Comments on Christian Kerr “Higher taxes a poor shield”, 2/09/2009, http://blogs.theaustralian.news.com.au/houserules/index.php/theaustralian/comments/higher_taxes_a_poor_shield/
Kerr asks a question that whether the Preventative Health Taskforce report to recommend very high taxes on tobacco and alcohol is just a revenue grab or cultural snobbery and his answer is it if both. That is likely to be true, because it is very attempting for government to increase revenue and be seen as doing good for the society’s health.
If the government embraces the recommendation that imposes high taxes to make tobacco packs cost $30 or more, that would be a popular but not a rational approach to public policy.
Taxes on tobacco or alcohol should not be too punitive and go beyond the externalities that consumption of those goods generates. An economically sound tax on a good that has a negative externality to the society should be enough to counter that externality. In the tobacco case, the benchmark is the additional health costs that consumption of cigarettes causes to the nation, such as losses in normal well being and treating any illnesses due to tobacco.
We have a Henry review going on at present and its recommendations will be made at the end of the year. Presumably, its rationale or designing principles are based on the economic foundation. It would be ill-advised to depart from good tax design principles to pursue for reasons of popularism.
The health minister should and must act with caution regarding to the Taskforce’s recommendations on taxes as solutions to health problems and goes too far beyond economic reasons.
Showing posts with label cigarette tax. Show all posts
Showing posts with label cigarette tax. Show all posts
2009-05-15
Turnbull scored a strong point in budget reply
At last night's budget reply, the opposition leader Malcolm Turnbull employed smart strategies in painting the Rudd/Swan government as inexperienced and incompetent in managing the economy and budget. He exposed the government’s weakness in these areas by opposing a key savings measure in the Rudd/Swan budget of means testing for government’s 30% rebate for private health insurance. Instead, he proposed to increase the tax on cigarettes to collect the same amount of revenue that would be saved by the budget’s means testing private health insurance.
Turnbull argued: "As private health insurance costs go up, more pressure is put on public hospitals." He accused Labor of "hating" private health insurance: “Labor hates private health insurance.” “Labor hates it because it encourages self-reliance and because it offers choice.” On the other hand, "Tobacco is the single most preventable cause of ill-health and death in Australia," Mr Turnbull said.
Turnbull challenged Rudd: "So there's a tough choice for a weak Prime Minister: raise $1.9billion by making health more expensive and putting more pressure on the public hospital system, or by adding about 3c more to the price of a cigarette and taking pressure off the public health system."
It was a clever strategy for a number of reasons. First, although both measures are related to “health”, increasing the tax on cigarettes is much more superior than means-testing private health insurance. As Turnbull pointed out, cigarettes cause health problems, so a higher tax on them will reduce consumption of them and reduce their adverse impact on health. Means testing private health insurance will reduce the number of people to buy health insurance and in turn to further increase pressure on public hospitals that already have long waiting lists.
Second, the budget measure is a broken election promise by the Rudd government. Rudd had ruled out any change to the private health insurance rebate during the 2007 election campaign. As Turnbull put it eloquently: "Never was an election promise given more emphatically and then broken so brazenly." Facing huge budget deficits and desperately to find some ways to make them look a little better, Rudd/Swan put their election promise aside and tried to save some revenue. It backfired and has shown how incompetent or silly in making that decision when there is at least a better way to achieve the same revenue amount: Rudd/Swan government’s dark backside exposed.
Third, Turnbull appeared to use this change as an example only. It implied that a much better budgetary package could be put together by the coalition, had they been in government to make it. This, in conjunction with portrait the Rudd/Swan government as shopaholic and reckless in spending taxpayers’ money to produce unnecessarily large and record breaking budget deficits and accumulating unprecedented levels of government debt, attacked the weakest side of the government. Turnbull said: “today, Australians see our national balance sheet drowning in red ink.” "They see our nation’s future mortgaged for as far as the eye can see.”
Four, by focusing on just one measure, Turnbull has given few targets and little room for the government to attack him and his coalition, while poking a hole in the Rudd/Swan budget 2009. It was a clever move at a time he himself is badly in need of showing strong leadership credentials.
Turnbull argued: "As private health insurance costs go up, more pressure is put on public hospitals." He accused Labor of "hating" private health insurance: “Labor hates private health insurance.” “Labor hates it because it encourages self-reliance and because it offers choice.” On the other hand, "Tobacco is the single most preventable cause of ill-health and death in Australia," Mr Turnbull said.
Turnbull challenged Rudd: "So there's a tough choice for a weak Prime Minister: raise $1.9billion by making health more expensive and putting more pressure on the public hospital system, or by adding about 3c more to the price of a cigarette and taking pressure off the public health system."
It was a clever strategy for a number of reasons. First, although both measures are related to “health”, increasing the tax on cigarettes is much more superior than means-testing private health insurance. As Turnbull pointed out, cigarettes cause health problems, so a higher tax on them will reduce consumption of them and reduce their adverse impact on health. Means testing private health insurance will reduce the number of people to buy health insurance and in turn to further increase pressure on public hospitals that already have long waiting lists.
Second, the budget measure is a broken election promise by the Rudd government. Rudd had ruled out any change to the private health insurance rebate during the 2007 election campaign. As Turnbull put it eloquently: "Never was an election promise given more emphatically and then broken so brazenly." Facing huge budget deficits and desperately to find some ways to make them look a little better, Rudd/Swan put their election promise aside and tried to save some revenue. It backfired and has shown how incompetent or silly in making that decision when there is at least a better way to achieve the same revenue amount: Rudd/Swan government’s dark backside exposed.
Third, Turnbull appeared to use this change as an example only. It implied that a much better budgetary package could be put together by the coalition, had they been in government to make it. This, in conjunction with portrait the Rudd/Swan government as shopaholic and reckless in spending taxpayers’ money to produce unnecessarily large and record breaking budget deficits and accumulating unprecedented levels of government debt, attacked the weakest side of the government. Turnbull said: “today, Australians see our national balance sheet drowning in red ink.” "They see our nation’s future mortgaged for as far as the eye can see.”
Four, by focusing on just one measure, Turnbull has given few targets and little room for the government to attack him and his coalition, while poking a hole in the Rudd/Swan budget 2009. It was a clever move at a time he himself is badly in need of showing strong leadership credentials.
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