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Per Capita Tax Survey 2012

Public Attitudes towards Taxation and Government Expenditure

by David Hetherington

Executive Summary


Australians’ attitudes towards tax and public spending are getting tougher. Increasingly, we see ourselves as paying too much tax in a system that is less fair. Our support for public spending is falling.

Objectively, this does not make sense. The tax take in Australia, measured by the tax-to-GDP ratio, has hit long-term lows in the last few years. Australia now has the fifth lowest tax burden of the 34 OECD countries, higher only than South Korea, Chile, the United States and Mexico. Recent public spending cuts, particularly in health and education, would normally be expected to lift support for greater spending.

However, it is perception rather than fact that drives attitudes, and the prevailing perception is that Australians are overtaxed and poorly served by public spending. The single most important driver of this perception appears to be the Federal Opposition’s highly successful campaign against “big new taxes” and for “cutting the waste”.

This is the third annual Per Capita Tax Survey. In October 2012, the Survey asked a representative sample of 1,422 Australians for their views on a range of tax and public spending issues.

The results can be grouped into four main themes. First, large numbers of Australians continue to believe that we need more government spending on health (84% of respondents want this), education (76%) and social security (42%).

Secondly, Australians think the tax system is becoming less fair, both at the individual and community level, and are less supportive of public spending. Fully one half of those interviewed stated they paid too much tax, up six percentage points since 2010. Fewer people believe that low-income earners are overtaxed. Over the same period, support for greater public spending has fallen by 11 percentage points.

A third theme is the lack of understanding of aspects of the tax system. More than half of the respondents stated that petrol prices had risen as a result of the carbon tax, when the tax is not levied on fuel. Almost half said they had received no compensation as a result of the tax, when 90% of households have received assistance. Nearly 60% say that Australia is a high-taxing, big government country when our tax levels are amongst the lowest in the OECD.

The final theme is the cognitive dissonance that sees respondents hold contradictory views about tax and spending. People want more public services and investments, but they also want to pay less tax. High-income earners who say they pay too much tax simultaneously believe the rich should pay more tax.

The Survey concludes by asking how policymakers can respond to these trends. Australians still express support for higher public spending and a progressive tax system, but this support is ebbing. If political leaders cannot respond, an important social consensus will be lost.

The response does not lie in technical policy design. It requires leaders to make the politically difficult argument that it is in the national interest to improve the health, education and social security systems, as well as increasing infrastructure investment - which in turn means we need to maintain a healthy level of progressive taxation to support this public investment in goods and services that cannot be delivered by the market alone.

Put simply, political leaders must explain that, by comparison with similar countries overseas, Australian tax levels are at a bare minimum. If we are to sustainably fund the services and infrastructure that we expect, taxes will have to rise. A difficult argument to carry, but not an impossible one.

Click here to download the full paper...

Media links:

Give and take that taps touchy topic of taxation, The Australian, 30 March 2013 - Judith Sloan, in The Australian Financial Review, looks at the 2012 Tax Survey.
Taxes are already low but you wouldn't know it, The Drum, 28 March 2013 - David Hetherington says whoever wins the election in September will need to address the issue of dwindling tax revenues.
High earners don't realise own wealth, study finds, The Sydney Morning Herald, 25 March 2013 - Peter Martin looks at the 2012 Per Capita Tax Survey for Fairfax Media.
Carbon tax perceptions hitting hard, The World Today, ABC Radio, 25 March 2013 - Ashley Hall interviews David Hetherington about the 2012 Tax Survey.
Australians oppose more taxes as budget time looms , The Illawarra Mercury, 25 March 2013 - Peter Martin looks at the findings of the 2012 Per Capita tax survey and it's implications for the Federal Budget.
Survey shows hardening attitude to tax, 3AW, 25 March 2013 - Ross Stevenson and John Burns from 3AW Breakfast interview David Hetherington about the 2012 Tax Survey.
Study finds widespread ignorance about the carbon tax, The Sydney Morning Herald, 25 March 2013 - Peter Martin interviews David Hetherington about people's attitudes to the carbon tax.
Aussies sure do hate paying tax, MacroBusinessBlog, 25 March 2013 - Leith Van Onselen blogs about the Per Capita 2012 Tax Survey.