Negative Income Tax – An alternative to the welfare system?

I’m currently on holidays and have decided to spend my time productively, watching Milton Friedman’s hit 1980s series Free to Choose. About two years ago, I stumbled across a copy of the companion book for this series in an OP shop. I quickly grabbed hold of the book and guarded it in case someone else wanted to buy it. Surprisingly, the book looked like it had been on the shelf for a while and it did not create the kind of excitement used copies of Harry Potter can cause. The bewildered shopkeeper seemed surprised at my excitement. On another another occasion a staff member at an op shop seemed amazed when I was clearly excited buying a TI-84 programmable calculator for only $10.

Anyway, Friedman in an episode about the welfare state raised the prospect of a negative income tax. I have provided a link to information on this idea but basically instead of having welfare payments and a massive welfare bureaucracy to administer it, you would instead get paid the equivalent of your tax free threshold and the low income offset in cash if you weren’t working and this would be phased out the more income one earns. The idea is that this would remove many of the perverse barriers to work that the interaction between the welfare system and the tax system currently produce. It would also be dramatically cheaper, Centrelink and the Employment Services industry would be largely abolished leaving only minimal paperwork to confirm how much income one earned.

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Lords of Poverty

I’ve just finished Graham Hancock‘s 1989 classic “Lords of Poverty” and recommend it to anybody interested in the working of the international aid bureaucracy. Hancock is scathing in his assessment of international aid agencies such as the United Nations, bilateral aid agencies (eg US AID), development banks (eg World Bank), and the IMF, and concludes that they haven’t just made a few unfortunate mistakes but they are irredeemably broken and need to be abandoned.

I found a few of his examples to be overly harsh, but found his thesis to be generally persuasive. Instead of trying to review his themes, I think it best to provide some extended quotes, and then encourage you to read the rest…

“This is how the game works: public money levied in taxes from the poor of the rich countries is transferred in the form of ‘foreign aid’ to the rich in the poor countries; the rich in the poor countries then hand it back for safe-keeping to the rich in the rich countries. The real trick, throughout this cycle of expropriation, is to maintain the pretence that it is the poor in poor countries who are being helped all along. The winner is the player who manages to keep a straight face while building up a billion-dollar bank account”

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Welfare State of Mind

From the UK comes this heart-wrenching story of a family “too fat to work”.   These poor souls – who through no fault of their own weigh a combined total of over 520kg – receive a paltry £22,508 (around $A50k) each year, and are having trouble coping.

Fat family

Naturally, they want more money (emphasis mine):

Mr Chawner said: “What we get barely covers the bills and puts food on the table. It’s not our fault we can’t work. We deserve more.”

After all, it’s not their fault they’re fat:

“We have cereal for breakfast, bacon butties for lunch and microwave pies with mashed potato or chips for dinner,” Mrs Chawner told Closer magazine.

“All that healthy food, like fruit and veg, is too expensive. We’re fat because it’s in our genes. Our whole family is overweight,” she added.

And it’s not like they’re lazy – they lead very hectic lifestyles:

Emma, said: “I’m a student and don’t have time to exercise” she said “We all want to lose weight to stop the abuse we get in the street, but we don’t know how.”

So, next time you’re doing it tough, spare a thought for the Chawner family, who can barely put food on the table.

UPDATE:  Seems this family has form.  Having achieved 15 minutes of fame for their daughter’s disastrous X-Factor audition, they were in the news again recently, after getting evicted over loud and horrible singing! (more below the fold)

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Quote of the Day

You’ve probably heard of Nadya Suleman – the US mother who recently gave birth to octuplets.  I just stumbled on this story, and found it quite amusing.  She had told NBC News that she was not receiving welfare, but it turns out she receives $490 a month in food stamps, as well disability assistance for three of her first six children.  Her publicist (!) provides the money quote, as he explains:

“In Nadya’s view, the money that she gets from the food stamp program … and the resources disabilities payments she gets for her three children are not welfare,” he said. “They are part of programs designed to help people with need, and she does not see that as welfare.”

It’s only welfare if you don’t need it…  Priceless!

Paid Maternity Leave a Right?

One of the reasons I’m not so keen on this new push for a bill of rights:

Paid maternity leave is a basic human right, Sex Discrimination Commissioner Elizabeth Broderick says.

A national scheme was long overdue and a pressing issue for the two-thirds of working women not able to access paid leave, she said.

Life, Liberty and Property… and paid maternity leave… and cheap childcare… free healthcare and education, obviously… and I reckon everyone should get one free movie pass with their tax return.

It’s funny that the “baby bonus” will now be means tested, at the same time as people are talking up paid maternity leave.  They’re so confident that they’re already haggling over how much they should get:

The Human Rights and Equal Opportunity Commission’s submission to the Productivity Commission inquiry has proposed a scheme which provides 14 weeks paid leave for mothers and two weeks for the other parent.

The other parent?  Do you think they mean the father, or am I being non-PC?

The commission is also proposing that after two years’ operation, the scheme be independently reviewed and a second stage introduced, entitling mothers to a total of up to 48 weeks paid leave.

Only 48 weeks?  Surely they need a couple years – or at least until their child reaches a reasonable childcare age.