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Why a Great Big Tax on Everything is a Great Big Bad Idea

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By Mark Morey

Mark Morey is the Acting Secretary of Unions NSW.

Friday, 29 January 2016

Wealthy Australians may not blink at the prospect of a slight rise to their cost of living, but for millions of us on a tight budget, increasing and expanding the GST could be the straw that breaks the camel’s back.

The GST turns the long-held basic principle of the Australian tax system upside down.  Where we have historically required the people with the most capacity to pay more, the GST demands the people with the least capacity pay the most.

The fact is consumption taxes are regressive – they have a greater impact on low-income earners than they do on high-income earners.

This is because people who are on low to middle incomes spend more, if not all, of their weekly pay on living expenses.

Research by ACOSS warns increasing the GST will make it even more regressive.

For people on lower pay  (the lowest 20 per cent of income earners), raising the GST to 15 per cent would increase the cost of living by around seven per cent.   For middle income earners, the cost of living would go up by 4.2 per cent.  But for the people at the top of the income tree, the cost of living would only go up by three per cent.

Can we really afford this increase to the cost of living?  The unemployment rate in NSW is 5.2 per cent. This  means one in twenty people who can and want to work are jobless.

These numbers, however, do not reveal a much bigger problem – the extent of under-employment in our community.

The latest figures on underemployment show there are over 300,000 people in NSW who are not working as many hours per week as they want or need to.

The steady casualisation of the workforce and increase in part-time employment is forcing many people out of full-time permanent jobs and into less stable jobs.

When people move into causal work they not only lose working hours, they can lose vital conditions like annual leave and sick leave.

The loss of  job security means they have less chance of securing economic beneficial arrangements like home loans.

Unlike people at the top of the income tree, who can afford to save, people in part-time and casual jobs are more likely to live week to week, often relying on credit cards to cover essentials like food and rent.

The spectacular rise of  “payday lending” is a telling symptom of people trying to make ends meet.  

Research commissioned by the Consumer Action Law Centre last year found the number of households using payday lending services increased by nearly 55 per cent between 2011 and 2015 – up from 416,102 to 643,087.

And after the idea of making highly profitable mining companies pay more tax blew Kevin Rudd out of the water, the idea of making polluting companies pay more tax proved to be equally effective in ending the Prime Ministership of Julia Gillard.

Less than two years after the overwhelming majority vote to “Axe the Tax”, the same people who railed so violently against the idea of taxing mining companies are spruiking a tax plan designed to slug every single Australian.

Let’s not beat around the bush.  Unlike the mining super profits tax and the carbon price, the GST  is a great big tax on everything.

No matter how you cut the consumption tax cake, the fact remains – the GST is an inherently unfair way to raise government revenue.

Working Life is a forum to share ideas and opinions about work and life, both light-hearted and serious. The opinions presented on Working Life are those of the author, and do not necessarily represent policies or views of the ACTU.

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We believe in the free flow of information, and content on Working Life is available to be republished online or in print under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
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Comments

  1. Keith Freeman
    Sunday, 31 January, 2016 at 5:40 pm · Reply

    The LNP simply Don’t have the Guts to force the Big End of Town, and the Foreign Nationals to pay a Fair Share of tax on the earnings they make in Australia. It’s much easier to hit the working middle class.

  2. Storeman Norman
    Monday, 1 February, 2016 at 12:09 pm · Reply

    The Liberals’ rank hypocrisy in opposing the mining tax and carbon price but backing a rise in the GST is truly mindblowing.


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