Problems of tax/welfare churn

Published in Business Spectator on 8 October 2009 under the title “We’re wasting billions on tax churn”. Written in my capacity as Research Fellow at the Centre for Independent Studies.

The Australian welfare system  including health, education and handouts  costs more than $250 billion per year. Some of this is redistribution from the relatively rich to the relatively poor. However, about half of the welfare is pointless ‘churn,’ where the same person both pays taxes and receives welfare benefits.

Some of this churn is ‘cash churn’ where people both pay tax and receive cash from the government. But the bigger problem is ‘services churn’ where middle- and high-income earners pay tax and receive government-subsidised health and schooling services.

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