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Promises Shouldn't Affect Vital Services

Ross Womersley – Executive Director, SACOSS

Ross WomersleyIn the last few weeks we have seen the opening salvos of the state election campaign. The Liberals have promised a cut to payroll tax and the Labor Party have outlined long term visions for transport and announced a plan to build a new Women’s and Children’s Hospital next to the new RAH.

Both these starting promises raise a key question which will run right throughout the state election campaign: will the state government – no matter which party - have enough money to provide the vital services that we all want and need – the schools, hospitals, roads, police  as well as critical support for vulnerable members in our community?

It is a key election question because State government revenue has declined over the last 5 years. Measured as a share of the state’s economy, if SA state taxes were now at the level they were before the GFC we would have an extra $182m in this year’s budget. The shortfall over the last 5 years has been $1.1bn. That is a lot of services we are missing out on. Add hundreds of millions in falling revenue from the state’s share of GST and there is a long-term financial problem for any government.

In this context, any decision to either spend more or to cut taxes, needs to be seen in terms of its impact on the ability of government to provide the vital services we all want as community members. So without any offsetting measures a policy that results in a $54m per year payroll tax cut to business, means there is that much less to spend on services to the community. Equally, a decision to spend more without a financing strategy leaves less to allocate.

This does not mean that taxes can’t ever be changed or reduced. In a submission to the state parliament earlier this year, SACOSS suggested that it might be wiser to lower both the pay roll tax rate and the threshold for when businesses have to pay, essentially, a smaller tax with a wider base. This would be fairer and help to maintain the revenue base that the state government needs to fund vital services, and at the same time remove the distortion in the market created by an artificial threshold that gives advantages to smaller (and potentially less efficient) employers or creates a tax barrier to business growth.

Ultimately though, election policies need to be judged in their entirety, not simply by one announcement on one tax, so we look forward to dialogue with all MPs on how to continue funding vital community services. This also applies to the government because their announcements of large infrastructure plans for transport and hospitals, whatever the merits of the individual proposals, will require a revenue base to fund those proposals.

Australia is not a high taxing country by world standards – the 4th lowest in the OECD, and South Australia is not a high taxing state. As a share of the economy, state taxes are about the same as the national average, and according to the last ABS figures, per head of population state taxes in South Australia are about $300 a year less than the national average.

What we really need from our MPs in the first instance is a measured discussion about how we are going to sustain the revenue base to pay for the vital services that we want our state government to deliver.

First published: The Advertiser, 31 October 2013

Published Date: 
Thursday, 31 October 2013