Fact check: Is Labor's increased tobacco excise a 'workers tax'?

Updated

The claim

Former prime minister Tony Abbott told Liberal Party members in Tasmania that Bill Shorten's Labor Opposition plans to bring in "five new taxes" if elected.

Mr Abbott identified these potential taxes as a housing tax, a wealth tax, a seniors tax, a carbon tax, as well as characterising Labor's proposed tobacco excise increases as a "workers tax".

"There'll be a workers tax 'cos he's going to slug smokers," Mr Abbott said on March 4, 2016.

"And as my grandfather used to say, 'it's the only pleasure I've got left, son'. I don't much like smoking, but nevertheless why single out one particular section of the community for yet another slug?"

He repeated the claim on March 23, telling Sky News host Paul Murray that Labor's policies include "increased tax on workers having a smoko", which he later called "a tax on every worker having a smoko".

Is Labor's planned tobacco excise increase really a "workers tax"?

The verdict

Mr Abbott's claim is spin.

Mr Abbott used broad language, requiring Fact Check to make a number of assumptions.

A "worker" is taken to be someone in a non-managerial job, with an income less than $70,000 a year.

Statistics show that most smokers are "workers", and they will end up paying more tax.

Because the increase will constitute a higher proportion of a "worker's" pay, it will have a greater impact on a "worker's" household budget than a higher income earner.

But the data also shows that around 80 per cent of "workers" do not smoke and so will not be affected.

Given smoking rates are higher among groups of people with other characteristics, such as being unemployed, on Mr Abbott's argument, tobacco excise increases could equally be described as an "tax on the unemployed".

Tobacco excise

Mr Abbott initially referred to a "new tax", but in his later interview correctly described it as an "increased tax".

He is referring to Labor's proposed four annual 12.5 per cent increases in tobacco excise, to begin on September 1, 2017.

It has been suggested that this will lead to $40 packets of cigarettes, although a spokesman for Opposition spokeswoman for health Catherine King tells Fact Check that Labor has "never put a figure on the final price" of cigarettes after the excise increases.

Labor has not publicly disputed the $40 figure.

The Turnbull Government is rumoured to also have a plan to increase tobacco excise, but Treasurer Scott Morrison did not confirm this when it was raised in Parliament in March.

Who is a "worker"?

Fact Check asked Mr Abbott for clarification on who he understood a worker to be, but he declined to comment.

Fact Check finds it unlikely that Mr Abbott was referring to all people in Australia who have a job when he referred to "workers".

Given the context of the smoking debate, Mr Abbott's reference to "one section" of the community, "smoko" and his use of an old anecdote, Fact Check takes Mr Abbott to be referring to that group of people who in the past would have been referred to as "working class" or "blue collar".

The problem remains that there is no set definition for such a person, on income or other characteristic.

Australian Bureau of Statistics figures indicate that in November 2015, average weekly total earnings was around $1,145 per week (around $60,000 per year).

The ABS also conducts a survey of employee earnings and hours every two years, the latest of which was in May 2014, based on which it issues statistics for "average weekly total cash earnings" by occupation.

For the purpose of this analysis, Fact Check has considered the income range of people who have do not have a professional or managerial role.

The range of average income for non-professional and managerial workers is between $760 and $1,355 a week ($39,520 to $70,460 per year).

Fact Check has therefore limited its classification of "worker" to those people who have a job, but earn less than $70,000 per year.

It is then necessary to find out how many smokers fall within this category.

Who smokes?

The most reliable estimates about the numbers and backgrounds of people who smoke in Australia are made by the ABS, based on results from its National Health Survey.

An ABS spokesman has provided Fact Check with results from 2012 that estimate smoker numbers for different income levels, with the same number of people in each level.

For this analysis, Fact Check has concentrated on those who smoke daily, given that increased excise would have the most impact on them.

Gross weekly personal cash income ($) No. of current daily smokers Others (including non-daily smokers) 0-79 149,900 1,443,200 80-259 231,800 1,322,200 260-360 285,300 1,345,800 361-489 250,500 1,335,200 490-670 253,700 1,222,700 671-862 361,000 1,256,300 863-1,054 305,600 1,214,700 1,055-1,342 332,700 1,402,800 1,343-1,825 244,000 1,350,500 1,826+ 145,200 1,444,600 Not stated 52,600 377,900

Based on these figures, 60 per cent of the population aged 15 years and over are "workers", earning between $260 and $1,342 a week (approximately between $13,500 and $70,000 a year).

Around 68 per cent of daily smokers are "workers" on these figures.

Only around 19 per cent of "workers" are daily smokers, although this is a higher rate than among all those aged 15 and over (around 16 per cent) or those earning over $70,000 (around 12 per cent).

Another source of relevant data is the Australian Institute of Health and Welfare's 2013 National Drug Strategy Household Survey.

The survey shows that there are greater levels of smoking among those in lower socio-economic groups (20 per cent in the "least advantaged" group compared with 6.7 per cent in the "most advantaged" group) and people without post-school qualifications (16.5 per cent compared with 15.4 per cent with such qualifications).

Of the "currently employed", 17.3 per cent are smokers compared with 15.8 per cent for all those aged over 14.

However the AIHW has not released statistics showing the actual numbers of these people who smoke and have a job.

Given the statistics also show a high smoking rate among groups with other characteristics (for instance 21 per cent of people who are divorced/separated/widowed are estimated to be smokers), it could be argued that those people bear an even greater burden than "workers".

Sources tell Fact Check that data from polling company Roy Morgan, available for a fee, indicates that smokers are 64 per cent less likely to be professionals, while tradesmen and other "semi-skilled" workers are 46 per cent more likely to smoke than the rest of the population.

A smoker's average household income is estimated to be around 15 per cent lower than that of a non-smoker's household.

Statistics from outside Australia support the notion that smoking rates are higher among "workers":

2013 statistics from the UK Government's Health & Social Care Information Centre estimate that 29 per cent of UK workers in "routine and manual" jobs were smokers, compared with 14 per cent in "managerial or professional" roles.

A 2008 Gallup survey of 75,000 across the United States indicates that the "likelihood of smoking generally increases as annual incomes decrease".

But regardless of employment, income or other characteristic, most Australians do not smoke and so most "workers" would be unaffected by higher prices.

Maurice Swanson, National Heart Foundation Spokesman on Tobacco Control, tells Fact Check that Mr Abbott's claim was "dredged up from 1940s thinking, when three quarters of adult males were smokers — not 2016, when smoking is on the way out".

"Tobacco tax increases ... are not a 'workers' or a 'non-workers' tax — they are just a tax on smoking, and will reduce death and disease from a lethal product."

In 2006 when Mr Abbott was health minister in the Howard government, he welcomed the introduction of a ban on smoke breaks by a government department.

"It's obviously up to individual employers how they want to handle this, but certainly I think that the smoko has had its day," Mr Abbott is reported to have said at the time.

Impact of tax increases

Tobacco taxes represent a greater proportion of a "worker's" income than that of a higher income earner.

Michelle Scollo of Quit Victoria has acknowledged that "increases in tobacco taxes are most felt among poorer sub-groups" but says that this makes tax increases "an effective preventive tool".

Dr Scollo points out that the "tax can be avoided by remaining a non-smoker, or giving up smoking, and those who quit smoking realise substantial financial savings immediately."

While increased tax may encourage a "worker" to quit smoking, the fact remains that "workers" who continue smoking will end up paying more tax.

Sources

Topics: tobacco, smoking, tax, liberals, abbott-tony, australia

First posted