CALLS BY two Labor Premiers to raise the Medicare levy to 4% as an “alternative” to GST reform — including lifting the GST rate and broadening its base — are short-sighted, inadequate, stink of a piecemeal Band-Aid fix, and betray a distinct lack of understanding where tax and health policy are concerned. This vacuous idea smacks of political trickery, and shames any credibility the ALP may once have had where economic reform is concerned.
This is the reform proposal (for want of a more fitting term) I held over in the hope of getting to it during the weekend just gone — thank you, Bronwyn Bishop — and even today I am on the run, so doing it justice is a bit of an ask.
Even so, it seems this idea isn’t going to go away, with Sydney’s Daily Telegraph carrying a story today showing modelling on the effects of doubling the GST to 4%, in response to a characteristically vacuous, ill-considered, half-baked idea by Labor Premiers Annastacia Palaszczuk and Daniel Andrews to double the Medicare levy and dedicate the entire proceeds to health funding for the states.
This dreadful idea — if ever implemented — will solve few if any problems, and leave a raft of other, arguably far more important issues, unaddressed.
Quite aside from anything else, all this is is a tax hike, and whilst the idea of more money for hospitals is an electoral hot button that makes certain groups of people feel good about themselves, more is not necessarily better, and not least when no attempt to realise efficiencies and optimise service delivery from existing Health funding pools is proposed to accompany it.
Labor governments (and the Labor Party generally) are obsessed with Health and Education, in that order, and along with throwing increased sums of welfare money around and smoothing the path for as much union power as possible, ostensibly care for little else.
Competing with them on Health is a dangerous pastime for conservative governments, yet that seems to be exactly what the Liberal Party’s wunderkind of the moment, NSW Premier Mike Baird, seems bent on doing with his equally silly proposal to simply lift the GST to 15% — with no offsetting income tax or other accompanying structural tax reforms — and earmark that money, too, exclusively for Health spending.
Certainly, Baird deserves credit for putting GST reform on the table, just as the likes of Palaszczuk, Andrews, and the contemptible specimen “leading” the federal ALP deserve censure for their refusal to even countenance it.
And the fact that Abbott government sources for the Tele‘s article are said to refuse to rule it out is, frankly, bloody scary — if unsurprising given the government’s record in office thus far.
But slugging people more under the guise of hiking the Medicare levy is a silly idea.
As the Tele shows, average families would be hit by between $2,000 and $4,000 per year; for many of the 50% of Australian households already paying a similar amount out in private health insurance premiums annually, this would be one slug too many — and the resulting mass exodus from health funds, and the huge additional strain imposed on the public system, would see it struggle to cope: even with all the new money the tax hike might reap.
Coming from Labor Party figures (and having regard to their party’s obsession with Health to the exclusion of many other critical areas of governance), the proposed doubling of the Medicare levy stinks of an ideological dogma and smacks of the kind of illiberal imposition of the will of the political Left that is sweeping left-of-centre politics across the world, and carrying many on the centre-right — unwilling or unable to compete in a battle of ideas — with it, as appeasement and lack of will are substituted for rigorous policy debate and the presentation of better ideas.
It’s a criticism consistent with much of what I have had to say about the Abbott government over the past two years, with its big-spending, high taxing, moribund “solutions” to the budgetary and economic management problems bequeathed by Labor that too often see it target its own constituency of support in its own marginal seats.
But having said that — even looking to Labor’s own pet policy fancies — a Medicare slug won’t fix much — if anything.
Already lifted from 1.6% to 2% in a deal between former Prime Minister Julia Gillard and the Coalition to “fund” the National Disability Insurance Scheme — which the Liberals were crazy mad to enter into, with the cost of the scheme when fully operational of well over $20bn annually remaining almost completely unfunded — a further hike will do little to balance out hospital funding requirements: partly as any new money would quickly be soaked up by the demands of an ageing population, partly through the waste and mismanagement that always accompanies Labor governments, and partly through the vicious swathe it will cut through the private health insurance industry.
It will do nothing to boost Education funding.
It will add nothing to the pot of welfare money so lovingly doled out by Labor to buy votes with new “initiatives” designed to enslave greater numbers of people on new or expanded “benefits.”
As for the unions, I couldn’t care less, although it’s a fair bet that were this “reform” ever introduced, the unions covering the health sector would find some way to get their paws into the till as well.
But Australia faces other problems that simply jacking up the Medicare levy won’t solve, although jackasses like Andrews and Palaszczuk — in office mostly due to smarm, union muscle, and vapid policies designed to cause little electoral angst rather than to actually fix anything — aren’t concerned with that.
It will do nothing to begin to pay down the $350bn debt pile that is the only tangible legacy of federal Labor in office.
It will do nothing to redress the gaping $40bn hole in the federal budget, engineered by a Labor Treasurer in Wayne Swan, which is now being used to try to destroy the present conservative government by using Senate muscle to refuse to allow it to fix it: and if Labor returns to office, not only will this problem not be solved, but it will simply be accelerated as the nation slips deeper and deeper into debt to the rest of the world.
It will do nothing to fix the tax base, making it more sustainable as people age and PAYE tax shrinks.
It will do nothing to incentivise business to hire people.
It will do nothing to incentivise people to work harder to get ahead or, indeed, to work hard at all.
There are plenty of other problems aside from just these as well.
But perhaps the most galling aspect of this cretinous tax “reform” plan is that if the Medicare levy is simply hiked to 4%, then at some point more and more tax rises are going to be needed to fix the things that the Andrews/Palaszczuk “plan” will not fix, and apparently disregards completely: and with tax collections in this country (once Medicare and superannuation costs are included) already running at 33.7% of GDP — bang on the OECD average — Australia is not a “low tax country.”
This proposal would simply heavy the burden on already stressed middle Australia, with very little indeed to show for it.
We will come back to this issue in greater detail in the weeks and months ahead, for as I said at the outset, it appears it won’t go away in a hurry.
But as I outlined in that article dealing with Baird’s half-a-GST reform proposal, the only way to reform taxes in Australia is a wholistic approach to tax reform — and that means making the GST, expanded and with an increased rate, the centrepiece of an overall solution that also cuts GST, introduces more compensation for low-income earners and the welfare poor, and abolishes some of the inefficient taxes still remaining on state statute books that are disincentives to business and employment.
In conclusion, this is just another mad, bad and dangerous idea from Labor types that hasn’t been properly thought through, and will cause untold economic damage if it’s introduced.
But then again, Labor — with the exception of Hawke and Keating — has never been averse to causing economic damage. It’s a point voters who might be impressed by this stupid thought bubble will ignore to their detriment — and ultimately, to their (and Australia’s) long-term cost.