Thursday, February 25, 2010

I couldn't put it any better myself

So I won't. From Chris Middendorp and Kenneth Davidson:

Without taxation, life would be less liveable

It was that protean genius Albert Einstein who said that the hardest thing in the world to understand is income tax. We can only speculate that with the great man cogitating on whether or not God was playing dice with the universe, he was too preoccupied to see how the revenue collected by government actually made life here on earth bearable.

If you bother to reflect on the role that taxation plays in a democratic state, it's almost impossible not to conclude that it is what makes a civil society achievable. Not just by funding a police force, a fire brigade or a defence force. Not just by paying for roads, public transport, gardens and parks. Not just by building hospitals, libraries, schools and sewerage systems. But by funding practically everything that makes it possible for human beings to flourish.

All this raises the question: why is the paying of income tax so reviled? How is it that elections are often won or lost over such a beneficial concept? Taxation is a synonym for an unpleasant obligation.

Many on the political right would go even further and view taxation as virtual government theft of an individual's hard-earned cash. The truth about taxation is rarely stated. It is a privilege and nothing less than our opportunity to make a positive contribution to the wellbeing of our nation.

Nevertheless, the politician who does not comprehend the public's general antipathy towards taxation is doomed. In 1993, when Liberal opposition leader John Hewson was unable to explain his new tax ideas during a TV interview, he generated widespread fear and lost the "unlosable" election. In the US, when George Bush snr failed to deliver on his triumphant neo-liberal promise "read my lips, no new taxes", he condemned himself to being a one-term president.

In recent times, the Liberal leader, Tony Abbott, has achieved some traction by evoking the great taxation demon. In seeking to discredit Labor's climate change initiatives, Abbott endlessly repeated the childish mantra that the policies were nothing but a "great big new tax". He knows that pandering to our fear of taxes is a better strategy than actually engaging in a debate about policy content.

Our fear and loathing of taxation has generated a vigorous culture of tax evasion in Australia. Through trust rorts alone, it is estimated that our community is robbed of about $1 billion a year by companies and wealthy people who conceal their true taxable income.

I'm advised by senior academics who specialise in taxation that there have been few, if any, studies into the full extent of tax evasion in Australia. In an era when research is conducted into navel lint, this omission seems staggering.

It is telling that the Australian Taxation Office is spending more than $774 million over four years to help identify what it calls "gaps in compliance".

Its goal is to energetically prosecute those who would avoid their tax responsibilities, thereby raising an astonishing $6 billion. What unfathomable amount, you wonder, will still slip through the Tax Office's lavishly funded dragnet?

In the meantime, we can read almost daily in the media how there isn't enough revenue to fund vital community programs. Treasury figures estimate that in four decades Australia will require $40 billion more in revenue just to fund age pensions and maintain aged care services.

The recently completed and much awaited report into tax by Ken Henry will be giving Treasurer Wayne Swan a lot to think about and will hopefully generate fresh strategies to capture the significantly increased revenue we require.

You will often hear conservatives posit how Australia is a high-taxing nation, but the truth is we are among the lowest taxers of the OECD nations. There are countries such as Sweden, for instance, that understand that a full public purse equates to a higher quality of life.

While it is true that there are many possible debates about how a tax system should be structured in terms of efficiency and fairness, what isn't debatable is that tax evasion is stealing from the community.

Many of us are clearly infuriated by the thought that people we know might be shirking their fiscal responsibilities, and this is reflected in the year's 56,000 phone tip-offs to the tax evasion report line.

Contrast this with the National Security Hotline, where reports of suspicious behaviour and potential terrorism are made. Even during the paranoid days of 2005, following the second Bali bombing and the London attacks, it only managed to peak at about 30,000 calls.

When politicians promise tax cuts we should be suspicious, not euphoric. A promise like that should make us contemplate what the community will be going without. By not paying tax, we will all pay in the end.

Australia faces some significant hardships ahead. Depleted resources for childcare, aged care, mental health support, housing, schools and hospitals are not just boring statistics. These inadequacies will destroy lives.

It is clear that we need to improve the efficiency of our tax system if we are going to continue to cherish the proposition that Australia is the lucky country. We need to grow up and acknowledge that paying income tax is not a burden; it ought to be our proud contribution.

Private health? It's enough to make you sick

There is not much point in starving the health system of funding to minimise taxes if it shifts the burden from citizens as taxpayers by creating an even bigger burden for them as consumers.

The debate is seldom framed in this way because the recently released 2010 intergenerational report, the Rudd government's first, is set up to ask only about budgetary costs of health, not the total cost.

I suspect that it was deliberately set up this way by the Howard government, which initiated the process, to avoid questions that involve confronting powerful vested interests, especially the private health insurance industry.

This industry has administrative costs that impose an unnecessary 10 per cent tax on premiums because its overheads are higher than Medicare's overheads. It also enjoys a $3 billion subsidy - dwarfing that given to any other industry - yet its major purpose is to give its customers the chance to jump the queue for elective surgery while allowing providers to over-service and over-charge their patients.

A sensible report would take into account all the costs of medical services and whether they were delivered efficiently and fairly.

The provision of medical services is a classic area of market failure. Fear of ill health reinforces the tendency of those who can afford to over-insure to jump the elective surgery queue.

Private health insurance subsidies encourage specialists who are otherwise available to public hospitals to shift to the higher paying, less stressful, private system. They undermine the idea that access to health services should be based on need rather than income. (Even so, it is still true that if you are really sick or have a medical emergency, the probability is you will end up in a public hospital.)

Cost shifting from the budget to individuals and stampeding them into private insurance - whose prime motive is profit rather than bearing down on health costs - is a recipe for a US health system - indisputably the developed world's least efficient. This is why the US spends 17 per cent of its gross domestic product on health, while Canada and Australia spend 10 to 11 per cent and have better health outcomes in terms of longevity, infant mortality and morbidity than the US.

The bloated incomes of US providers have allowed the industry to capture enough Republicans, and a minority of Democrats, in the Congress who will lie and filibuster for as long as it takes to prevent any diminution of the health industry's ability to gouge its customers and lock some 40 million Americans out of access to reasonable healthcare. Australia's political health vandals haven't been nearly so successful.

Medicare remains popular, despite the best efforts of the Howard government to wreck it by providing a massive subsidy to private health insurance; imposing a tax surcharge on higher income groups who sensibly chose to self-insure by putting aside savings to meet the cost of private elective surgery; and by attempting to push as many people as possible into private insurance with a none-too-subtle threat to run down public hospitals.

The Coalition is frustrating the government in its attempts to claw back some of the $3 billion a year subsidy to private insurers. To add a farcical touch, shadow treasurer Joe Hockey said last week that, in government, he would sell Medibank Private.

Hello? Medibank Private is the biggest private health insurer because it is public. Hockey said it could be worth $3.5 to $4.5 billion, based on its revenue. This may be why the Coalition is obstructing means testing the $3 billion health insurance rebate - to maximise the sale price.

Don't laugh. The first thing the Kennett government did in Victoria was to boost electricity prices by 10 per cent to fatten up the sale price of the State Electricity Commission.

Meanwhile, the government is spinning the intergenerational report to show the burden that an ageing population will impose on future budgets, using it to justify a continued high level of immigration to offset the ageing population.

It won't achieve this, but continued high population growth based largely on immigration means that Australia's unconditional promise of a 5 per cent cut in greenhouse gas emissions by 2020 translates into a 20 per cent cut in per capita terms.

This is an impossible dream, unless greenhouse gas reduction policies are put ''front and centre'' in election debates and the winner has a mandate to undertake real climate abatement policies.

Like its predecessor, the Rudd government is obsessed with the burden an ageing population will put on the budget.

It is a red herring. We will be richer and healthier in the future. Healthier people want to work longer. The bulk of spending on hospital costs occurs in the last two years of life, irrespective of whether average life expectancy is 80 or 84 and medical technology is likely to reduce health costs in the future.

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