The Howard government has given little real incentive to work

Hard-working Australians know all too well the diminishing financial returns that come from working a few extra hours or from a long-overdue pay rise.

The combined effect of tax and the clawback of social security or family benefits means there is little or no incentive to earn extra.

The latest research shows that 860,000 Australians are in this boat - losing more than 60 cents in each additional dollar earned in tax and the clawback of other benefits.

Three quarters of them are families, most on middle incomes earning between $30,000 and $60,000.

Among those losing the most - up to 87 cents in the dollar - are those on unemployment benefits moving from welfare to work.

The worst affected are families with older dependent children receiving the Howard Government's Youth Allowance. An estimated 40,000 lose up to $1.10 for each additional dollar earned - in other words, they go backwards.

This group of 860,000 who lose between 60 cents and $1.10 of each extra dollar earned as much as those who are on the top marginal tax rate losing 47 cents of each additional dollar earned.

With these figures you can see why low and middle-income earners are sick to death of having Mr Howard and Mr Costello digging into their pockets when they earn a bit extra.

Parents in particular, don't sacrifice family time to have the Howard Government pocket 60 per cent or more of their extra earnings.

Tony Abbott recently weighed into the debate and in the process brutally exposed the Howard Government's punishing tax record.

Desperate for political cover, he claimed all the problems date back decades.

The truth is they don't.

Just two and a half years ago, Australians were promised improved financial incentives to work harder as part of the New Tax System reforms.

A quick flick through the lengthy policy document reveals that a key principle of the New Tax System was 'incentive' with 'greater reward for effort'.

Indeed, the entire first chapter was devoted to the problem of the tax and social security system conspiring to destroy incentives to work, and how the ANTS reforms would fix it.

But as Labor predicted, the package has become a burden on average Australians - and not just because of the 10 per cent GST on nearly everything they buy.

A recent paper by the National Centre for Social and Economic Modelling concluded that the ANTS reforms made little difference to financial incentives.

Indeed, close analysis of figures in the paper reveals that in 2002 the number of earners losing more than 60 cents in each additional dollar earned (due to tax and the clawback of benefits) was approaching double the number before tax reform!

Confronted in Parliament with the burden being placed on low-and-middle income Australians who attempt to earn extra, the Treasurer brushed it aside with scorn.

Peter Costello's response was a throw back to the Marie Antoinette quote: "let them eat cake". He said the question was based on a "falsity" and "wasn't a serious policy question at all".

The fact that the next Leader of the Liberal Party is in denial about the problem should make average Australians sceptical that Mr Abbott is genuine about fixing it.

The truth is, Tony Abbott doesn't know what corner he is boxing from - he is all talk and no pants.

This Government is taxing Australians more than any other in our history, it has allowed a massive decline in bulk-billing, forced families to pay more for medicines, and made it more difficult for their kids to get a quality education.

As we watch the HIH inquiry unfold and see the way in which corporate high-flyers have lived high on the hog unchecked, it is hard to excuse the Government's treatment of ordinary hard-working Australians.

Under the Howard Government the benefits of economic growth have been delivered only to the few.

Labor offers an alternative.

Labor's central task in Government will be to make sure the opportunities of strong economic growth are fairly shared by those who work hard.

Farsighted changes to tax, employment, and education policies are needed to ensure everyone gets a fair go.

People must be rewarded for their work - this is a particular priority for Labor.

Families and other working Australians would probably identify that a key reform principle should be that people should keep the majority of their extra earnings.

There is plenty of sense in that. The task is to find ways to make that happen.

Labor will not shy away from the task.

That is why since 1998 Labor has advocated tax credits to restore financial incentives for Australians who work hard.