Charity is no substitute for justice

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One of the stranger reactions to franking credit reform was Prime Minister Morrison's claim it 'undermines the incredible work done by charities across Australia, including the fight against cancer', backing up Cancer Council Queensland's assertion that 'Two of our major donors ... have advised CCQ that they are unlikely to be in a position to donate if this policy is introduced.' CCQ has since withdrawn its submission on this issue but the government continues to correlate franking credit reform with the erosion of philanthropy.

Man representing 'big philanthropy' gives money to charity instead of the ATO. Cartoon by Chris JohnstonFor the record I support the proposed reform of franking credits. It is not, as some mischievously claim, a tax. It is the removal of a tax rebate that is currently provided to some wealthy retirees even though they are not actually paying the tax they are getting the rebate on! It's already confusing but it doesn't help when the waters are muddied with outright falsehoods. This is well explained by my Per Capita colleagues Emma Dawson and Tim Lyons in a recent opinion piece.

What I want to reflect on here though is the reasonable question as to whether the purported impact on philanthropy cited above should, in general terms, be a consideration when weighing up public policy.

'Philanthropy', muses advertising agency owner Bert Cooper in one of the early episodes of Mad Men, 'is the gateway to power.' This is a rather cynical view of the act of giving but it is not without some truth in some cases, namely when the already powerful use discretionary funds to promote their own interests instead of the public interest. Philanthropy is considered primarily as a gateway to doing good in Australia. The work of charities and not-for-profits is highly respected and valued.

I say this as someone who has worked in the community sector for most of my adult life, including 17 years with Vinnies, 12 of which I served as the national council CEO. What I learned was that philanthropy is carried out not only by wealthy individuals but by people who are seriously struggling to make ends meet; people who, having gone through hard times, decide to give what is in effect a massive chunk of their meagre incomes, not as a paternalistic act of charity, but as a powerful act of human solidarity. What it made me ask though was how we arrived at a situation where charities have become the default mode of delivering essential social services.

The excellent work of charities, including the generous work of volunteers, should not be a means of letting governments off the hook when it comes to fulfilling their responsibilities to properly fund, and take responsibility for, essential services. Listening to the stories of people who bear the brunt of inequality, I learned that people do not want to have to rely on charity; they want to be able to count on justice. And charity is never a substitute for justice.

But it is constructed precisely in this way when governments abrogate their responsibilities. And along with this construct comes the perverse notion that discretionary philanthropy could be a substitute for compulsory taxation. At a time when the ATO reports that a third of large Australian companies paid no tax, despite benefitting and profiting from publicly funded infrastructure, this position was eloquently refuted by Dutch historian Rutger Bregman at Davos recently.

 

"The fundamentals of a fair society are the responsibility not of charity but of government."

 

How do we, as a society, determine whether something is essential enough to be guaranteed public funding, rather than being dependant on discretionary philanthropy? We would recoil at the thought of our armed forces needing to depend on philanthropic donations in order to do their job. We are fine with the thought of being able to make donations to political campaigns but would find it rather weird if, for example, the Office of the Prime Minister needed philanthropy to properly function. Governments provide significant funding for health and social services, including homelessness services, but we seem to accept as a society that for these areas of public good to come even close to meeting public need we need to significantly augment public funding with discretionary philanthropic funding. Why?

The fundamentals of a fair society are the responsibility not of charity but of government. Government is the chief means by which we can collectively achieve what we cannot achieve alone: our infrastructure, including our social infrastructure — education, health, housing, social services, transport. Big businesses sometimes use the argument that they are generous philanthropists and therefore should be spared the unwanted scrutiny regarding their failure to pay taxes (or, in some cases, workers!). Philanthropy is not a substitute for progressive taxation. And it is not an excuse for wage theft.

Neither tax nor social expenditure is discretionary. The market idolaters constantly remind us that you get what you pay for and that we are all consumers who should pay only for what we want and can afford. They dismiss anything else as rank socialism. But as the 2018 World Inequality Report notes: 'Economic inequality is largely driven by the unequal ownership of capital, which can be either privately or public owned ... Since 1980, very large transfers of public to private wealth occurred in nearly all countries, whether rich or emerging. While national wealth has substantially increased, public wealth is now negative or close to zero in rich countries. Arguably this limits the ability of governments to tackle inequality ...'

The reality is that our society works best when we collectively ensure that the essentials of a good society are not left to the market but are guaranteed by government. Hence the well-established belief that no child should be denied the highest quality public education and that no one should be denied the highest quality healthcare. Sadly, these are struggles that continue but the level of public support for these propositions is high. When we allow government to abrogate its responsibilities to the people, we find (in my view, false) comfort in the thought that charitable organisations will fill the gap.

But what kind of society are we allowing ourselves to become in the process? We have seen from recent history that government outsourcing of essential services to the not-for-profit sector is often simply stage one in the trajectory that leads to the responsibility (and the public funding) going to for-profit providers. A strong civil society, with diverse movements and organisations large and small, is essential to a robust democracy. We should protect and support the right of civil society organisations to engage in service to the community, social activism, research, and advocacy.

Civil society organisations are particularly well placed to provide a space for people to have a voice, especially the people who are described by the Indian writer Arundhati Roy as being 'deliberately silenced and preferably unheard'. These organisations should feel safe to speak and amplify the truth and should not feel the need to self-censor because of concerns about the withdrawal of funds by either government or private donors. Philanthropy can be a real force for good, but it does not replace the role of government doing its job.

We get what we collectively pay for. When government walks away from its responsibility to support and protect the wellbeing of its people, we lose the right to democratically determine what we want to collectively pay for. If corporations and high wealth individuals are not kicking in their fair share it means there's less in the common pool to make sure no one misses out on the essentials of life. In the meantime the private stashes, some of them safely offshore in tax havens, fatten up nicely.

The 2018 Social Progress Index saw Australia slipping from fourth to 15th place over two years, a decline attributed in part to the concentration of political power among the wealthy along with unequal access to health and education. Nobody wants to inhibit philanthropy, but it is not the starting point for ensuring that we arrive at a fair society.

 

 

John FalzonDr John Falzon is Senior Fellow, Inequality and Social Justice, at public policy think tank, Per Capita. He was national CEO of the St Vincent de Paul Society from 2012 to 2018.

Topic tags: John Falzon, charity, social justice

 

 

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Existing comments

A terrific article. Thanks John. One minor point, you attended the Dedman Plan 70th Anniversary Celebration in 2015 that was organised by Bill Mitchell. As anyone who attended that meeting must now understand, the Federal Government is NOT funded through taxation. Such an argument becomes an excuse, "We can't do anything because those nasty companies won't pay tax". You know and I know that the Federal Government is quite able to address poverty without relying on some spiv of a CEO to insist his company do the right thing. There are many other reasons for tax and Government should continue to chase these companies to ensure they do what is right. However, it is a dangerous and ultimately futile argument to run that we can't do anything until this tax is paid.
Warren Ross | 22 March 2019


I think you pricked the contentious philanthropy balloon well and truly there, John. It is a pity we are not moving closer to the social welfare models of Scandinavia. Instead we seem to be moving more towards the model of the USA, whose public health, welfare and public education systems are deplorable. Much tax deductible corporate philanthropy seems to go to the Arts, which is, in one way, a good thing, but, in another, does not really help people living in poverty and often homelessness on the fringes of our society. Jesus railed against the iniquity of the rich of his time, who ignored the very real poverty which existed outside their gates. Outsourcing essential public services, such as the former national employment service, to private, including for profit providers, who often achieve very little, is a retrogressive step. We need politicians of real insight and vision in these times. We will only get them if we hold the current lot to account.
Edward Fido | 23 March 2019


Thank you John for a a great article on philanthropy and how the super wealthy use it to avoid paying their fair share of tax. This is a very important topic that needs to be considered with more wide-ranging public discussion than what it is. The political economy of social justice is largely overlooked by the main stream media. And in addition, conservative politicians support philanthropy of the super wealthy to justify not taxing them adequately. An important quote in John's article is: "The fundamentals of a fair society are the responsibility not of charity but of government". Responsible governments should assess the real needs of the population and then organise a fair taxation system based on what taxpayers can pay. Discretionary philanthropy is not a fair way of attempting to meet the needs of our society. Frequently, the institutions that are receiving the benefits of philanthropy are those involved with the arts and not those attempting to provide economic justice for members of society. Australian governments have failed to do this. The attempt by Kevin Rudd to introduce a mining tax initiated an incredible response from the executives of the mining corporations and the idea was dropped by Joe Hockey when he became treasurer. I think it would have been preferable to have introduced a wealth tax that applied to all sectors of the community and/or a Robin Hood Tax that applies in many European countries that is a small tax on the movements of large sums of money by the large corporations. The money raised from this tax funds programs to alleviate poverty and to protect the environment. The fact is that the large oil corporations operating in Australia made profits in the billions and many paid not tax at all. This is surely an obscenity of huge proportions! I think that we could learn from the Norwegian model. It makes the large corporations pay their fair share of taxation and its citizens enjoy exceptional social services. Why cannot this happen in Australia if we sincerely believe in a fair go for all?
Andrew (Andy) Alcock | 23 March 2019


I wish to mirror the views expressed by John and the other commentators .Sadly the advent of neo liberal policies where "the Market rules" , have seriously impacted the social justice role of governments. Demonizing terms like "dole bulgers" , "welfare cheats" as well as "Middle Class Welfare" have become stock in trade of those who think the terrible U.S. system works best. Sadly too many of the wealthy think charities should bear the burden, while they use creative accountants and tax lawyers to rort the system. In the end, they can't take their wealth with them anyway. Jesus was absolutely scathing in His attack on this class of people in His day. I would like to see our Church leaders take a far stronger role in protesting this rise in inequality in our society...but I will not be holding my breath!
Gavin O'Brien | 25 March 2019


John many retirees on very modest incomes are very heavily affected by this change to the long existing situation. It is certainly not just the wealthy as you infer. I suggest it may be equitable if retirees earning less than say $50000 per year be exempted by the changes. I am a self funded retiree with assets which just take me outside the assets test for minimum pension. This change will only require me to dip into more capital annually to maintain a modest lifestyle
peter burke | 25 March 2019


"We would recoil at the thought of our armed forces needing to depend on philanthropic donations in order to do their job. " We are already being asked to give charity to the troops. Our local IGA store asks people to buy packages of Vegemite, TimTams etc. to send to our troops overseas! Apparently the coffers of the Defence Department do not run to such luxuries.
Janet | 25 March 2019


Agreed, private charity is not enough. Tax avoidance is a problem. But the perennial question is how much should government be involved. Mackenzie and Edridge’s 2008 report into youth homelessness largely blamed no-fault divorce and single parenting, noting “few would seriously want to reverse these social changes.” So behavioural changes which cost society nothing are rejected, while communal strategies costing billions are promoted by ever-expanding charities. Lyndon Johnson’s War on Poverty succeeded only in creating a permanent underclass: “The welfare state has done to black Americans what slavery couldn’t do…destroy the black family” (Black economist, Walter Williams). A US study into charity, “Who Really Cares” by Arthur Brooks, concluded that religious people were more charitable than nonreligious people despite earning on average 16% less; conservatives were more generous than liberals despite earning on average 6% less; and “People who think the government should redistribute income are less likely to donate to charity than people who don’t think so.” That’s unsurprising. Rousseau, who abandoned all his five children, thought the State should take over personal responsibilities. And spendthrift Karl Marx impregnated his unpaid maid, Lenchen, then rejected young Freddy and made him enter via the kitchen door when visiting his mother.
Ross Howard | 25 March 2019


I believe you are absolutely right, John, when you argue that, "The fundamentals of a fair society are the responsibility not of charity but of government." At present in Australia we have a two-tiered health and education system, where the wealthy do very well at great cost to the poor. And people on low to middle incomes are not benefiting from the constant rises in company profits. Every person deserves enough income to meet their daily needs without having to rely on charity. Unfortunately this is simply not happening in Australia today. Governments are in the best position to change this terrible inequity.
robert van zetten | 25 March 2019


I admire John for his work leading SVdP but while I agree that philanthropy should not be used to impact on public policy, he may be overstating the issue. But he raises many interesting points. I don't think governments duck the issue. Federal Governments of either stripe place great emphasis on social security and welfare, which comprises 38% of the Budget. Most of the rest is an array of other non-economic expenditures but especially health, education and payments to the states and herein you have 90% of the Budget. It would be well nigh impossible for any government to cover every single problem in social welfare and I guess this is where such worthy organisations as SVdP come in. However, many of these organisations (SVdP an exception here) receive substantial funding from government anyway. So, I think it is not an either/or, but a role for both. On philanthropy, many like to give (and why not!). That it is a tax deduction means that the government effectively provides a portion, and it incentivises the individual to give more than they otherwise would. I think it is an overstatement to claim it is a substitute for compulsory taxation. On business and taxation, the ATO corporate report noted that about one third of companies paid no tax in 2016-17. But ATO noted there are valid reasons for this (eg they made a loss, carry forward of losses etc). I think for 2017-18 the numbers are much higher and a significant contribution to the Budget turnaround in the MYEFO. I am unaware of business putting the argument that philanthropy as a reason for not subjecting their tax liabilities to scrutiny. On franking credits, two problems. Firstly, it is inequitable across the superannuation sector. If you are in an industry fund, my understanding is that you will still get the benefit of the franking credits. But if you are in an SMSF, nothing. It thus breaches the equity principle in taxation. It should be across the sector, and not favour one group. Secondly, for those heavily dependent on superannuation but having insufficient funds there, loss of the credits will impact. There are better options. Perhaps you do away with franking credits. Or leave as they are and increase the tax that Morrison introduced on superannuants above a certain level, and have it apply across the board.
Bill Frilay | 25 March 2019


A splendid article with some impressive responses. Two caveats: the arts philanthropy referenced here often goes to support 'high culture' aficionados and their projects, usually classically European and restricted to opera and ballet, while the experimental arts languish perennially in underfunded poverty. A former Arts Minister, George Brandis, regularly ignored the application and consultative process for arts funding and used his discretionary powers to privilege the art modalities that he valued. Secondly, we Catholics operate a two-tiered school system: one for the lower middle-class and another for the privileged. Not only that; our inner-city systemic primary schools are now almost exclusively feeder-schools for our inner-city independent schools as well as others with no fondness whatsoever for the kind of just political economy that John Falzon so passionately and eloquently promotes. Years ago I researched a PhD showing that Catholic schools would be better off in the public sector. In return for full-funding, which is almost what they universally attract throughout the OECD, they would have to take any child desiring their educational philosophy, which, incidentally, is based entirely on the Catholic Social Teaching that underpins John's argument. Even though many politicians I interviewed favoured it, the Church did not respond.
Michael Furtado | 25 March 2019


It begs the question, Are Charities part of the solution or simply part of the problem? The critique of Government responsibilities is a valid one but I'm left wondering what responsibility for enabling Governments and the perpetuation of poverty do Charities see in their own practices?
Liam Clancy | 26 March 2019


As somebody who has been at Vinnies for 17 years, John Falzon May be interested to learn that some of us volunteers at Vinnies do not share his enthusiasm for the proposed change to franking credits. We are not wealthy. If we were, we would be able to use franking credits to reduce tax on other income, but there is no other income. One example is a man whose annual income will be reduced from $30,000 to $26,000. He will no longer be able to afford his round trip of 30 Kms from home to Vinnies in a country town, so Vinnies will lose a volunteer. The result is that a person who has tried to provide for his own retirement under existing rules while at the same time help needy people through volunteer work at Vinnies, will now not be able to do so, and may need help himself. His sense of a purpose in life will be replaced by a sense of uselessness. He has volunteered at Vinnies for 22 years, paid tax for 65 years, and now is referred to as a wealthy non-taxpayer by Shorten and Co. And John Falzon supports this!
Joe | 29 March 2019


If you are going to quote incomes, Joe, then I think that you need to be clear about what you mean by ‘income’. I suspect that in the example you gave you are talking only about taxable income and that you are ignoring receipts from a superannuation stream.
Ginger Meggs | 16 April 2019


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