NDIS levy: a general tax hike by stealth

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.’

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41 Responses to NDIS levy: a general tax hike by stealth

  1. stackja

    If it quacks and waddles it is a duck.
    This levy is a tax.

  2. Ant

    I see the Thought Stormtroopers have stomped all over the Myer CEO’s carcass in their jackboots for him daring to make a statement of the bleeding obvious: Less money in consumers pockets means less profit for Myer (amongst other retailers, naturally).

    Somehow, the disability industry sharks think that this demanded an immediate apology. And they got one!

    Hasn’t stopped them from demanding that Myer be now boycotted, as though that wouldn’t harm thousands of ordinary Australians who work for Myer, some of whom may be disabled themselves.

    This country is going down the plug hole in bloody quick time if this kind of BS is allowed to go on.

  3. Steve of Glasshouse

    Little piece from the NT times 2011..
    http://www.ntnews.com.au/article/2011/01/24/208471_opinion.html

    Not much has changed….

    btw, I was looking into the Ansett ANA levy when i found the article

  4. 2dogs

    Abbott says he will support the increased levy, provided Gillard releases the full details of:

    a. how the scheme will work;
    b. who will be covered; and,
    c. how the 60% funding shortfall will be provided.

    An easy promise for Abbott. No-one actually expects Gillard will answer those questions.

  5. MattR

    Ant, this culture of people publically apologising for stating their beliefs is ridiculous. Honestly, if I had founded and built a company, or had reached the top of a large organisation, I would be saying this kind of thing and then some. Bleeding hearts don’t like the truth? Stiff, reality is a bitch sometimes. Less money in producers pockets means less profits for business, means less prosperity, means less growth, means less jobs.

    Don’t like reality? Too bad, reality doesn’t give a shit.

  6. John

    Why do you hate disabled people Julie? It’s just 6 coffees a day!

  7. stackja

    Thought Stormtroopers have stomped all over [insert ALP critic name here]. ALP/media are a real problem. We can see how past dictators gained power with a compliant media and then with gullible voters.

  8. johno

    Could the govt include a clause in the legislation to restrict the spending on the NDIS to an amount equivalent to the amount raised by the levy. This would force the govt to increase the levy to fully fund the NDIS or keep spending on it under control?

  9. GSM

    MattR,

    And those very bleeding hearts will reap the rewards when the numbers of people sufferring depression and other mental ailmants increases exponentially because the jobs they need, specifically in retail which is the Australian households second wage, becomes redundant and then threatens the roof over the family head.

    We have become a country overrun by whiners and bludgers. The Anzacs, God Bless them all, would be horrified at this nation full of public purse parasites.

  10. Giffy

    Who will be covered? Who won’t be.
    Hands wlll go up all over the country.

    It’s a general tax.

  11. Ant, this culture of people publically apologising for stating their beliefs is ridiculous.

    Gratuitous nudity has been replaced with gratuitous apologies. At least Number 96 never pretended to be of moral virtue. Apparently these days Jacko or Singo pretending to be apologetic to the effeminate among our gender is the absolute height of moral decency. Who’da thunk it?

  12. Gab

    Anyone turning 65 won’t be covered, Giffy.

  13. Tel

    I see it as a more general principle at work: government expenditure should be open-book and auditable by any member of the public down to quite a fine grain level.

    I had a look over the list of “Building Education Revolution” projects… the list that was finally released under FOI because otherwise it would not have been released at all. Well, the descriptions of each project were vague, no metrics at all were included (not even the size of the building). Projects of several million dollars get a ten word description. I can’t imagine getting away with a report like that for any employer I’ve ever worked for. There’s no way for the public to know what they paid for, yet we live in an information age, we have all the tools, but none of the incentive.

    The situation is much worse in health care, and many times worse in disability care… absolutely opaque where all the money goes. While ever this situation is normal, outcomes will be crap. Doesn’t matter how much you throw into the pit, always someone will figure out how to slurp it back out somehow.

    If Abbott could promise one useful thing (I know he is a “big government” conservative so I’m not expecting miracles) he could just offer a small step towards genuine auditability of spending. Nothing more than that. Once the Australian people start to get a glimpse of where their money goes, they might just ask a question or two.

  14. Chris M

    Well at least it is sort of a flat tax I guess (trying to look on the bright side) 🙁

  15. Gab

    Does this new tax have an expiration date? Or does it continue for eternity? Will it be increased in future?

  16. Ros

    At least, well so far anyway, those who pay the Medicare levy are eligible to use publicly funded medical services. However this not the case with the NDIS levy. If you are over 65 you are excluded. Many Australians over 65 will be paying for a government service which they are specifically excluded from accessing.

    In fact most Australians as of 2017 will be required to work until they are 65.5 but may not have access to NDIS from the age of 65. They will be required to continue supporting themselves on the grounds that they are still able and capable of contributing to the Australian economy, but on the other hand they are clearly past contributing and hence there is no need or justification in assisting them in being ongoing members of the Australian workforce. Become disabled, off to the nursing home you go, no need for adequate income support or economic security for the over 65’s, let alone inclusion and participation in the community or access to life long learning-priorities of the national insurance plan.

    Even the arguments for the involvement of the disabled in the economy are essentially based on nothing but emotion, unless they fail on the grounds of age. This is another Julia promoting act with no reflection on or understanding of the world we now live in, let alone a serious attempt to construct a social infrastructure that my support a future world and which allows for the emergence of realistic fair and appropriate Australian human systems.

  17. lem

    Right. It’s time to start training the whole family for the coming insurrection. And I mean everyone.

  18. Empire Strikes Back

    Tel @ 9.00pm

    Couldn’t agree more. The cost for producing and maintaining a whole of government online database and DMS for all expenditures, whilst not absolutely cheap, would be relatively cheap. The only thing preventing this is political will. As for invoking commercial in confidence clauses for outsourcing, what a load of crap. If you want revenue from the public pie, you agree to full disclosure.

  19. Tel

    If you want revenue from the public pie, you agree to full disclosure.

    There’s a Constitutional ammendment worthy of consideration.

  20. lem

    Constitutional amendments, now we’re talking! How about something to jail lying politicians? And I’m not talking concurrent sentencing, Julia.

  21. hzhousewife

    Nobody EVER plans the expiration date !

    This is a major FAIL (imho) in lot of things.

    Do you have a will?

    If you are on a committee, do you know what happens to the last of money in the bank account when the club closes down?

    If you are in a small business, how are you going to wind it up when the cashflow goes negative, will the corporates get paid while your fellow small business people find out three weeks later that you can’t pay the last milk/paper/fuel/office supplies bill?

  22. Chez

    This is just a ploy to get at Abbott! Gillard has the Greens and Independents on side to get this Medicare levy legislation thru parliament without Abbott, but no she wants to screw him instead! I hate this uncaring, self obsessed bogan of a prime minister!

  23. This is just a ploy to get at Abbott!

    It’s all about getting Abbott to commit to unsustainable spending to perpetuate Labor in office. Never mind that in the process she makes Australia a debt vortex of which it can never escape. No cost is too great for the great fabian experiment. Australia is considered acceptable collateral damage.

  24. Fleeced

    NDIS levy: a general tax hike by stealth

    Not very stealthy.

  25. blind freddy

    Julie
    Q.Is the NDIS means tested?

  26. Paul

    This is just a ploy to get at Abbott!

    My first assessment too. I hope he’s neutralized it as an election issue. She has of course forced him into complicity in the planned destruction of the Australian currency and financial system, but if she didn’t Turnbull would have. Same Masters.

  27. A general tax hike is to do nothing and allow bracket creep to occur. So since bracket creep could easily take care of this scheme in 5 years it must be an increase in the top marginal rate otherwise it is to look busy like sweeping the floor when the big boss walks past.

  28. Rob MW

    It will be interesting to see exactly how the NDIS will influence the civil torts that are, as general rule, decided in some if not most disability cases.

    For example; a stupid person jumps into a shallow pool of water and hits their head causing permanent paralysis. Because the shallow pool of water is on public land, liability is assumed by the local council so the person sues the local council for damages engaging public liability insurance.

    The obvious questions arise; will the NDIS work alongside public liability (double dipping) or, will NDIS cancel any civil torts of this nature ??

    It would seem quite absurd to carry ‘Public Liability Insurance’ for, and funded, by both the private sector and the public sector on the one hand and on the other hand, create a separate ‘National Disability Insurance Scheme’ funded via a national levy.

  29. Chris M

    ….and hits their head causing permanent paralysis.

    Paralysis, you mean like a real disability? perhaps 70% of ‘disabled’ are ageing pot-heads and the like I suspect. A lot of it is self inflicted harm. Maybe in the future they will get free medical marijuana from Gillards scheme.

  30. Jessie

    The Beer Whisperer at 10.21pm

    The Fabian Experiment continues. …true.

    The Australian 1st May Editorial mentioned various parties to the NDIS.

    A quick search from information in the Editorial brings up
    Philanthropy Australia;

    Australian Services Union

  31. Jessie

    OT

    The Doors will never be the same!!

    Michael Smith blog has posted this.

  32. Pingback: Australia: National Disability Insurance Scheme Funding At Last · Global Voices

  33. Pingback: Australia: National Disability Insurance Scheme Funding At Last :: Elites TV

  34. Uber

    Ok, so now who do we vote for? We know that both sides are as useless as each other.

  35. Fleeced

    We know that both sides are as useless as each other.

    Oh, give me a fucking break…

  36. Meanwhile, NSW will introduce a tax, called a levy, to fund fire and emergency services.
    Ha.

  37. Uber

    Fleeced, I get emails from the LNP. They go on about hope, reward, productivity, easing the burden, recharging the economy, rewarding aspiration.
    But all Abbott has done in the real world is impose more and more burdens on businesses and taxpayers. He now supports an additional 3 bills in personal taxes.
    So you give me a ****ing break. Tell me how the LNP is going to walk the talk, because there is absolutely no hard evidence that they will be any different to this big money wasting Labor government.

  38. Ellen of Tasmania

    You expect such stuff from Ms. Gillard and Labor, and I suppose one should expect it from the Libs as well, but I’m more disappointed in them because I hope for more from them.

    Bottom line – people who really care, care with their own resources.

    What percentage of their time or income have all the tear-stained Labor politicians given to help the disabled they tell us they care so much for? It’s politics, not care, and it will be a disaster.

  39. Pedro

    ” 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.”

    Ummm, leaving aside the perjorative descriptions of taxation, what’s the big deal here? We are in favour of low taxes and small govt, but moving beyond that is important when your considering a particular measure or you just sound like a parrot.

    The real question is whether, given the budget and various spending needs over time, govt’s should or should not adjust the rate of taxation using:

    1 specific taxes identified with particular programs, like a medicate levy or milk levy

    2 short term taxes to cover particular unusual spending needs, like a flood tax.

    It seems to me that the govt just has two choices about how it is going to fund spending, tax or borrow. Generally, spending should be sensible and under control, tax should be used to fund recurrent spending and borrowing should be limited to cap ex and short term spending increases due to economic slow downs etc. But there would be times when a short term tax increase is a better way to manage a temporary spending increase than borrowing.

    The good thing about identifying a tax as temporary is that it creates an expection it will be removed. The good thing about identifying a tax with a specific program is that it reduces the general tax illusion of the total budget and the rates of tax.

  40. kraka

    OT but I notice recently the conservative blogs have been awash with either ALP/Union hacks or public servants spouting the same lines in unison. One of them goes something like this

    “The first thing you need to understand is that irrespective of the coalition rhetoric they are not the party for lower taxes. Their tax revenue as a percentage of GDP was the highest in history and even after six years of Labor the tax take is a % point or two below what the coalitions was”.

    I am assuming this number is cherry picked or affected by lower tax takes because of the fiscal incompetence of this government.

    Can someone tell me how they come up with this line, is it accurate? or has some fancy accounting been used
    Thanks in advance

  41. Pedro

    Yes, munty whinges all the time and then goes on to complain about the structural deficit Costellow left behind.

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