A chief criticism of the proposed NDIS levy is that it is a general income taxation hike masquerading as a hypothecated charge. This criticism is a well held one, in my view.
As Sinc’s perceptive post of yesterday pointed out, constitutional provisions expressly prohibit the commonwealth government from earmarking money for specific purposes, with all monies collected by the government deposited into one Consolidated Revenue Fund. Constitutional niceties, however, haven’t prevented successive governments from thrusting their paws deeper into our wallets, and to politically mock up some of these inherently confiscatory exercises as specific, and sometimes even temporary, measures to attend to crisis x or to give to constituency y.
With many Australians effectively feeling the economic pinch of numerous cash-grab tax increases of recent years, it was with lightning speed that folks generally figured out for themselves that the NDIS levy is merely a crude and nasty generalised income tax-increase con, that won’t cover even the net costs of running the NDIS in its first year of operation.
Reinforcing this point, The West Australian newspaper published a piece of mine referring to another sad instance of faux tax hypothecation, the Medicare levy. While I am not a fan of the NDIS, as explained in a recent post on this blog, I do ask its advocates these questions: if politicians of every conceivable stripe wish to ratchet the government welfare state to even greater heights with the NDIS, shouldn’t they at least fully finance the NDIS through expenditure cuts? What sensible, non-emotional objection do the army of NDIS supporters have against financing their favoured scheme through, say, an elimination of corporate welfare, for starters?
My West Australian piece does not appear online as yet, as far as I can see, so I provide below a few snippets from the piece:
there are reasons for taxpayers to be concerned about the financial efficacy of a NDIS levy, if the experience of the longstanding Medicare levy is any guide.
The Medicare levy was introduced in 1984 at a rate of one per cent of personal taxable income, and was described by Labor government spokespeople during the September 1983 Medicare parliamentary debates as a ‘substantially self?funding’ arrangement for Medicare.
However, subsequent experience has shown that changes to the Medicare levy have acted in effect as generalised income tax increases befitting political needs to expand consolidated revenue.
it is difficult to imagine how a NDIS levy would not replicate the largely unhappy experience of the Medicare levy, with entrenched higher tax rates unable to deliver sufficient funding for the intended purpose.
If both parties remain determined to implement the NDIS, a more effective approach than tax hypothecation would be to make sustained and permanent reductions in government expenditures elsewhere.
There are always opportunities to governments to divest themselves of responsibilities in activities which do not correspond with public goods, such as industry subsidies or arts and recreational spending, and also seems to be a growing acceptance of the need to reduce middle class welfare payments.
Both Labor and the Coalition could also make a case for a generic reduction in funding right across the board, to fund an NDIS.
I also note that former Howard government staffer and a good guy who writes thoughtfully, Terry Barnes, has written a piece for The Age similarly explaining the NDIS funding shortfall posed by the NDIS levy, a general tax hike posing as a specific, hypothecated ‘levy.’