Thursday, June 3, 2010

A public health case for the super profits resources tax

The Resources Super Profits Tax – a public health initiative

by Luke Slawomirski*

Amidst all the hysteria surrounding the proposed RSPT, not a single person has made a key argument in its favour…. That it will benefit the health of all Australians.

Those to whom this may seem preposterous overlook a key underpinning philosophy for the tax, which Lindsay Tanner eloquently outlined in Parliament a couple of weeks ago. This is to prevent the (further) development and embedding of a two-tier economy driven by extreme commodity prices and a largely oligopolised market.

By extension, this situation naturally leads to some individuals growing wealthier while others are left behind, an effect compounded by inflationary pressures induced by super profits (anybody living and paying their rent/mortgage in WA will attest to this).
This is bad for our health.
Surely not! A rising tide lifts all boats; there’s a trickle down effect; more money coming in means people are happier and give more to charity; jobs are created; the tax will push cost of living up even further!

The last argument was comprehensively debunked by Ken Henry in front of a Senate Committee. A recent study by the Australia Institute dispelled the ‘rising tide’ myth. It is well known that charity contribution has nothing to do with wealth. An there’s no need to even speak of the tenuous link between wealth and life satisfaction.

More and more empirical evidence is emerging to show that the more unequal or economically stratified a society, the less healthy all its citizens are.

Let me be clear. We’ve know for a long time that being poor is bad for your health. What we are learning now is that being rich in itself is not enough if you live in a country with a steep socio-economic gradient (where the gap between rich and poor is large).

The work of epidemiologists such as Sir Michael Marmot and Richard Wilkinson is showing that, beyond a certain threshold of GDP per capita termed the ‘epidemiological transition’, absolute wealth ceases to exert any significant influence of health and wellbeing. Rather, it is how the wealth is distributed that counts.

Nations which consistently outperform their counterparts on a range of health and wellbeing indicators (such as life expectancy, coronary disease, obesity, smoking, depression, drug abuse, homicide, incarceration rates, suicide and so on) are ones where the wealth gap is narrower. These tend to be the Scandinavian countries like Norway (which, as it happens, has a functioning tax on its oil reserves very similar to the one proposed here).

Japan also stands out (no it’s not their diet or culture… the rise has only been apparent since WW2). It is a low-taxing country but the income gradient is relatively flat – the CEO of a company will earn maybe 20-30 times what the janitor earns.

Even some developing countries like Costa Rica outperform much more affluent ones on a range of measures. Kerala, a state in southern India, has lower infant mortality rates and comparable life expectancy to the USA, despite being much much ‘poorer’.

The USA, in spite of its wealth and tremendous spend on health care (12-13% of GDP), languishes around the middle of the table that includes developing as well as developed nations.

This same can be observed when comparing states within the USA, neutralising the argument that the differences are cultural and measurement related. Adjoining states with homogenous populations can exhibit considerable differences in population health.

Differences that are largely attributable to the levels economic (in)equality within them. These reductions in health manifest at both ends of the social spectrum.

So how does Australia rate?

Overall not too bad but slipping. We also have inordinately high rates of mental illness and drug abuse.

The point is that, based on the epidemiological research into inequality, permitting a 2-speed boom/bust economy to develop will be to the detriment of social cohesion and consequently bad for our health…of everyone.

So back to ‘the tax’.

The economic arguments for the RSPT are sound (almost all reputable economists in Australia endorse it) not least because it is coupled with a lowering of company tax. The environmental case is strong, as is the moral argument. And, as we can see, there is also a for public health case for instituting it.

So what’s the problem?

Firstly, I think the population is so strongly inculcated with the ‘more is more’ mantra that mounting any argument for wealth redistribution is extremely difficult. Anybody raising this as an issue is branded a communist. Tax is un-Australian and anti-freedom.

There is also the strong mythology around mining and wealth creation built into our national narrative. People like Andrew Forrest and Clive Palmer are seen as heroes not only because they have managed to become extremely wealthy (let’s remember that Kerry Packer got a state funeral here) but their image taps squarely into the mystique of Aussie machismo.

Latte-belt pinkos can squawk all they like about equality. Twiggy and Clive are the real men who turn the wheel of the Australian economy, put 4WDs in our driveways and jest skis on our waterways. This perception has been very astutely exploited by the pro-mining lobby in the RSPT debate.

The mining mythology makes it politically very hard to argue for the tax, but I think the Government has also made an absolute hash of selling it. Also, the lack of consultation has been astoundingly short sighted and arrogant. Meanwhile the Opposition, true to form, have trained the crosshairs squarely on the lowest common denominator, braded it a ‘great big new tax’ and prophesised impending economic doom.

On the grounds of this tax and the Coalition’s declaration to dump it, one can only hope that the Government scrapes in at the next election and commences the necessary reform to make this a more cohesive, progressive and ‘healthy’ nation.

*Luke Slawomirski is a public servant working for a Western Australian Government Department. He has a clinical background and a Masters Degree in Health Economics. He has strong interest in health policy, and, in particular, the social determinants of health. The opinions expressed in his piece are personal and not reflective of the view of the Government agency for which he works.

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