What’s wrong with churning?

Still the concern about churning does raise legitimate issues.

The right-leaning CIS wants to reduce churn by extending self-provision - for education, health, unemployment and other hardship. We’ve begun doing so by forcing people to make superannuation contributions. That will lower churn by reducing people’s future dependence on pensions. We should do more, but the CIS underestimates the difficulties in replicating the targeting of our existing system - and the bureaucracy that would be necessary for specific self-provision accounts. Just look at the bureaucracy engulfing super.

From the left of centre, ALP politicians Chris Evans and Craig Emerson proclaim the iniquity of higher taxes for those without children. Now call me old fashioned but if you want to get extra cash to families with children I reckon you’ve got to get it from people without children.

Still as Evans and Emerson point out, among people without children, those earning over $52,000 per year have received much larger tax cuts than those below.

These contributions from the left and right help highlight the need for vigilance in keeping family payments away from wealthy people.

We’ve increased churn and loosened targeting since 1988-89, not least in the 2000 tax package. (Back then churn was called “compensation for the GST”). In 2005 we extended childcare subsidies to rich people. By then we were already paying Family Tax Benefit B to 76 families earning over a million dollars a year and to nearly 40,000 families earning more than $100,000.

So, when they spot real problems, with workable solutions let’s pay attention to the critics of churning.

But let's not churn the baby out with the bath water.