Doug Cameron (NSW, Australian Labor Party) Share this | Hansard source

I raise to support the Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill (No. 2) 2008 and I do note that Senator McGauran in his usual quite dramatic way has raised a number of concerns from the opposition. But what should be understood is that the Medicare levy surcharge is simply a tax on income. This bill will provide tax relief for low- and middle-income individuals earning between $50,000 and $75,000 a year and for families earning up to $150,000. This bill will restore equity to the incidence of the Medicare levy surcharge and will remove a tax trap that increases each and every marginal tax rate by one per cent on each and every dollar earned by anyone earning between $50,000 and $100,000.

The government intends to redress the lack of fairness in this Medicare levy surcharge and it is a lack of fairness that the coalition did nothing about in their 11½ years of government. It has been left again to a Labor government to bring about some fairness and equity to the ordinary taxpayers of this country. We will do that by having a proper administration of the Medicare levy surcharge.

The coalition oppose this bill; it is hardly surprising that they oppose the bill. In the past few months they have caved in to just about every rent seeker that has knocked on their door. They oppose tax relief for low- and middle-income earners paying the Medicare levy surcharge while they oppose taxes on luxury cars for the rich. On private health, they have made no mention about some of the costs imposed on the community through private health insurance.

It was very interesting that during the Senate inquiry we heard from the chief executive of one of the private health funds who had gone through a process of demutualisation and, in that process of demutualisation, this chief executive was awarded $1.2 million to demutualise the health fund and turn it into a private entity. I do not see this as a good spend of public money. Why should we be supporting a 30 per cent subsidy for these health funds if this is the type of conduct that they are going to embark on? We should be saying loud and clear that if you want a private health industry in association with the public health system then we should get value for money, and $1.2 million bonuses to chief executives in private health funds is not good value for those that are paying into the private health industry or for the public, who are subsidising the private health industry.

We have seen the opposition defend an unjustifiable and unconscionable subsidy from every taxpayer in the country to the North West Shelf joint venture partners, who include some of the biggest, most powerful and most profitable corporations in Australia. The public need to know what the opposition have been about in this house. They have been supporting the big oil companies and they are supporting the private health industry and their executives with their $1.2 million-a-year bonuses. They have been supporting the Maserati drivers and the Lamborghini drivers and, at the same time, they are saying that ordinary Australians should not get a tax cut when they are being forced into paying for private health insurance at a level that was never envisioned by this policy when it was set up by the coalition when they were in government.

The bill increases the Medicare levy surcharge thresholds from an annual tax income of $50,000 to $75,000 for individuals and from $100,000 to $150,000 for families and couples. The increased thresholds will apply from the 2008-09 year of income. For 2008-09 tax returns, individual taxpayers earning $75,000 and under will not be liable to pay the Medicare levy surcharge. Currently, the surcharge is an additional one per cent of taxable income imposed on those who do not have private health insurance and who earn over $50,000 a year—or $100,000 a year for couples and families. It is not just a levy on income over and above the income threshold; for those whose income exceeds the threshold, it is levied on all of their taxable income.

If this bill is passed, a single person without health insurance on the average annual salary of $58,600 would receive a tax cut of $586 a year. This is an important tax cut when ordinary families are under pressure from the global economic crisis that we are facing. At a time when the government is taking substantive steps to reduce the burden on ordinary workers in this country, we cannot have the opposition continue to try and impose a $586 a year tax penalty on workers who do not want to be in the private health industry area.

This is a unique tax in Australia and it is not in the least bit progressive. In fact, it acts in reverse. It taxes income downward after a person’s income exceeds the threshold. In this sense, it does really carry the coalition brand of unfairness, the coalition brand of not caring about ordinary Australians, the coalition brand of looking after the big end of town when they are screwing ordinary working Australians. Only the coalition would introduce such a tax. Labor is moving to fix this by raising the threshold.

If the Medicare levy surcharge had been indexed to the CPI since it was introduced on 1 July 1997, the threshold would now be $67,000 per annum. If it had been indexed to average weekly earnings it would now be set at $76,000 per annum. Labor has accepted the amendments from the minor parties, which go to the level at which the Medicare surcharge levy should be set. We have listened to those concerns and we have made proper amendments to the first bill. The Australian Taxation Office figures show that, in 2005-06, 465,325 taxpayers incurred the surcharge—up from 436,490 in 2004-05 and only 167,330 in 1997-98.

On the government’s private health website, the policy intent of the Medicare levy surcharge is described as follows:

The surcharge aims to encourage individuals to take up private hospital cover and, where possible, to use the private health system to reduce the demand on the public system.

When the Medicare surcharge levy was introduced in 1997, it was targeted at high-income earners. The then Treasurer, the Hon. Peter Costello, told the House in August 1996:

… higher income earners who can afford to take out private health insurance will also be encouraged to do so.

          …            …            …

This is the levy which the Government hopes no-one will pay. It is entirely optional. Those who take out health insurance (with the benefits attached) will be exempt.

The coalition have moved from that principle. It is a bit like the way Senator McGauran has slipped from his principles with the National Party into new principles with the Liberal Party—you have no standing in terms of your values for the long term. Senator McGauran has the cheek and the hide to stand up and talk about principles when he has demonstrated absolutely none in his political conduct and his political career. It is an absolute joke for him to come in here and talk about principles. I am glad to say that I have some principles that I stick to. I want a strong national health system that is available to everyone in this country. There is no problem with me sticking to that principle. But Senator McGauran, in my view, will not be sticking to too many of his principles—if he can climb up that slippery pole of leadership, which he seems destined never to climb up. Never have I seen such hypocrisy in the House as I have seen from Senator McGauran.

I will now turn to Professor John Deeble, the principal architect of the Medicare system in the 1980s, who was not challenged in any way, shape or form by opposition senators when he gave evidence to the Senate Standing Committee on Economics inquiry into this legislation. In his submission to the inquiry Professor Deeble said:

The surcharge is an income-related tax. However, unlike almost any other income-based tax, it operates in a reversionary way—that is, it applies to all of the taxable income of people earning above the thresholds, not just to the excess. I know of no other tax that works in this way and it is extraordinary that an Australian parliament should have approved it. The result is a very high marginal tax rate for people with incomes at or close to the thresholds.

Professor Deeble, as I said, was unchallenged in his submissions to the inquiry. In his summary he said:

The economic effect of the proposed changes will be to reduce the cost of public hospital care by 40% for single people with incomes between $50,000 and $100,000 per annum, and for families with combined incomes of between $100,000 and $150,000 a year.

Professor Deeble understands these issues. He is a compassionate man and he is a competent public administrator with a long record. He has targeted the issues here, not only in terms of the health system but in terms of the fairness that is required for ordinary Australians to go about looking after themselves and their families in a fair and equitable manner. He went on to say:

That will have some effect on the membership of private health insurance and on the private hospitals and doctors that private insurance supports. The shift in membership is most likely to occur amongst younger people whose use of hospital services is lower than the average.However, the effects will be quite small.

We have heard all of this doom and gloom. The doom and gloom merchants of the coalition have been at it loud and strong again on this issue. Professor Deeble said:

Based on hospital usage in the relevant age groups, the number of people covered by private insurance is expected to fall by about 8% but benefits paid would fall by only 3%. Premiums for the remaining members would rise by just over 5%. That would not threaten the viability of private insurance.