It's not hard to fathom why the Safer Families package Andrew Barr unveiled in Tuesday's budget has being so well received. The $21.4 million that is to be spent on front-line domestic violence prevention and support services in 2016-17 and beyond will ensure a continuity and certainty of funding that's previously been lacking. The means by which Mr Barr will finance this spend – a $30 annual levy on all Canberra households – has not had quite the same rapturous reception however.
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Ratepayers worn out with apparently endless increases in rates, fees and charges (usually well above the rate of inflation) have asked – quite reasonably – why the package could not have been funded out of consolidated revenue. Some have questioned how, and on what basis the $30 figure was arrived at. As anti-violence advocates have themselves remarked, the greater the awareness of family violence, the more that victims reach out for help from services providing accommodation, financial support, or legal aid. Plainly, there's every likelihood the levy will go up in time.
It's easy to identify the appeal of levies or hypothecated taxes for governments. They ensure a steady and reliable funding source for a particular program, and they tend not be resented to the same extent as, say, income tax increases. This is because taxpayers can see where their money is going in a way that's not always obvious with other tax revenue streams. Many dedicated taxes are finite (the Queensland flood levy) or in good cause (the various state fire and emergency services levies) and this too adds to allure.
But earmarked taxes have downsides as well. They may deprive policymakers of the flexibility to effectively allocate funds among different expenditure programs based on prevailing needs. Assessing all competing claims to determine which of them will provide the most public benefits for the money spend is generally considered to be optimum budgeting practice. Separate tracking and accounting demands means levies also incur additional administrative costs.
Nor can it be assumed that the portions of general revenue no longer needed for targeted categories funded by levies will be banked or handed back in the form of lower taxes. US studies indicate these savings are perfunctorily spent in other areas. That same research has also identified a tendency for dedicated revenues to be used to increase the size of government. And as it happens, the budget papers indicate that the biggest portion of the first year's levy proceeds (some $3.07 million) will go towards employing a full-time coordinator-general for Family Safety and assembling "a dedicated safer families team to lead the whole-of-government effort".
A $30 levy may be considered a small price to pay for ensuring that an important social welfare program gets security of funding And it will be inexpensive, provided the government ensures the money goes to the neediest of the support services rather than using it to bulk up an already well-padded bureaucracy.
