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Shorten's cynical tobacco tax grab

By John Slater - posted Thursday, 10 December 2015

Bill Shorten plans to sell his hike on tobacco taxes that will see the price of a pack of cigarettes top $40 as a responsible revenue measure aimed at improving public health. In reality, it is a cynical cash grab from a group that already contributes more than it's fair share to the public purse.

The tobacco excise is well known to be amongst the most regressive forms of taxation. Almost a quarter of Australians earning in the bottom 20% are smokers. This rises to 30% in poor remote areas and 50% in regional Indigenous communities. A report commissioned by the Rudd government found that a 25% hike would see a smoker on the minimum wage with a 30-cigarette-a-day habit have their income diminished by 3.2%. That's the equivalent of more than doubling the Medicare levy.

This exposes the hollowness of Bill Shorten's posturing of Labor as vanguards of fairness against the Coalition's cruel-minded cuts to low-income earners. Smokers already cough up $8 billion to Treasury coffers each year and cost the health system a mere $320 million. To put that into context, one year of smoking taxes covers more than half of the cost Gonski education reform funding for 6 years. So at what point exactly will smokers be making a 'fair' contribution for a lifestyle choice that the law deems perfectly legal?


Australians face no shortage of nanny-state overreach throughout the ordinary course of their lives. Yet there are few instances where government punishes an otherwise legal activity quite like smoking. Bicycle helmet laws, restrictions on pokie machines, nightlife curfews and banning junk food advertisements all have the effect of curbing individual freedom for doing something that causes no harm to another person. But you can still eat a Big Mac on your to the casino without making a compulsory donation to the ATO equal to 200% of the actual price of each of these products.

Many people accept punitively high tobacco taxes based on the uncontroversial claim that cigarettes are bad for you. What this doesn't explain is why smoking is taxed far and beyond any other legally permissible product that has negative health consequences. Recent research shows that regular physical activity is the single biggest indicator of longevity and overall good health. Similarly, many studies show an irrefutable link between poor diet, particularly processed foods, and chronic disease.

If we take the logic of Shorten and his likeminded band of nanny-staters seriously, there should be nothing wrong with taxing the cost of fast food into oblivion in order to fund tax credits for attending government run bootcamps. Yet somehow, that comes off as instinctively implausible. The reason is that smoking is well established in the minds of the public as a social ill of unmatched proportions. And that makes it all the easier for it to be singled out for punitively high taxation compared to the myriad other lifestyle choices that cause irreparable harm to ones health.

The grim truth behind Shorten's moralising is that a cash grab from cigarette sales under the guise of public health is at least in political terms, low hanging fruit. Smokers are by now well accustomed to their status amongst Treasury officials as a persecuted minority. So why wouldn't politicians keep looking to smokers to underwrite their fiscal largesse?

Aside from the bald-faced opportunism of lifting tobacco taxes, perhaps the even bigger farce is Shorten's pretence that doing so is a constructive way of addressing the Commonwealth's budget deficit. The policy would deliver an extra $3.8 billion over four years. That would cover just 2.3% of this year's more than $40 billion deficit. That amount would no doubt weigh heavily in wallets of Australia's disproportionately low-income smokers. Yet it would barely put a dent in the outright profligacy of the Commonwealth's current spending habits.

It is fashionable for political elites to wax eloquent about an addiction to smoking as one of society's gravest vices. But perhaps our politicians' time would be better spent thinking of ways to curb their own addiction to spending instead of targeting ever larger tax grabs at a perfectly legal lifestyle choice enjoyed by a modest few.

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About the Author

John Slater is a student and an intern at the Cato Institute.

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Creative Commons LicenseThis work is licensed under a Creative Commons License.

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