Thursday, December 31, 2009

Creative accounting Douglas-style

54 percent of your and every one else’s personal tax goes towards healthcare. The growth is scary, when just two years ago the figure was 41 percent of your personal tax. Saying 54 percent can hide what this means. If you earn minimum wage, you will pay about $2500 every year for healthcare. If you earn the average wage, you will pay over $6000 for healthcare.

That's Roger Douglas on Health. It's from an e-mailed pamphlet that landed in my in-box a few days ago. It also features here.

My immediate reaction is BS. Roger is up to more creative accounting. And I didn't think much more about it.

I was reminded of it again this morning however when reading a well-written op-ed from Des Gorman, head of Auckland University's School of Medicine, and the chairman of Health Workforce New Zealand.

Health accounts for 20 per cent of Government expenditure and half of the new money in the 2009 Budget was allocated to health.

Correct. In which case 20 percent of the tax you pay goes towards healthcare. Unless the government apportions more income tax to health than it apportions to any other area of expenditure. Which it does not.

Whatever tax is paid - income, GST, corporate, excise - goes into the consolidated account and is then allocated accordingly. If we applied Roger's formula across the board government would be spending 170 percent more than it collects. For instance I could calculate that welfare spending is costing you $9,000 a year ($20 billion divided by 2.2 million individuals) or 81 percent of your "personal tax" if you earn the "average wage". See how quickly this is coming unstuck? 100 percent has already been exceeded.

As I have said before I am not totally averse to Roger's ideas - I support individual responsibility but do not like compulsion. However, creative accounting turns me off totally. Why would I trust the rest of the message when I can't trust the numbers?


JC said...

In one respect I support Douglas' way of putting it..

Income tax per taxpayer is a very personal thing, and health is even more personal and about the number one priority for the tax payer, so yes, he may well see a direct relationship between his tax dollars and the health services he receives.

As you point out its a relationship thats not real, but maybe it should be., you can be damned sure that if the taxpayer personally puts in $20 odd billion that he expects it gets spent on his priorities of health, education and welfare, and stuff like the ETS, Rugby World Cups and the Arts comes out of some other (discretionary) bucket.


Shane Pleasance said...

JC, you are correct, taxation is a very personal thing. It is my money. I want the option to not pay for and not receive certain services. Just those which the Government (any Government) is unable to run effectively - say, health, education and welfare. I will sort my own out, thank you. Services will right size. Problem solved.