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Why billionaires like Gina Rinehart should get the $300 electricity rebate

From Medicare to beer taxes, there are many examples where rich people get the same benefit or pay the same price as the poorest in society.

The Albanese government has copped some flak for its decision in the budget not to means test the $300 electricity rebate, which will be paid to all Australian households, regardless of their income or wealth.

Australia’s billionaires will get $300 off their electricity bill as will cash-strapped pensioners, low-income earners and the unemployed.

In some quarters, this is seen to be unfair with the richest people in Australian society getting the same financial assistance on the important and essential cost of electricity as the poorest.

Gina Rinehart
It's cheaper and more efficient to give the electricity rebate to every household, including billionaires like Gina Rinehart. (Source: AAP)

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At face value, this is a fair criticism. But dig down into the factors behind the decisions and it is clear they are misguided. And indeed, the Australian tax and social support systems are riddled with such ‘unfairness’.

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Criticisms of the across-the-board electricity subsidy take no account of the administrative costs or the threshold that would disqualify ‘rich’ people from getting the subsidy.

Would a pensioner in a $2 million house qualify? Would a 30-year-old lawyer on $175,000 a year who rents and has $40,000 in HECS debt get the subsidy?

Imagine trying to work that out!

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It is clearly cheaper and more efficient just to give the electricity subsidy to every Australian household than it is to have some government official figuring out whether you or your next door neighbour or the family around the corner get the electricity subsidy based on last year’s income or some such other measure.

The economy and provision of government services have many examples where means testing does not apply with rich people getting the same benefits or paying the same price as the poorest in society.

Think of Medicare. Whether you are a billionaire or a pensioner, you get the same access to health care. So too with the cost of pharmaceuticals – the price of those prescription medicines is the same regardless of your income or wealth.

Maybe a rich person should pay more, something close to the market price, than a pensioner for some medicines whose cost to the government can run into the tens of thousands of dollars. But can you think of the huge costs associated with working out who should be the cheap script and who should pay full price for a drug that might save lives?

It’s similar for a range of taxes.

A poor person driving an old beaten-up VW pays the same excise per litre of petrol as a millionaire driving their Ferrari or Rolls Royce. Is that fair?

Even the dollar amount of the excise paid on tobacco, wine and beer is the same for a poor person and a billionaire.

This is the way it is and should be because it would be absurdly expensive, complex and time consuming to have it any other way.

The good news is that there are solutions to this unfairness.

It is in the form of how the government that can inject fairness into society. This is where the progressive nature of the income tax scales and welfare provisioning come into play big time.

For example, someone working part-time casual work earning $18,200 a year pays zero income tax.

With the next tax scales that take effect on 1 July 2024, this is in contrast to someone on $100,000 a year who pays just under $23,000 income tax or 23 per cent of their pay. The high flyer on $500,000 a year who pays $196,000 income tax or 39 per cent of their total income in tax.

This tackles the issues of fairness in an efficient and relatively easy-to-administer way.

And it works!

It is a similar story for those who qualify for other forms of government assistance. Access to JobSeeker is only for the unemployed, not those in a high-paying job.

All of this goes to show that while the general approach of the government to payments can be seen as ‘unfair’, it is the best and most efficient way of helping those in need and the extent of any unfairness is clawed back through the income tax and welfare payments systems.

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