A reality check on the flood levy

The preliminary costs to rebuild the infrastructure destroyed by the floods is estimated by Treasury to be $5.6 billion over the next four years, the bulk of which is needed for Queensland alone. This figure only takes into account such public infrastructure as public transport, ferries, ports, rail and roads; it does not include the costs to private businesses and individuals, which are still being estimated. It’s a staggering amount – and that’s without factoring in the likely effects on both state and national economies, which may drop our expected Gross Domestic Product figure by as much as 0.5%.

Under longstanding national disaster arrangements with the states, the federal government pays 75% of that $5.6 billion. Given that the budget is in deficit, there are really only three ways to find that money – borrow it, take it from other programs or institute a levy. Gillard absolutely ruled out borrowing, calling it a ‘soft option’. Instead, the government proposes to combine the other two approaches, bringing in a flood levy and cutting and capping programs.

On the face of it, there are a lot of numbers and it all gets confusing pretty quickly, so I want to deal with these two proposals in separate posts. Let’s start with the one that’s provoked the most hysterical rhetoric so far – the levy.

This will be raised over the 2011-12 financial year. Those earning between $50,001-100,000 per year will pay 0.5% on their taxable income, while those who make over $100,000 will pay 1%. Low income earners – under $50,000 – and those affected by the floods will be exempt.

Gillard absolutely ruled out extending the levy past the 2011-12 financial year. So Australians are being asked to pay a set amount, once, to help offset the cost of rebuilding infrastructure around the country.

According to Treasury’s fact sheet, that means someone earning $80,000 will pay $149.76, or $2.88 per week. That’s a little more than half the price of a decent latte that you might grab on the way to work. On a salary of $55,000, the amount drops to $24.96, or 48c per week – about the price of an apple.

If you’re lucky enough to earn $300,000, you’ll pay $2250.04 – the equivalent of replacing your 12-month-old MacBook Pro, or a big family meal at KFC every week.

Cue the aforementioned hysterical rhetoric.

It’s ‘grossly unfair’, according to Opposition Leader Tony Abbott. It’s ‘unprecedented,’ shouted Shadow Treasurer Joe Hockey. It’s ‘unnecessary,’ according to any Opposition MP or Senator who could secure air time.

Abbott warned that ‘flood victims and volunteers’ would be hit with the tax. Hockey railed about how terrible it was to ask people to donate money and time to help flood victims and then slug them with a tax they had no choice about paying. Both tutted about the unfairness of bringing in this levy ‘on top of the mining tax and the carbon tax’, and said there was more than enough ‘fat in the budget’ to pay for the rebuilding – the government simply hadn’t looked hard enough.

Finally – and most egregiously – the Opposition claimed that because of the levy, people would be less likely to donate to disaster relief appeals in the future. Instead, they’d simply wait for a levy that they were forced to pay.

Reality check.

Anyone in receipt of a Disaster Relief Payment is exempt from the levy. Abbott says this is unfair, because unless your home was pretty much destroyed, you can’t get that payment. Take a look at the qualifying conditions from the government’s Disaster Assist website, however. Yes, you’re eligible for that payment if your house was destroyed, someone was injured or someone was killed. What Abbott failed to mention was that you are also eligible if you were stranded or kept out of your house by floodwaters for 24 hours, lost power for 48 hours due to floods or your sewage backed up for the same amount of time.

So if your power stayed on and you need to have your carpets cleaned, possibly replace a few pieces of furniture – you’ll have to pay the levy. Otherwise, you’re exempt.

What about the idea that this is ‘unprecedented’? Queensland Premier Anna Bligh pointed out that the idea of a levy is nothing new. She cited four from recent years. To fund the Guns Buy-Back Scheme after the Port Arthur massacre, the Howard government increased the Medicare levy by 0.2% in 1996, lifted in 1997. In 2000, the Howard government placed a levy of 11c per litre on milk to help fund deregulation of the dairy industry that was only discontinued after 2008. When Ansett Airlines – a private company – collapsed in 2001, the Howard government raised a $10 per airline ticket levy to help pay entitlements for the laid-off workers. That levy was abolished in 2003. Finally, a levy of 3c per kilogram of sugar to help fund restructuring for growers, was instituted in 2003 and lifted in 2006.

The only thing ‘unprecedented’ about the Gillard government’s flood levy is that it will be used to fund rebuilding national public infrastructure after natural disasters – not prop up or bail out failing industry.

As for the claims of ‘more fat in the budget’ – this is speculation at best, nonsense at worst. When asked, Abbott’s only response to ‘where else would you get money from?’ is to point at the NBN. Get rid of that, and apparently all our problems would be solved. I’ve already covered the consequences of scrapping this major infrastructure work-in-progress. Needless to say, those sorts of details don’t factor in Abbott’s condemnation of the government’s levy.

And then there’s the idea that a levy will make people less likely to donate. I’m disgusted to say that I’ve seen a fair few people posting around the net that they intend to withhold potential future donations on the basis of this levy. Worst of all was the call for people to ask for their donations back from the Premier’s Appeal, or to cancel cheques and credit card payments. ‘Why should I have to pay twice?’ was the substance of their reasoning.

I hardly know where to start.

First, no one ‘has’ to pay twice. Those who chose to donate to the Premier’s Appeal did so voluntarily – and deserve thanks for doing so. But it was their choice.

Second, this isn’t some kind of ‘double-dip. Money collected from the voluntary appeal is earmarked for individuals hit by flood damage – the ‘Mums and Dads’, to use Bligh’s phrase. The levy is purely for rebuilding public infrastructure.

But what’s behind this incredibly mean-spirited sentiment?

The idea that we should just ‘wait for the tax’ undercuts the entire rationale for giving money to people in need. Public funds are already spent to help homeless people and those with major disabilities – does this mean we should therefore stop giving to St Vincent de Paul or Vision Australia? We send millions of dollars overseas in aid – should we no longer donate to World Vision or Care Australia? And how about all those kids, who are covered by Medicare? Surely we don’t need to donate to the Good Friday Appeal?

The whole notion is patently absurd.

Or is this about visibility? Is it just that people want to be seem to be voluntarily giving up their money to help others? What a repugnant idea – that we should only give when we can tell others we’ve done so.

I’d like to think it’s not about the fact that donations are tax deductible, and a levy is not.

Is there something ideological at work here, something that says it’s fine for us to donate to privately run charities or through businesses such as Coles and Woolworths, but not through the government that is directly accountable to us? This is particularly nonsensical. If a government rips us off, we have recourse. We can find out where the money has gone. Prying that sort of information out of charities and businesses is considerably more difficult, if not outright impossible. Ultimately, we can even vote out a government if we find it’s screwed around with that money. We can’t demand that a charity cease to operate unless we can prove criminal acts – see my earlier point about getting that information.

The Premiers of Western Australia and Victoria – both Liberal – endorsed the levy. Abbott, however, just goes right on raising meaningless objections and pandering to the pettiness of the mean-spirited.

It’s worth repeating: this levy is tiny. It requires almost no sacrifice from the majority of Australians – and what little it does ask is surely worth it. That money will help Brisbane and other flood-affected areas return to something like business as usual, with knock-on benefits for the entire country. Even aside from the economic benefits, the simple humanity of helping out others is something to be desired.

To end on an encouraging note: many people have already signalled that – although they earn well under the levy threshold – they would be happy to pay the levy. At least one said last night that they would donate more money to the Premier’s Appeal (besides their initial donations), and make public statements to the effect that this because they were exempt from the levy, but wanted to contribute anyway.

That’s certainly something I plan to do. And maybe if enough people do likewise, it will send a message to Abbott and the Opposition that Australians are both capable of compassion and able to see through spin and rhetoric to the heart of an issue.

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12 Responses to A reality check on the flood levy

  1. […] introduced a flood levy to help pay for reconstruction from the disastrous floods? You know, the one Tony Abbott said was a cruel impost on the poor? The one he declared would put paid to anyone ever again voluntarily donating to any other disaster […]

  2. I am so grateful for the opportunity this levy is giving me. Half our family income comes from market trading and the weathe in the last 3 months has made this a very chancy business as it has rained regularly on weekends washing out the markets so we have not been able to donate cash at all. By having my income levied I will be donating cash and I am grateful to be able to do this.

  3. Captainslog says:

    A thoroughly thought out and researched piece, quite the opposite to the opportunistic political rhetoric that seeks to be included in the debate. A great article.

  4. Bri says:

    I just spent the last week listening to my MIL complain about this levy. I tried to reason with her but no dice. It is just beyond me why people are carrying on so much about it. I mean what happened to helping people/communities in their time of need?!

  5. Bern Morley says:

    Awesome. I prepare tax returns for a living. Do you know how many people noticed they were paying an extra .02% when the gun levy was introduced, when they signed their tax return? None. And the way I see it, if we aren’t paying our taxes to keep our nation running and great, then what for?

    xxx

  6. Juda says:

    Thank you for posting this. Most Australians are not like Flopsy Abbott but then again there are some who would welcome his comments. He delights in fear politics and attracts those who are afraid someone is getting more than them. I have even heard the comment ‘well at least with money being spent on flood recovery less will be spent on asylum seekers’.
    I work for the University of Southern Queensland in Toowoomba. Through our payroll system we can make ongoing or one off deductions to Lifeline specifically for flood recovery. For those of us who work and earn less than the threshold levies, this is a wonderful way of making ongoing contributions. I would be very surprised if there weren’t more organisations doing the same thing. Mr Abbott’s karma will catch up with him at the next election.

    • Juda,

      This is fantastic news – and, coming from a region that itself was hard hit by the floods, is doubly wonderful.

      Mr Abbott and the Opposition should be made aware that there are organisations and people out there who won’t be taken in by the pettiness of his anti-levy campaign.

      Kudos to you and USQ for being such great Australians!

  7. Beau Gamble says:

    Brilliant summation – I agree with everything you said. The Gillard decision that I DO have a problem with is the cutting of funding to climate change abatement programs. I made a short post about it: http://www.beaugamble.wordpress.com

  8. lilacsigil says:

    I really, really don’t want to move towards an American-style system where public utility (schools, roads, parks) is funded by (often very generous) individuals and corporations. This makes basic living standards a gift rather than a right, and gift-giving can always be withdrawn – note all the people who are complaining they’ll “never donate again”! Thanks for a succinct overview.

  9. Geoffrey says:

    The ones who scream loudest about how they’ll never donate again are very often the same ones who weren’t donating before.

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