This photo from the website of Australian Prime Minister Julia Gillard shows cleanup of extensive flood debris.

Australian Flood Relief Relies on One-Year Tax, Cutbacks

Prime Minister Julia Gillard's $5.6 billion plan announced Jan. 27 is a hot political issue. She calls it a necessary response "to the immense national challenge of rebuilding flood-affected regions across Australia."

A one-year progressive tax on everyone earning more than $50,000 annually who was not directly affected by recent flooding is part of Australian Prime Minister Julia Gillard's plan to spend $5.6 billion rebuilding flood-damaged regions. Her Jan. 27 announcement of the tax was denounced by her chief political opponent; Gillard said the tax will generate $1.8 billion, $2.8 billion will come from government spending cuts, and $1 billion will come from delaying infrastructure projects to free up money and skilled labor.

"The recent floods across Australia pose a unique challenge," Gillard said. "This is likely to be the biggest natural disaster in Australia's history in economic terms -- an extraordinary event requiring an extraordinary response."

The tax will work this way:

  • Those earning $50,000 to $100,000 will pay 0.5 percent of taxable income above $50,000.
  • Those earning more than $100,000 will pay 0.5 percent of taxable income in excess of $50,000 and 1 percent of taxable income in excess of $100,000.

"Every cent raised through these measures will go directly to flood-affected regions across Australia," Gillard said. She said her government realizes many Australians have donated to help flood victims. "That is a great contribution," she said, "but entirely separate from the job of rebuilding essential infrastructure in flood-affected regions, which is what today's announcement, including the progressive, levy, is focused on."

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