"This isn't the fifth term of the Howard government," Prime Minister Tony Abbott said in question time several weeks ago. Indeed: the proposed "debt levy" will restore personal income tax rates to levels last seen in the Howard government's third term, when Peter Costello, under pressure from newly arrived backbencher-in-a-hurry Malcolm Turnbull, increased income tax thresholds and reduced tax rates. Back when the Howard government took a quarter of GDP in taxation revenue.
But the more accurate comparison is with a different Howard era, the second term of the Fraser government, when the "fistful of dollars" promised voters by the Liberals before the 1977 election was wiped out by then-treasurer John Howard's "income tax surcharge" of 1.5% to fix the deficit.
So Tony Abbott, who in 2012 promised "tax cuts without new taxes", isn't the first Liberal to break a promise and impose a tax levy under the guise of fiscal discipline.
But the Tony Tax won't merely affect taxpayers. The tax, as outlined by Coalition favourite Terry McCrann
today, is highly progressive, and targeted at middle and higher-income earners, as it should be. But in being so, it is aimed at discretionary consumer spending, which is more likely to be subject to the GST than basics like food and health, which form a much greater part of the spending of low-income earners.
As a consequence, the Tony Tax will simply direct revenue away from the GST, and thus state governments, to the federal government. It's a revenue shift between levels of governments that will leave struggling states, already facing difficulties with flat GST growth, with an even bigger budget challenge.
Assuming the Tony Tax raises around twice as much as the National Disability Insurance Scheme levy, established by the Gillard government last year, which was estimated to earn $3.2 billion in its first year, it will lead to the siphoning away of over half a billion dollars a year from the states and territories and into federal coffers, a neat little trick that state treasurers will be less than happy with.
But even at that level, the tax will be no more than a sugar hit to the budget given the size of the deficit next year. Let's compare the sort of revenue raised by a levy both to the deficit and to some other budget costs.