes to FTB rest on a simple truth: after a decade of constructing a family-welfare state on this scale, major improvements aren't likely to come from the architects. Labor leader Kim Beazley's support crew is mulling over the implications of the trends in tax and welfare. Beazley is now pitching to the middle; the tax burden, workplace insecurity, high petrol prices and interest-rate rises are the core of his crusade. It's also open season on Howard's welfare mothers.

• Tom Dusevic
• You'll see them on school days in the pricier parts of cities, reversing people-movers and four-wheel drives into the tightest of parking spots.