In his speech on Thursday, the irrepressibly ignorant Scott Morrison made some very dubious claims about the Medicare levy. As Gabrielle Chan reported in the Guardian’s Politics Live thread:
In arguing the case for the Medicare levy rise, Scott Morrison has said in future, the government wants to lower taxes – apart from increasing tax for the NDIS.
Asked if 100% of the levy rise would go toward the NDIS, Morrison says:
“100%, all of it.”
The treasurer makes this point and while I usually speak Morrison, I am having trouble with this one. I think his main message it that the levy will be put in a separate bucket, otherwise known hypothecation.
“In the future, governments like our government would want to reduce taxes … if it was a Bill Shorten government he would want to increase taxes. In either case, the way this is designed is that the levy at 1% out of the total 2.5%, that would be secure so governments could on transfer payments, welfare payments, make whatever changes a government may wish to make but the funding flow from the Medicare levy would be secure.”
I want to go back to hypothecation (because it’s such a alluring term) and the idea that the Medicare levy increase for the NDIS goes into a locked box.
Fairfax’s Peter Martin addressed this issue back in February.
“In reality there are no locked boxes. Clause 81 of the constitution says “all revenues or moneys raised or received by the executive government of the commonwealth shall form one consolidated revenue fund, to be appropriated for the purposes of the commonwealth in the manner and subject to the charges and liabilities imposed by this constitution”.
There are no separate jam jars.
But it hasn’t stopped the governments of all persuasion from acting as if there are. The best-known is the Medicare levy, which we are told funds Medicare and the National Disability Insurance Scheme, but which in reality goes straight into consolidated revenue (and couldn’t anywhere near fully fund them in any event).”
Sorry, Gabrielle, but Peter Martin led you up the garden path as well. There’s not only no jam-jars or locked boxes, but no consolidated revenue either. Money that returns to the government through taxes does not get recycled. There’s no warehouse that your tax dollars end up in, waiting to get re-spent. Tax dollars cease to exist, and every dollar the government spends is a brand new dollar, brought into existence by the act of issuing it.
Taxes don’t pay for anything. What they do is drain money away, thus making room for further non-inflationary government spending.
The government does not need this tax to fund NDIS, or anything else they do. Not only is hypothecation an utter crock, all discussion of “but how are you going to pay for it?” totally misrepresents how a sovereign currency functions.
The government’s role is to ensure that the real resources (human and physical) available are put to work in the most optimal manner possible, for the betterment of the country now and into the future. And the issuance and reclaiming of dollars is a tool at their disposal to orchestrate that.
At the moment we have willing human labour going underutilised, the limited resources being consumed as if there’s no tomorrow, just so the government can feel good about the number of dollars (the one thing they have in limitless quantity) they’re issuing, as if that means anything real.