Ross Womersley - Executive Director, SACOSS
As a community we all rely on taxes to pay for vital services like hospitals, schools, roads, and support for vulnerable and disadvantaged people.
Having a tax system that is fair and sustainable is fundamental to our quality of life.
But, since the Global Financial Crisis in 2008, South Australian government revenue has decreased massively — putting pressure on the state budget and leading to cuts in vital services.
There is not much joy looking ahead either, so it is crucial that in this election all parties face up to the real revenue challenge which will confront any future government.
The SA Council of Social Service (SACOSS) has just released a report, Taxes and the South Australian Election, which sets out the extent of that challenge. It also debunks business claims that SA is a high tax state.
While some tax rates are relatively high, as a proportion of the economy SA tax revenue is only just above the national average, and on a per capita basis South Australians pay about $450 a year less in state taxes than the national average.
In this context, achieving a sustainable revenue base to fund vital services will be a key issue for our next government. So at this election it is important to understand how the parties’ election promises will impact on the tax base — and therefore on their ability to provide the services our community needs.
The Labor Party has claimed it has the right tax balance. It will introduce a CBD “carpark” tax but rejects lifting other taxes to raise revenue. They argue that big tax cuts would just further erode the revenue base.
However, the Labor Party is also promising long-term infrastructure spending which will need to be funded and it is not clear where this money will come from.
The Liberal Party has promised a couple of big tax cuts in this election: a cut to payroll tax over four years, and the abolition of the CBD “car park” tax. Combined these amount to a 1 per cent decrease in state tax revenue.
Since the Liberals have also promised no new taxes, there will be little room for compensatory measures. Accordingly, key questions for the Liberal Party’s policy costings will be: what impact the cuts will have on the immediate budget deficit, what expenditure items will be cut to compensate for the tax cuts, or, what levels of growth would be required for revenue neutrality?
Equally, they must now explain how they will fund services that councils say they won’t be able to provide, under proposed revenue caps.
No matter which party wins government, they will need to deal with the likelihood that Holden’s closure will result in further decreases in state revenue.
Of the current smaller parliamentary parties, the Greens’ position appears closest to SACOSS’ platform, while (like the major parties) Family First, Dignity for Disability and the Xenophon Group seek to achieve a sustainable revenue base through economic growth and cutting waste.
These are admirable goals, but as policy they can be problematic.
For instance, SA’s $1.1 billion revenue decline over the last six years has actually taken place during a period of economic growth; while too often, “waste” is talked about without identifying specific changes.
If politicians promote “economic growth” as the solution to revenue problems, they must identify the level of growth will be required to restore revenue levels, and provide evidence that this growth will indeed deliver that revenue.
Similarly, if their revenue strategy is built on “stopping waste”, they must be prepared to say exactly what “wasteful” services, programs or practices they will cut.
All governments make crucial choices around taxes and spending. SACOSS hopes that when parties release their election policy costings, the debate is not just about whether they counted the beans correctly, but rather on what impact their policies will have on state government revenue and its subsequent ability to fund the services that our community needs.
Our concern remains — without a sustainable revenue base, vital services will disappear.
No one wants to talk about increasing taxes, but we have to do this.
First published: AdelaideNow, 5 March 2014