Taxation policy has been front and centre of Australian politics in recent years, with debates over company tax, personal income tax and perennial fights like the GST rarely being far from the front pages. But most of this debate happens at a federal level and relatively little attention has been paid to the substantial tax changes that are taking place at a state level in South Australia.
That is unfortunate, because while the numbers are bigger for federal taxes, it is state governments that generally deliver services like health, education and public transport. Any changes to state taxes have a very direct impact on the capacity of governments to staff their hospitals and schools or to employ enough drivers for their buses and trams.
The Marshall Government’s first budget, delivered in September of last year, contained a series of changes to the Emergency Services Levy, payroll tax and land tax.
The land tax reforms will mean that people and companies who invest in property will pay less from June 2020 and were designed in a way that primarily helps those with land worth more than $1.2 million. The Government effectively reduced the ESL, which is paid by homeowners, and cut the amount of payroll tax being paid by small businesses.
Collectively, these tax cuts are predicted to reduce government revenue by approximately $613 million over the next four years. While tax cuts sound appealing, the question that must be asked is how will public services be maintained, given the revenue shortfall? The answer so far seems to be that they won’t.
The State Government has already announced significant cuts to education, public transport and other services. Seven TAFE campuses are going to be shut down and Service SA centres in Modbury, Mitcham and Prospect will be closed. The amount of money going to public transport services has also been cut by $45 million and 4000 jobs will be axed from the public service.
Additionally, while land tax on investors’ properties will go down by $96 million over two years, some of the state’s poorest citizens will be forced to pay more as the rent for their housing trust homes goes up.
It’s pretty obvious what’s happening here – taxes have been reduced for some South Australians while services have been reduced for others.
We’ve seen all of this happen before, on a larger scale, at the federal level. Howard era treasurer Peter Costello cut income tax each year from 2004-05 to 2007-08, benefiting the richest 10 per cent of Australians more than the bottom 80 per cent combined and reducing government revenue by $169 billion over a decade. It was these cuts that led to the “emergency” that supposedly justified huge cuts to services in the Abbott Government’s 2014 federal budget.
Undeterred, the Turnbull Government then went further, legislating another tranche of personal income tax cuts in 2018, at a predicted cost of $144 billion over the next 10 years. Australia Institute research showed that, once again, the majority of the benefit will go to the wealthiest Australians. Someone earning $40,000 per year will get an annual tax cut of $455 while someone earning $200,000 will get a benefit 16 times larger – a tax cut of $7225.
Rearranging taxation settings to disproportionally benefit already wealthy people is a choice governments are entitled to make. But it needs to be recognised that choosing to forego revenue will have a lasting effect on whether our governments can afford to deliver the public services that many rely on.
The Turnbull Government had also planned on delivering a company tax cut for the largest corporations in Australia, which would have cost the federal budget $65 billion over 10 years. After Senators baulked at having to explain to voters why they would deliver a $39.5 billion benefit to the big banks, and likely necessitate future cuts to public services, the corporate tax cuts were abandoned.
This loss in the Senate, along with other electoral examples, shows that public opinion on taxation and the delivery of services might be changing. Beyond strong public opposition to federal company tax cuts, the now re-elected Andrews Government went to the last Victorian election promising not tax cuts, but a wide range of increased services. The ACT Government, too, has remained in power while implementing a long-term policy of increasing land tax to phase out other taxes and pay for popular policies such as a move to 100 per cent renewable energy.
These results point to a growing appetite in the electorate for an increase in taxation, especially on those who can most afford it, while improving the quality of services being delivered.
Which brings us back to South Australia.
With the next state election still three years away, the Marshall Government has time to implement substantial changes to taxation and service delivery policy. How these changes are formulated, presented, debated and received will have a significant impact on the development of our state.
While there’s no right or wrong amount of tax that should be collected, or services provided, South Australians should seriously consider what sort of a society they want because the decisions we make today will have effects that last for generations to come.
Noah Schultz-Byard is the SA projects manager at policy think tank, The Australia Institute.
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