“We know that there is a growing pot of wealth, sitting in the hands of older Australians that will be passed on in coming decades.”
Gosh, that sounds juicy. What government could refuse the temptation to take a slice of that pie?
However, that sentiment speaks to the fundamental flaw in the approach of our policy makers towards balancing our books – always trying to increase revenue without doing much to cut spending.
While it would take a brave government to set their sights on inheritance as a potential source of tax revenue, comments from incoming Productivity Commission boss, Danielle Wood, indicate the wrong question is being asked.
Structural Budget Pressures
Treasurer Jim Chalmers, who is arguably among Labor’s more agile and pragmatic front-benchers, has flagged the NDIS and aged care as key budgetary pressures going forward. While high commodity prices are currently keeping the wolves from the door, the rapidly rising cost of Government funded services and a forecast drop in revenue over time has even the typically Keynesian Labor camp concerned.
Although Labor has denied plans for an inheritance tax are on the agenda, Danielle Wood’s comments and the wider conversation nationally on debt and deficit are clearly not focussed on fixing the most glaring issue facing the budget – spending.
Out of control spending
For example, since its inception in 2013, the NDIS has grown astronomically and now accounts for the biggest cost of any social program the Federal Government runs – $30 billion last financial year. Originally designed to help those with genuine disabilities, the NDIS faces many unforeseen challenges. Its expansive criteria means that over 500,000 people now use the NDIS, participants don’t leave the program as quickly as first envisioned, and up to 20% of NDIS payments are estimated to be fraudulent!
Aged care is not immune either – one of the key recommendations of the Aged Care Royal Commission was to establish a ‘blank cheque’ style funding model. This would ensure outcomes remained uncompromised by ‘fiscal challenges facing the government of the day’. With attitudes like that, it’s no wonder social programs are growing at such a speed and are open to rorts – the government is being told the cash tap can never be turned off! What message does that send to users or providers? Of course, the first proposed solution to the issue of funding was to slap a levy on taxpayers – in other words, more tax.
Cutting through
Dramatically reducing the size and scope of all government programs would be a more ideal solution (Caroline White knows it!), but at the very least Chalmers and the relevant ministers could begin with more palatable reforms in the service sector. For example, a user-pays model for aged care services – reducing the share paid by the general tax-base and increasing accountability for providers. Meanwhile the NDIS could benefit greatly from increased scrutiny of payments made and more stringent eligibility criteria.
The government is being told the cash tap can never be turned off!
While governments fear the political ramifications of being seen as ‘gutting’ social services, perhaps the issue needs re-framing. The Australian Taxpayers Alliance found in 2021 that a Victorian worker earning an average salary costs about $73,000 to employ. Of that amount, 55% is taxed! Our lifestyles, our productivity, our time and our future are being gutted – and all for what? So that whatever we have left when we finally kick the bucket can be taxed one last time?
We can only hope that one day governments will attempt some introspection, but it doesn’t look likely just yet. Apart from talk of scrapping the Stage 3 tax-cuts, aged-care levies and death taxes, Jim Chalmers has also flagged that he expects future nation-building funding to fall at least partially on the super funds.
At what point will we finally see the leadership required to start treating the problem of spending rather than the symptom of revenue?
