MEDIA RELEASE: Stub out tax hike for tobacco - The Centre for Independent Studies
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MEDIA RELEASE: Stub out tax hike for tobacco

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The ALP seem oblivious to the inconsistency in their arguments about tax increases. They are apparently considering a tax increase for tobacco, while simultaneously opposing an increase for the GST, according to Centre for Independent Studies economist Michael Potter.
“This is despite the tobacco excise hitting poorer Australians much harder than the GST,” Mr Potter says. “An increase in cigarette taxes will have a much greater impact on low income households than an increase in the GST. What is more, it seems likely that there won’t be compensation for the tobacco tax hike, but there will be for the GST. Therefore, the ALP’s proposals will on average hit low income households much harder than a GST increase with compensation.
“It is inconsistent that the ALP supports a tobacco tax hike without compensation and not a GST hike with compensation.
“The ALP might argue that their proposed tax hike is good because it will flow through to school funding. But this means the government is taking with one hand and giving back with another.
“The ALP’s proposal is for a highly inequitable tax increase to fund a (supposed) equity measure for schools. It isn’t clear that low income households will be better off, particularly as the case for more school funding is uncertain: school funding has increased steeply in recent years but the performance of schools has worsened.
“Over the past decade, billions of dollars have been spent on literacy programs in Australian schools, but 28% of Year 7 students don’t meet the minimum standard for literacy. There arebetter measures to improve school performance including evidence-based reading instruction in early school years.
“Finally, there is no need for an increase in the total tax take, which is currently around historical averages. In fact, even without the tobacco tax grab, the total tax burden is heading upwards towards levels that were last seen in 2002 and nearby years, when the ALP arguedtaxes were at record highs. They shouldn’t move away from this earlier position in opposition to high tax burdens.
“In essence, the ALP’s tax and spend idea should be stubbed out,” Mr Potter says.
Michael Potter is a Research Fellow at the Centre for Independent Studies
Media Enquiries: Karla Pincott  kpincott@cis.org.au  0407 716 752