Cyclones, Floods and Levies (Levees?)

Well this is great news: just a few days before I leave to go to Queensland, a tropical cyclone is right on track to hit our area this weekend.
For reference, I live just above Bunbury: i.e in the middle of the forecast path.

Its not as bad as the storm in a teacup re: the Gillard Flood Levy.

Given that well over 40% of the households in this country receive more money than they pay in taxes and that over $109 billion was spent on social welfare in the 2009/10 Budget, the puny amount raised by the levy (around $1.8 billion) pales into insignificance.

I wonder though what would have been more efficient:

1. Borrow the money by selling Australian government bonds (a market that desperately needs more liquidity so our myopic fund managers can stop buying BHP and the banks, inflating their share prices, and actually allocate capital properly), providing a welcome home for genuine savers, OR
2. Take the money off the wealthy,  and waste about 20-30% of it on collection and accounting/bureaucratic malaise at the ATO (and countless HR departments around the country)

Sure, the former would create an income liability stream that needs funding, and would raise the national debt (which would again focus the mainstream commentariats effort on bashing the government on its extremely minor total debt position, whilst ignoring the real debt problem: households and State governments).

But the latter will inevitably result in unintended consequences, particularly the more wealthier using many available loopholes to legally reduce this new tax (although negative gearing won't be one of them - as pointed out by The Unconventional Economist, most property "investors" (sic) are in lower tax brackets than those affected materially by this levy), and the inevitable wastage and inefficiencies that go with collecting a new, temporary tax.

Had the Gillard Government been bold and gone for Option 1, and extended this to say, $20 or $30 billion and planned a major infrastructure initiative, including a widespread flood mitigation system for the entire state of Queensland, in the long run, would that have been a bad thing?

As I've stated before, this country suffers from four deficits, one is minor but could blow out of control due to the structurally unsound property market ala Spain - the Federal budget; two will eventually come back to haunt us as we squandered a whole generation's wealth and purposely destroyed our manufacturing industry and high skill base (the trade deficit and the savings deficit - i.e record household debt), but the one most in deficit in this country is leadership.