Increasing taxes: still not the answer...

As I unfortunately predicted in my blog last week, the federal government has proposed the introduction of a flood levy on taxpayers to cover the costs of rebuilding ravaged infrastructure in flood affected communities, in an effort to keep its promise to return the budget to surplus by 2012-13.

As I alluded to last week, the most effective way to meet Australia’s increased spending requirements is to defer the date of returning the budget to surplus – it is important to have a real-time sense of perspective about budget deficits and public debt. When successive governments have been trying to reduce the tax burden on Australians over the last decade, the last thing we need is a new levy.

Australia’s financial and risk management strategy should involve controlling expenditure and having the capacity to fund unexpected events or emergencies. While the flood crisis was an unexpected natural disaster on a massive scale, it was not unpredictable.

The question Australians need to ask themselves is: what can we do to ensure this country is able to deal with crises of this scale in the future? Will the flood levy set a precedent for future ‘one-off’ taxes?

The Institute has also published a media release on this issue.