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May 07th 2013 print

Peter Smith

Let’s put all big-ticket programs to the ‘levy test’

"Levy" or "surcharge", it really doesn't matter what name the government of the day might choose to use, it will still be a tax.  What a pity we can't have specific levies for all big-ticket expenditures, just to establish where all that money goes

A tax is a tax is a tax whatever terminological euphemism is used to disguise it. The two popular euphemistic terms are surcharge and levy. Howard and Costello used the term surcharge to disguise an additional superannuation-contributions tax back in 1996. As clever as it was, we cynics saw through it.

In the case of Medicare there is both a levy and, for high income earners, a surcharge, if they have the temerity not to voluntarily take out private hospital insurance. Now we can look forward to an additional levy under the badge of Medicare to cover national disability care. At least this avoids the use of the term insurance. In this instance that would have been both euphemistic and plain silly.

So, what we are left with is that Gillard and Abbott have agreed with each other about imposing a new tax to cover additional welfare expenditure. Gillard’s excuse, presumably, is that she is operating in that great tradition of democratic socialist parties of using the bottomless pit of taxpayers’ money to fund worthy causes. Onwards, as it were, to deficits, debt, and despair. What is Abbott’s excuse? That is the question.

There is no doubt that helping people with disabilities and their carers is a worthy cause. I can’t think of much that is worthier. Life is difficult enough when you are able bodied with only yourself to care for. But there is no bottomless pit of taxpayers’ money. There are two overriding priorities. The first is for the public sector to leave as much room as possible for private enterprise to operate and make us increasingly more prosperous and, in consequence, better able to help those in need. The second is to allocate taxpayers’ money acquired by the public sector in the best possible way. This second priority means making choices among competing “needs”.

The only reason additional tax has to be raised to better fund disability care is to avoid making choices in circumstances where so much money is wasted on unjustified welfare programs. If you doubt that, apply what I now choose to call the Smith levy test, brought to my mind by this latest levy.

It is hard to find anyone who disagrees with providing additional support to the disabled and their carers. Ergo a levy almost becomes beyond criticism, as Myer boss Bernie Brookes found out.

How about a special levy to support the Gonski futility? The NBN extravaganza? Hmm! You might say. How about for school-kid bonuses or child-minding for middle-class dual-income earners; how about for a fair-dinkum super-generous parental leave scheme? All of a sudden I think Mr Brookes would be on firmer ground in objecting to levies. The Twitter and Facebook brigade might not be able to generate the same level of sanctimonious outrage.

Here then is the test: Match each category of welfare expenditure with an accompanying levy. I suspect a lot would pass muster — old age pensions and the like — but a lot would not. If a plebiscite were held on each I suspect that we would end up with plenty of money to support disability care and reduce taxes at the same time.

This is all a bit fanciful I know. At the same time, what is the point of electing a Coalition government if it simply delivers more of the same? True, it will certainly be more competent than the Gillard government. But that surely is the easiest of hurdles to jump.

There is no need for another levy. Wouldn’t it have been exhilarating if Abbot had stood up, promised the disability scheme and listed the “welfare” programs he would prune to pay for it. A vote loser? I don’t think so. Maybe I’m a dreamer but I’m not the only one.

Peter Smith, a frequent Quadrant Online contributor, is the author of Bad Economics

Peter Smith, a frequent Quadrant Online contributor, is the author of Bad Economics