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Jan 27, 2011

Laugh until you cry -- can we put a levy on political stupidity?

The debate over the flood levy is one of those moments that makes you want to cry over the mediocrity of our leaders.


The proper response when Julia Gillard rises at the Press Club today to announce a flood levy is laughter — the sort that slowly dissolves into tears. Tears at how stupendously awful this government can be.

Its flood levy — for which the way has been prepared with the usual Labor subtlety and sophistication — is wholly unnecessary and wholly political, a product of how it has first allowed its opponents to dictate the terms of economy debate, and, second, bungled its own contribution to that debate.

And it is unrelated to — indeed, possibly antithetical to — serious fiscal policy. Warwick McKibbin may not be on the government’s Christmas card list, but he’s not alone in saying the levy is unnecessary and perhaps even harmful given the state of the non-mining sectors of the economy — Joshua Gans has made similar points. Alan Kohler has, too. There’s a serious debate to be had on our long-term fiscal strategy, including on the issue of whether the overall tax burden should rise in the long-run to address our ageing population — a position, for example, argued by John Quiggin (who supports the flood levy). But at the moment any fiscal debate occurs in a political context where neither side of politics is willing to touch the billions of dollars of expenditure going to middle-income earners, or contradictory tax breaks. It also occurs in the aftermath of the debacle of the Rudd government’s handling of the Henry Tax Review.

Roll on the tax summit — we desperately need a circuit-breaker on our long-term fiscal strategy.

Instead, we’ve got short-term, lazy policy from a government that didn’t have the guts or competence to keep fighting to make transnational mining companies pay something closer to what other sectors of the economy pay in tax, preferring to try to exploit sympathy for the flood victims by hitting PAYE taxpayers.

And forgetting about serious policy for a moment, in doing so, the government has created a wholly unnecessary make-or-break moment for itself. It must sell the levy first to the Greens and independents — all of them in both houses — and then to voters. And we know how good this government is at selling anything. There will be much talk of “tough decisions” and how the government is prepared to do the unpopular thing — but its history suggests that unpopularity reduces this government to a quivering mess. But it can’t afford to fail — what if Tony Windsor and Rob Oakeshott decide they can’t stomach a new tax? And what if voters misunderstand the tax or react hostilely to it?

Yes, the government would always have been confronted by a dilemma in addressing the floods, but it now faces a self-created problem that failure to secure passage of the levy will massively damage it politically.

The only positives in this mess is that the government is taking the opportunity to get rid of the risible Cash for Clunkers program — although you can be assured that was going to be jettisoned in the budget in May anyway. If Gillard announces some other decent expenditure cuts today, it might lift all this from the laughable to the merely terrible.

Being right for once hasn’t managed to improve the Coalition’s prosecution of the case against the levy. Andrew Robb has started talking about how soft the economy is, when the Coalition’s line for 18 months has been that the economy is strong and the government should slash spending. And much sound and fury has emanated from that simpleton Barnaby Joyce (the ex-Shadow Finance minister, recall), who yesterday contrasted “downloading movies” (the sole purpose of the NBN, apparently — he omitted to mention p-rn) with the much more Austrayan activity of rebuilding after floods.

And while normally significantly saner than Joyce, Tony Abbott, remarkably, topped him by dubbing the levy a “mateship tax”.

At that point, you stop crying and start lying in a foetal position, whimpering and wondering who let any of these people on either side anywhere near power.

Oh, wait.



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45 thoughts on “Laugh until you cry — can we put a levy on political stupidity?

  1. Peter Evans

    Where did the ALP get sh-tcanned in the the last election? Queensland. Surely the floods are a heaven-sent chance to buy a little goodwill…. That’s why the Coalition are so spooked by the prospect of Government spending ramping up north of the Tweed. Katter will love it. Oakeshott and Windsor, however, must way up the odds of losing their balance of power position in the next election.

  2. ronin8317

    The Government’s re-election strategy includes balanced budget in 2013 to neutralize the deficit hysteria from the Coalition. Begging to differ with other political commentators, a flood levy is better than more government debt because unemployment is below 5% right now, and a levy will shift resources into rebuilding without increasing the total demand of the economy. More government debt at this point of the economic cycle will be inflationary.

    The effect of the flood must be considered from both a ‘balance sheet’ perspective and a ‘demand’ perspective. On the ‘balance sheet’, the flood has destroyed a lot of assets, so it’s effect on the GDP is negative. However the flood also created over 20 billion dollars in demand for rebuilding, and that translate to a lot of raw material and labour. They do not appear magically, and a reduction in consumption in other sectors of the economy will be needed. Either we’ll get a flood levy, or we’ll get more interest rate increases.

  3. Ten black donkeys

    Are those of us who have already made donations to the Qld Premier’s fund (or any of the other flood relief funds) going to get rebates, now that we’ll be having to put our hands in our pockets again for a mandatory donation? Perhaps we should ignore all future appeals to help each other out because we can rely on the government to extract further levies from us.

  4. Holden Back

    Those of you who have made charitable donations to relief funds will have done so out of the generosity of your hearts and with no expectation of return to help individuals in need. (Of course, Ten Black Donkeys, you won’t be claiming those donations as a tax deduction.)

    Paying for public buildings, roads, stormwater, sewers, new levees, and flood mitigation is going to cost a great deal more over a long time. Even the Australian public at its most generous won’t cover that, and I would guess most people feel this is one of the proper functions of government.

  5. Lorry

    Another example of a lazy, ineffective and backward looking govt. The greens will love it because they are into heavy taxing. Now is the time to defer the defecit Julia and show real leadership. Alternatively, stop foreign aid and other waste of tax payer money.

  6. Meski

    @TBD: I guess that the Qld Premier’s Fund and others are deductibles when you put your tax return in. But you could have saved the paperwork.

    @The article. Yes, what were they thinking, calling it a flood levy? Damn it all.

  7. Ten black donkeys

    Well, Holden Back, I agree with everything you say (although of course I’ll be claiming a tax deduction if I’m entitled to one – who wouldn’t?). That doesn’t mean that a levy is a good way for the government to fund these works. For example, they could delay the return to surplus that they seem to think so terribly important.

  8. Kevin Herbert

    How long will Gaza Gillard last at this rate of policy stupidity?

    Give Bowen, or Combet or the drover’s dog…or anyone a go…Gillard’s simply not up to it…..just like Rudd, Latham & Beazley.

    In September 2010, I tipped she’d be gone by February (next month)……why am I feeling quietly confident.

    For the record, I too wanted a capable female PM from either side, ‘cos like many I believe the gender imbalance in politics is way off, and also becuase some of the most capable, personable managers I’ve met have been women.

  9. GocomSys

    I would have phrased it slightly differently: Whilst maybe somewhat saner than Joyce, Tony Abbott topped him by dubbing the levy a “mateship tax”. At that point we find ourselves lying in a foetal position, whimpering and wondering who let any of these people anywhere near power.
    Of course it is essential to hold this weak government to account but please, please, do not keep on quoting some of those morons giving them exposure they do not deserve. They stifle sensible debates, further adding to an already toxic environment.

  10. CML

    What a ridiculous article, Bernard! You might at least have waited to see what the government was going to do, instead of speculating on what YOU think they are going to do. I have just watched the National Press Club address by the PM and her answer to the followup questions from the usual suspects. What she had to say was imminently sensible – a mixture of levy (on taxpayer earnings OVER $50,000) and programme cuts, most of which are in the environmental area. These cuts are to schemes which mostly benefit the wealthy anyway – how many people on $30,000 or less can afford to put solar panels on their roof or install solar hot water (even with the subsidy)? And the cash for clunkers was a misguided policy anyway.
    PM Gillard also pointed out that carbon abatement would be much more efficiently dealt with if a price was put on carbon, and that is what they intend to do in 2012. I am no fan of Julia, but I think you have been spending too much time with the journalists from Ltd. News, Bernard !!

  11. Holden Back

    But your point Ten Black Donkeys, seemed to be that you had already contributed enough at your personal discretion, rather than the underlying principle of the mechanism the government nominated to fund their obviously much larger contribution.

    A contribution which would have been made regardless. It’s an argument I’m sure is being put forward with much less civility and sophistication in other locations.

  12. David

    Pity some of you didn’t wait for the announcement by the PM, Bernard in particular. She is hardly going to send anyone to the poor house at a dollar or 2 dollars a week for one year.
    Shite all over the MSM and Coalition faces, what happened to their Medicare levy 🙂
    Well done Julia and well done the cabinet.

  13. Kevin Herbert

    Have just checked the Australian & the SMH’s polls on this silly proposal.

    They’re both between 75 to 79% AGAINST.

    There’s no feet left to shoot at Federal Labor.

  14. Keith Bedford

    I have just read John Quiggin’s article and the comments appalled me. The comments here also appall me.I don’t think Bernard is right but I agree with John Quiggin. Most Of the Crikey commentators would be good candidates for the Tea Party ,American or the Mad Hatters.

  15. David Hand

    You can’t help feeling the levy has come about because Julia has received feedback from a Western Sydney focus group that she faces a cataclysm at the polls if the surplus does not arrive on schedule.

    There has been quite a discussion on a thread last week about this about the macroeconomic implications of a defecit / surplus. The levy is a tax increase which, however justified, will have a negative impact on economic growth in the same way that last year’s stimulous supported growth.

    I just hope that the economists win the day and what is best for Australia is what has happened. But she has that uncomfortable flaky look about her………

  16. David

    David Hand…did you actually watch the Press Club address and Questions from the media?

  17. David Hand

    I did not watch the press club address.

  18. jimD

    Not me, Bernard, not me. I voted informal last election, for the first time in my life. A lot of people I know were in exactly the same position, and voted informal for the same reason: we knew what a Gillard government was going to be like; we knew a Greens vote (in our electorates) would go straight to Labor; and, of course, Abbott was out of the question. We’re all still out here; our votes would go to any coalition that can come up with a little genuine vision, a lot of common sense on the big issues, and some real guts.

    No takers so far, we can see that: the wisdom of bogan-heavy focus groups seems to outweigh us. So be it.

  19. Kevin Cox

    There is no need for a levy.

    We can allocate interest free credit to all individuals, businesses, local governments and state governments for the specific purpose of rebuilding when and how the people affected want to do it. If prices increase then people will not take up the credit offer until the prices are reasonable so it is important for the credit to be available when the rebuilders need it. This will tend to stop inflation which the levy will not. The loans have to be repaid after people have rebuilt and are paying taxes again. Some of a person’s regular taxes can be used for the repayments and there can be a levy on their future taxes until the loans are repaid.

    Interest on credit used to rebuild is used to account for opportunity cost. There is no loss of opportunity with rebuilding and so the credit should be interest free.

    While the whole community can pitch to kick start the process it is still necessary to encourage people not to rebuild, or buy, in flood prone areas.

    Interest free loans repaid from future taxes does not impose an immediate burden on the government (the taxpayer). It simply reduces the future government income from taxes.

  20. michael crook

    I thought it was OK and not really worth turning into a major debate. How easily we get distracted away from important issues. This is not a subject worth the amount of (artificial) angst being generated. Talk about something important guys.

  21. David

    Cheers David. Reason I asked was after your comment…”But she has that uncomfortable flaky look about her………”
    She looked and sounded 100% better than that, more like mmm a Prime Minister.

  22. Perry Gretton

    What is the real objection to a one-off levy? It serves as a convenient way to raise funds for rebuilding broken infrastructure and domestic dwellings. As such, we’re contributing to restoring the welfare of our more unfortunate neighbours. Is that a bad thing? Must everything be measured in narrow budgetary terms?

    Luckily, I’m not affected by the floods, but if I were, the last thing I would want to hear is arguments about budget surpluses, fiscal responsibility, and so on. All I’d want is to get my life back together as quickly as possible.

  23. Rena Zurawel

    The best solution to the fund problem is to withdraw our troops from Afghanistan and build/rebuild the infrastructure in Queensland and everywhere else. We can also cut down on military junk. Simple.
    Well, I do not dare ask what has happened to the money that we have had already paid for our ‘water safety programmes’ and other ‘would be projects’ like ‘to save the Murray’. Any transparency on that one?
    But it seems that we have to pay for our consecurtive governments total neglect of our infrastructure. Both Labor and Libearal politicians should start paying from their own pockets for their own blanders. (insulation, education, etc)
    Julia Guillard should pay for the mining tax from her own bank account.

  24. CML

    RENA Z….. What a ridiculous lot of nonsense! We are being asked to pay up to $5/week for goodness sake! What is wrong with you people? All your comments must make the flood affected people in Qld and elsewhere feel really good – NOT!! Most of you are a bunch of a-seholdes. Why don’t you all move over and make your comments on Ltd. News – just the type of comment they will publish?

  25. Ian


    Would you have the courage to stand in the main street of Gatton, Qld and spout this crap……..No?…didn’t think so

  26. mark

    Apart from repeating the accepted line of various economic pundits (who have little credibility as far as I can see – my Economics professor heavily emphasised the point many times that economics is not a science and I have seen that proved time and time again), please explain why a once of levy for a once of event of this magnitude is a bad idea. I for one think that it is quite an acceptable approach and am quite happy to pay it. Not the only one, not necessarily the best, but quite reasonable.

    The level of objective journalism in Crikey continues to sink……

    This government might have its problems and its weaknesses but the level of the debate proffered by the media, the lobby groups and the opposition appalls me.

  27. Rena Zurawel

    In all civilised countries all rivers are regulated!!!!!! We never seem to have money for any infrastructure.
    We have been blabbering about ‘water solution’ for decades and have never had any results. It is interesting to observe that some people are happy to sympathise with the victims of unnecessary bushfires and floods that could have been avoided, rather than think about the solutions so the next generations would not suffer.
    In this country, we are constantly ‘taken by surprise’ by natural disasters occuring regularly.
    So, instead of calling me names, ( you did not have to introduce yourself) stick out your head and try to find out how other countries have already solved the flooding problems thus avoiding people’s misery.
    It is my money, too and I would not like it to be wasted on bureaucracy and unfinished programs.

    It reminds me of the old story about monkeys suffering from heavy rainfalls and promissing solemnly to build themselves a house as soon as the rain stops. Once the rain stopped, they were happy frolicking among the trees and forgetting about their promise… until the next heavy rain.

  28. mark

    Apologies for not being able to spell “off”……

  29. Catching up

    The levy might not be necessary as some say but is it bad. It would take a miracle for any Labor government in this climate to convince the public a surplus is OK. It is OK to be brave but taking on battles you cannot win is a little stupid. Maybe down the track with the help of economist and the media the public might come to understand. There is no way the Opposition is going to change their stance on the matter.

  30. Graham R

    So individual Australian taxpayers are to pay a flood levy, starting with those on a modest $50,000 per year.

    Why is there not a corresponding levy on corporate tax?

  31. CML

    @RENA Z….There is no way to “regulate” the rivers in Qld which caused all the problems. They built Wyvenhoe to do just that – worked well, didn’t it? Every engineer/expert I have heard interviewed on radio has said that Brisbane (in particular) is built on a flood plain, which means flat land, and there is just nowhere to build a dam (or any other structure) which would stop the flooding. Short of moving Brisbane somewhere else, there are two alternatives – one: move all the existing buildings out of the flood zone, or two: put all buildings up on stilts. That seems to be about it.

    @GRAHAM R…. The levy is to be applied to earnings ABOVE $50,000 – for example, if you earn $51,000, you pay the levy on the $1,000 only. That doesn’t seem to be a big deal as far as I’m concerned. Should amount to a few cents/week.
    You may have a point about the corporates, but according to the PM at the Press Club today, many, many businesses have given millions of dollars, in cash and kind, to assist the flood relief and rebuilding process.

  32. AR

    The Gillarobot has a new verbal tic, even more annoying & meaningless than Krudd’s “working families”. On Friday’s AM the phrase “Australians around the country” droned out so many times I began to wonder if the alternative was to become an ex-pat.
    Please dump the leaden Sussex St suicide script and set free the witty, intelligible and relevant ”real Julia” before it’s too late.

  33. JMNO

    I can’t see the problem with the levy even though many economists don’t seem to like it.

    And as for the Opposition, they ran several levies – gun buyback, Ansett collapse, Timor intervention, diary and sugar industries – so I don’t see why they are bellowing like a wounded bull. In fact these levies got nothing like the adverse response that this one is getting.

  34. Meski

    @JMNO: The opposition would rather the levy didn’t go ahead so that when the budget didn’t go back to surplus as promised, they’d have something to point to. As for pointing out “don’t do as we did, do as we say” well, we knew they were hypocrites.

  35. Kevin Herbert

    My view on this levy is not about whether it’s right or wrong, just that how could this Federal ALP leadership make yet another major misjudgement of the public mood.

    The public opinion polls are running around 75%+ against.

    It’s time to ditch Gillard, and start rebuilding. There is no way they can remain in power with the current leadership coterie in place.

    Latham, Rudd..and now Gillard…surely they can’t screw up their fourth leadership choice in a row.

  36. mark

    Kevin – where do you get that the public sentiment is 75% against a levy to pay for the flood re-build?

    A why oh why is it now a bad thing that a government makes a decision based on what they think is the right thing to do rather than the polls?

  37. Meski

    Probably a news push-poll. And yes, a government doing the right thing, and not the popular thing, is different. Kevin would normally lambast them for being populist. Five dollars a week isn’t going to hurt me, I drink more coffee than that in half a day.

  38. Kevin Herbert


    The only pools I’ve seens are in the Australian newspaper (81% against) & the SMH (76% against). Of course, the results would have to be adjusted to allow the respective media audiences demographics.

    All major news media are running polls on it. I’d reckon both Fairfax & News Lt will publish formal polling results tomorrow.

    I haven’t had a chance to check out last night’s TV news polls, but on last night’s 9 (or was it 7) 6pm news (I flick between them constantly) it was around 75%.

    As for Government’s making unpopular decisions, in the Gillard government’s current extremely precarious position, I wouldn’t advise making any announcement if it’s popularity was not likely to be proximate to the last election voting numbers.

    Gillard like Rudd may be academically talented, but both have the political nous of a mudbrick.
    Australia deserves better leadership from a PM, not knee jerk back-of- the-Z car discussion outcomes.

  39. David Hand

    The problem that many commentators have with the levy is that it depresses economic activity. It’s not that high income earners can’t afford it or shouldn’t pay it: it’s that by paying it, the $1.8b or whatever is sucked out of the economy.

    Julia’s government is therefore raising a tax (contractionary) while for the last two years spending up on BER and such like (stimulatory).

    I can’t help feeling that the cuts announced and the tax increase are only and entirely political, aimed at getting the government coffers back into surplus by 2013 to keep an election promise – a political aim rather than a fiscal one.

    By playing the fairness harp, she might appeal to the left but her economic policy narrative is hopelessly conflicted.

  40. kraken

    This is smart politics, for those of you who don’t seem to understand the inner logic of a levy. Further borrowing would be lambasted by the hysterical anti-debt mob. Immediate allocation of $2 billion to the Q’land recovery is necessary now! Twaddle on the rights and wrongs of a progressive tax such as this are irrelevant in the face of the human crisis we confront. Again, BK has revealed his penchant for overreach and outright silliness in his critique of Labor’s policy management. His endless ranting on bank reform a while back a case in point. Gillard is spot on with this approach, whether it is immediately popular or not. I suggest Labor will manage the politics, particularly in the face of Abbott’s continuing idiocy on public investment. I agree that structural reform of middle class welfare is an ongoing challenge, but you don’t look to those measures in a crisis. Not only does the Govt have to act swiftly, but also has to be seen to be decisive and it is smart politics to involve the whole community in the response. It is not going to be fixed by charity but a systematic and transparent mobilisation of substantial capital for the public good. We are all Q’landers today!

  41. Meski

    The money isn’t being removed, its getting spent, on infrastructure, which trickles into businesses, individuals.

  42. David Hand

    You are correct in what you say but if there was no levy and the government funded the $1.8b through deficit spending, just as it did through the GFC to the tune of $30b or so, that spending would be extra and stimulatory. The unanswered question is what fiscal policy is needed now. Does Julia know?

  43. Moira Smith

    Agree with Holden Back. The flood levy is about rebuilding infrastructure, not helping out individuals/families (the Govt is already attempting to do that via Centrelink, and of course most who donated via their bank account or put money in a bucket had individuals/families in mind). Miles of roads (etc) need to be rebuilt in Qld. I can’t see people tossing money into buckets for that, it’s not sexy.

    There is still a toll on the Harbour Bridge, I understand … and now one on the tunnel just what Tony would these days call ‘another great big new tax’ (and not a one-off, either) .

    We see the dangers as other economies (think Greece, Ireland, USA) slide into deficit …. if $50 or per person can help stop that happening here I’m all for it. And, as pointed out above, it wil be a sliding scale.

    PS @ Kevin Herbert: “Gillard’s simply not up to it…..just like Rudd, Latham & Beazley.” Oooh – you wouldn’t happen to be a coalition voter, would you? Nothing wrong with that, of course …. but you might have said so openly, ie ‘No Labour politician is up to it, bring on Abbott”! Unless you’re a Green or Independent, of course.

    @JIMD: You voted informal at the last election, that means you didn’t vote at all, just went along to buy a lamington and or sausage sandwich and avoid a paltry fine. Because your ballot didn’t count in any way whatsoever except to a) waste the time of those who spent their Saturday evening counting votes and b) add to the total of those who (in the main) couldn’t understand the instructions. You don’t appreciate what it is to live in a democracy and – not to put too fine a point of it – you don’t deserve to have any say on any political matter in this or any forum. People have given their freedom and their lives to get a vote, and you just trash what is not something to throw away but something precious to treasure and use with care and thought. What do you think the current protests in Egypt are about?

    @ Lorry. Who said the Greens are into heavy taxing? Show me where they state that in their policy statements?

  44. Kevin Herbert


    Now now Moira, you’re letting your prejudices cloud your judgement.

    For the record, until the Rudd disaster, I was a ALP supporter for more than 40 years.

    Also, I thought Howard was a divisive, racist dimwit, who apart from the positive GST intro, will be remembered for destroying public service independence along with ministerial responsibility. Middle class welfare is another of his pathetic legacies, along with playing to the rednecks re refugees (as have Rudd & Gillard).

    However, at least Howard ran a largely effective (but cowed) public administration, unlike Rudd who destroyed some Government departments thru rank stupidity & gross incompetence.

    Gillard will be gone shortly, as she is simply a ‘conservative careerist” (Lindsay Tanner’s description) with no substance whatsoever. She is hated within the parliamentary party, in a way that only Labor can hate.

    And yes, I’d give Abbott a run..cos he almost certainly couldn’t do any worse than Gillard & co.

  45. drsmithy

    People have given their freedom and their lives to get a vote, and you just trash what is not something to throw away but something precious to treasure and use with care and thought.

    So after I spend some “care and thought” and reach the conclusion there’s nobody I want to encourage by voting for them, what should I do ?

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