Victoria will lose the equivalent of the money needed to run two major hospitals – or to perform more than 10,000 elective surgeries a year – when federal funding cuts kick in in 2017, the state health department told a Senate inquiry this week.

The Queensland government says the cuts it is facing are equivalent to what is needed to pay for 4,500 doctors and nurses. The New South Wales premier, Mike Baird, just says they are “not sustainable.”

It’s a crisis, and it’s less than two years away.

Isn’t this where we should start any discussion of tax “reform”; in the real world, asking why we levy taxes in the first place and what we want to buy with them, rather than with a meandering, directionless series of thoughts via 24-hour news grabs?

Most Australians would put hospitals and schools at the top of the list – knowing that hospital care is there in any emergency and knowing that, whatever our financial circumstances, our kids can go to a good school.

We also know hospitals and schools serve the collective good – unlike other countries, our sense of “fair” includes not having to produce a cheque book or an insurance policy before we get let through the hospital door and that the state finds enough money to make sure disadvantaged kids don’t fall further and further behind, hobbling their own life choices and often imposing bigger burdens on the community than if we had just educated them properly in the first place.

Problem is, right now, governments are choosing to spend the tax we pay in a manner which does not leave enough money to do these things that we consider so essential.

Kevin Rudd saw the hospital funding problem looming and tried to hammer out a solution, but that was in the death spiral of his first prime ministership and in the end it was finalised by Julia Gillard – winding up as a promise that the commonwealth would eventually pay 50% of the growth in hospital costs, in return for an agreement that the states would do things more efficiently.

Gillard, as education minister, commissioned the Gonski report, which found that more money was urgently needed to stop poorer schools and disadvantaged students from falling further behind.

Money for both was included in budgetary forward projections, promised in signed state and federal agreements. But then Tony Abbott, in a truly shameless act of buck-passing, wiped the projected post-2017 extra spending for hospitals and schools ($57bn for hospitals and $28bn for schools) in his 2014 budget – just drew a line through it without talking to the states or offering the country any real alternative ideas for how they might be paid for.

Even more shamelessly, the Coalition then pretended this black hole in future funding was non-existent, claiming it had “saved” $80bn over the next 10 years, when of course it hadn’t “saved” anything, it just hand-balled the problem of finding the money to the states.

At the time it was assumed this was a tricky negotiating ploy to force the states to the negotiating table when the government started negotiations about the goods and services tax and federalism. But now – if that ever was the trick – Coalition MPs seem to have forgotten about it, warning against “lazy” tax reform where money from GST is just frittered away on flimflam like hospitals and education, instead of being used for the ideologically worthy aim of reducing other taxes.

Exactly how the government could pay for hospitals and schools, deliver tax cuts and welfare increases that compensate for a GST hike and also for bracket creep, deliver company tax cuts and reduce the overall tax take remains a mystery.

And that’s before we even get to the Daily Telegraph’s view that “the most unfair aspect of the present tax system is that the 2% of Australians on incomes above $180,000 pay 26% of the country’s income tax.” Others might say that was the whole point of a progressive tax system.

There is, of course, room for ideas about how health and education spending might become more efficient. A government can find ways to reduce spending in one place in order to free up more money for other things it considers more important.

But we should beware of a debate where the starting point is an ideological objective of lower taxes, because that can give a rhetorical cloak of respectability to all kinds of things that can harm our lives and our society.

Thankfully, the signals from the prime minister, Malcolm Turnbull, are more reassuring, albeit still vague.

He has been saying any increase or broadening of the GST has to be fair, that low and middle income earners and welfare recipients would have to be compensated for its regressive impact through tax cuts and payments, and that essential services have to be funded. He’s accepted the logic of Gonski’s reasoning about spending enough on disadvantaged schools. He knows that if his tax package is not seen as fair, the electorate won’t buy it. He’s also promised to look at closing tax loopholes, for example the concessions enjoyed by very high income retirees with huge nest-eggs in superannuation.

But he’ll need to because he’s also promising new spending – in the first instance with his imminent statement on innovation. And there are still more things on the new prime minister’s very big “table”, changes to competition policy and federal/state relations which could also become moving parts in the big tax/payments tradeoff.

On the other side, Labor is promising to restore the hospitals and schools funding, and says tax crackdowns on superannuation, multinationals and possibly negative gearing will help pay for it – along with other, as yet still unidentified, savings. It is rejecting the whole idea of a GST hike, even with compensatory income tax cuts, before seeing any detail, on the grounds that the GST is regressive and there can be no guarantee the compensation will remain in place.

That seems strange since the same basic idea was behind Labor’s introduction of the carbon price – a regressive increase in the price of power compensated for by progressive cuts to the taxation of income. And since Labor is promising to reintroduce another carbon price, presumably it will have to do the same thing again this time. Shadow treasurer Chris Bowen’s argument – that the Coalition criticised Labor’s carbon tax compensation – proves bipartisan inconsistency, but it doesn’t really disprove the point.

Despite all the talk, as yet we have no firm plans from either side to analyse.

We do have the start of a fascinating election campaign that cuts right to the heart of the politics of economic growth and equality. Is it better to reduce taxation in the belief that it will boost growth and create the revenue that might be used for the services we need? Or is it better to retain existing levels of taxation to avoid the inequality that stymies consumption and growth and life quality, and continue to pay for the social safety net and essential services?

Surely we should start that discussion with a clear idea of what we want to pay for, what services we value in our lives and what things we value as a society.

Is the priority to cut the government’s tax take, or its spending, below a certain percentage of GDP, or to have a functioning hospital to treat a sick child? Starting with a theoretical or ideological position about a “desirable” level of taxation – without knowing what we are taxing for – is bound to get the answer backwards. And it’s not really a “saving” if we can’t pay for things we really need.