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What do the proposed tax cuts mean for health and inequality?

After passing the House of Representatives today, the Government’s tax cuts legislation is heading to the Senate where the real negotiating will begin.

Stage 3 of the proposed tax cuts, which advantage high income earners over those on middle or low incomes, is being widely criticised for both its economic and social impacts.

This criticism was summed up by Crikey’s Bernard Keane as follows:

Stage three of the government’s tax package provides a windfall for high income earners, is unfunded and will increase inequality.” (Article is paywalled)

Below, Jennifer Doggett summarises some of the concerns about the impact of the proposed cuts and shares some health sector suggestions for alternative names for the Government’s legislation.


Jennifer Doggett writes:

It’s important to understand that the proposed tax cuts would be introduced against a backdrop of existing inequality in our society.

The report Inequality in Australia 2018, published by the Australian Council of Social Service in partnership with the University of New South Wales, makes it clear that while Australians like to think of ourselves as egalitarian, we actually have significantly higher income inequality than most OECD countries.

This means that the proposed tax cuts will increase existing inequalities, moving us even further away from the OECD average.

While the relationship between income inequality and health is complex, it’s worth noting that the country with the greatest income inequality is also a country where “the government operates fewer than 45 emergency ambulances for a population of 9 million and which has spawned an underground industry of for profit ambulances, often run by people with little or no training or certification,” according to the makers of the documentary Midnight Family.

The graph below, from the ACOSS/UNSW report, shows exactly where Australia sits.

Health expenditure

The truth about the impact of the tax cuts on health spending may already be buried in this year’s Budget papers,  according to Joe Zabar, director of economic policy and deputy CEO of Catholic Social Services Australia.

Writing for the Pro Bono website, Zahar is clear that the tax cuts will have some impact on services, stating:“…however you look at it, $158 billion in forgone revenue will have some effect on the capacity of the government to meet the needs of Australians”.

His detailed analysis of this year’s Budget papers shows that despite the apparent increase in government health funding, once it is adjusted for inflation and population growth, spending per capita is actually decreasing.

He writes:

Deep in the 2019 budget papers are two tables that provide some interesting data on government spending over the forward estimates. Health expenditure, for example, is set to increase from $81.7 billion in 2019-20 to $89.5 billion in 2022-23, or about 9.5 per cent. However, after inflation, the real growth in the health budget is about 1.8 per cent.

More alarming, though, when health expenditure is adjusted for the forecast increase in population, the amount spent on health per person will go backwards. This is similar for the social services budget, despite it having a marked increase in expenditure for the NDIS and aged care services.”

The need for a Senate Inquiry

The Australia Institute has produced a useful article summarising the case against the Stage 3 tax cuts, which includes the following:

Giving away a $95 billion dollar tax cut means billions of dollars less for schools, hospitals and other services.”

Tax revenue is what pays for community services and infrastructure, and this proposed tax cut for the wealthiest Australians represents one of the largest threats to Australia’s revenue base in recent times, dwarfing even Turnbull’s doomed big business company tax cuts, which were thwarted by the Senate.

The Australia Institute has also argued that these income tax cuts are the largest single budgetary measure not to face a Senate Inquiry and so have proposed some Terms of Reference for an Inquiry into their impact on the economy and the community.

Twitter titles

The Twittersphere has been pinging with helpful suggestions for renaming the Tax Bill to reflect the concerns people have about growing inequality in Australia and the potential for these cuts to increase the gap between the ‘haves’ and ‘have nots’.

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