Something very important is at stake in this year's budget and the opposition's response to it: the shape of Australia's welfare state. Will it continue to be needs-based, or will we progressively make benefits universal - available to everyone regardless of income?
Historically, people on the conservative side of politics have strongly supported means-tested benefits, whereas people on the left have been attracted to the idea of universally available benefits, thus removing the ''stigma'' attached to the receipt of benefits.
These days, however, we're witnessing a strange role reversal where the Liberals move away from needs-based benefits and Labor seeks to return to them.
Our means-tested welfare system is an inheritance from the Menzies era. The Whitlam government introduced universal health benefits in the shape of Medibank and began phasing in a non-means-tested age pension. The Fraser government was conflicted: it dismantled Medibank and restored a watered-down means test, but introduced a more generous, non-means-tested family allowance.
The Hawke-Keating government restored Medibank as Medicare, but put a lot of effort into tightening up means-testing, imposing it on the family allowance and making considerable savings to the budget.
Then came John Howard, the great disciple of Menzies, who spent all his 11 years introducing what economists have come to disparage as ''middle-class welfare''. He introduced an only lightly means-tested family tax benefit, repeatedly increasing it. He added an extra benefit for single-income families - Part B - which was means-tested only to the extent that mothers who did any paid work were rendered ineligible.
He inherited the means-tested childcare benefit but, rather than abolishing it, he added the non-means-tested 30 per cent childcare tax rebate on top. So whereas the first measure carefully excluded better-off families, the second brought them back onto the public teat.
He did something similar for the self-proclaimed ''self-funded retirees''. Older people judged too comfortably off to receive the age pension were given a special senior Australians tax rebate and a seniors health card that entitled them to pay what pensioners pay for pharmaceuticals, $5.60 a pop, rather than the $34.20 even the poorest working family pays.
Perhaps the biggest move in the direction of middle-class welfare was the decision to make superannuation payments tax-free for people 60 or older. Before, how much income tax you paid was a function of the size of your income; now it's also a function of your age. Old comfortables don't pay it, young strugglers do.
Rather than introducing paid maternity leave, Howard brought in the baby bonus, payable without means-testing to women who hadn't been in paid work as well as those who had.
He introduced a non-means-tested 30 per cent tax rebate on private health insurance and changed the formula for grants to private schools in a way that produced winners and losers, then let the losers keep the extra to which they weren't entitled.
The Rudd-Gillard government has been under continuous pressure from economists to roll back Howard's middle-class welfare. One of its first acts went the other way: fulfilling an ill-judged election promise, it increased the childcare tax rebate from 30 per cent to 50 per cent. It has also kept a promise not to change the winners-but-no-losers formula for grants to private schools. But most of its other actions have gone in the Hawke-Keating direction of tightening up means-testing. It imposed a cut-off of $150,000 a year on eligibility for the family tax benefit Parts A and B, the baby bonus, tax rebates for dependants and soon the paid parental leave payment.
The $150,000 a year sometimes applies to a couple's combined income, but often it applies just to income of the ''primary earner''. To avoid adding to the problem of high effective marginal tax rates (where the rate of gradual withdrawal of a benefit as income rises adds on to the rate of tax on the additional income), it's a ''sudden-death cut-off'': on $150,000 you get the benefit, on $150,001 you don't. Because of the sudden-death nature of the cut-off, it was set at a very high level. Even today, only about the top 17 per cent of households have pre-tax incomes of more than $150,000. And only the top 4 per cent of individuals earn more than $150,000. Arithmetically, there's no way people on these incomes can be said to be in the middle; they aren't rich as James Packer is rich, but they are undoubtedly high income-earners.
The $150,000 hasn't been indexed for inflation since it was announced in 2008 and the decision last week was to leave it unindexed until July 2014. This means the level of the cut-off is actually falling in real terms, removing more people from receiving the benefit as the years pass. The budget's other main move to reduce benefits to the comfortably off was the decision to phase out the tax rebate for dependent spouses under 40 and without children.
Tony Abbott and the Liberals have attacked these measures, condemning them as ''class warfare'' and ''the politics of envy''. Abbott has yet to say whether he will oppose them in the Senate, but his party's longstanding opposition to Labor's attempt to impose a means test on the private health insurance rebate suggests he will.
Much is at stake. You may think you pay a lot of tax, but people in almost every other developed country pay a lot more than we do, even the Kiwis. The single greatest reason for our relatively low level of taxation is our inheritance from Menzies of a lean and mean welfare system: low, flat-rate, means-tested benefits. Most other developed countries pay former-income-linked, universal benefits and have high taxes and huge government debt to show for it.
We can take our welfare system in whatever direction we choose, mean or generous. But the more generous we make it, the more tax we'll end up having to pay.
