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ABC News

National

RMIT ABC Fact Check

Opposition Leader Chris Minns says the people of New South Wales pay more tax than other Australians. Is that correct?

Chris Minns Fact Check Australia RMIT ABC David Hayward Victoria ABS New South Wales NSW Government Queensland

Opposition leader Chris Minns claimed NSW was the highest taxing state in Australia. RMIT ABC Fact Check found there was more to the story (AAP: Bianca De Marchi)

The claim

With the New South Wales state election this coming weekend, the major parties have laid out their visions for the future, each emphasising policies to address the rising cost of living.

Opposition Leader Chris Minns has argued that the cost of living in NSW is "spiralling out of control", in part because of the burden of state taxes on residents.

"NSW is the highest-taxing state in the country," his website claims.

But is that correct? Are New South Wales residents paying more tax than people in other states? RMIT ABC Fact Check investigates.

Labor leader Chris Minns blamed the heavy burden of state taxes as a major factor for the rising cost of living in NSW. (ABC News: Danielle Bonica)

The verdict

There's more to the story than Mr Minns's claim suggests.

Experts told Fact Check there were two primary measures for comparing the relative tax burdens across jurisdictions: tax per capita and tax as a percentage of gross state product (GSP).

Based on the former, New South Wales was the highest-taxing state in 2021-22, with the equivalent of $4,806 in state-based taxes collected for every resident.

Victoria ranked second (collecting $4,643 per resident) and Western Australia third ($4,202).

In making his comparison, Mr Minns referred to "states" and not "states and territories".

When including territories in a comparison of tax per capita, New South Wales fell to second place behind the ACT ($5,290).

However, the ACT is unique in that it has a single tier of government. Unlike other jurisdictions, it also collects rates from property owners, which inflates its revenue figures.

When tax is calculated as a proportion of the state's total economy, Victoria topped the table with tax revenues equal to 5.9 per cent of GSP, ahead of New South Wales (5.6 per cent) and Queensland (4.5 per cent).

Experts noted that some states relied heavily on mining royalties, which function in a similar way to taxes. When these are included in a state-by-state comparison, New South Wales placed third and second respectively among states on the basis of tax per capita and tax as a share of GSP.

Finally, experts told Fact Check that as New South Wales and Victoria received less per capita than some other states of the money raised through the Commonwealth goods and services tax (GST), they had to rely more heavily on state-sourced revenues.

Canberrans enjoy an event on the shore of Lake Burley Griffin. Residents of the ACT pay more per capita in tax than residents of NSW. (ABC)

What is a tax?

As Fact Check has previously explained, there is no universally accepted definition of taxation.

The Australian Bureau of Statistics, however, offers the following definition:

"A tax is a compulsory levy imposed by the government, mainly to raise revenue … Taxes are levied, inter alia, on income, wealth, production, sale and/or use of goods and services and the performance of activities."

In New South Wales, this includes (but is not limited to):

Stamp duties
Payroll and land taxes
Taxes on motor vehicle ownership and operation
Gambling and betting taxes
Other taxes and levies, including waste and environmental levies, parking space levies and pollution control licences.

Methods of measuring state taxes

NSW Premier Dominic Perrottet and Treasurer Matt Kean after they delivered the state budget last year. (AAP: Dan Himbrechts)

A spokesperson for Mr Minns told Fact Check that the Labor leader's claim was based on taxation per capita, pointing to ABS statistics for 2020-21, the latest available full-year comparisons from the bureau.

Taxation per capita is calculated by dividing the total tax take by the estimated population of the jurisdiction.

Experts told fact check this was a legitimate means of measuring the relative tax burden across all states.

It is not, however, the only measure.

RMIT University emeritus professor of public policy and the social economy David Hayward told Fact Check another approach was to consider tax revenue as a percentage of the size of the state's economy, expressed as gross state product or GSP.

This approach gave an indication of taxation relative to income generated within the state, he said.

Fact Check drew on both of these measures for its analysis.

Which data?

While Mr Minns has relied on the ABS figures for 2020-21. Fact Check has sought the most up-to-date data for its revenue comparison, drawn from the various state budget documents. This allowed for a comparison of states for the 2021-22 year.

Population and nominal GSP statistics were sourced from the ABS for the same period.

What does the data show?

As suggested by Mr Minns, New South Wales is the highest-taxing state on a per-capita basis.

In the 2021-22 financial year, the equivalent of $4,806 was raised through state-based taxes for each New South Wales resident.

Victoria was not far behind, collecting $4,643 per person over the same period. Next came Western Australia ($4,202), Queensland ($3,789) and South Australia ($3,043).

Although not a "state", the Australian Capital Territory collected significantly more taxes per capita than any other jurisdiction — including New South Wales — with the equivalent of $5,290 collected per resident.

However, Professor Freebairn noted the ACT was unique in that it had a single tier of government.

In contrast, the other jurisdictions have local councils that collect rates on behalf of residents. These revenues are not included in state budgets but are included in the ACT budget.

What about tax as a share of gross state product?

When state taxes are expressed as a share of the state's economy, Victoria overtakes New South Wales as the highest-taxing state with revenues equal to 5.9 per cent of GSP.

That compares to New South Wales's 5.6 per cent and Queensland's 4.5 per cent.

Including the territories in the comparison, the Australian Capital Territory placed third in 2021-22, with a tax take equivalent to 5.2 per cent of its GSP and the Northern Territory was the lowest, with 2.4 per cent.

Mining royalties

Mining royalties are not categorised as "taxes" within state budgets.

University of Melbourne professor of economics John Freebairn points out, however, that royalties represent payments made to governments in exchange for the right to exploit minerals and other resources and, arguably, could be considered a tax.

Some states — Queensland and Western Australia in particular — rely heavily on royalties. Indeed, adding royalties into the calculations displaces New South Wales as the highest-taxing state.

On a per-capita basis, New South Wales would only rank as the third-highest taxing state ($5,263) after Western Australia ($8,208) and Queensland ($5,478).

When considered as a proportion of GSP, New South Wales would fall to second place (6.1 per cent) behind Queensland (6.5 per cent), and narrowly ahead of Victoria (6 per cent).

Gold mining at the Kalgoorlie Super Pit in Western Australia. Some states rely heavily on mining royalties, which are not categorised as taxes. (ABC Goldfields: Jarrod Lucas)

Accounting for GST revenues

Professor Hayward told Fact Check it was important to also take into account the Commonwealth government's general revenue assistance to the states in the form of GST distributions.

"States like Victoria and New South Wales must raise more of their own revenues because they do relatively poorly out of the formulae used by the Grants Commission to distribute those grants," he said.

While Tasmania received $1.96 back for every GST dollar collected in the state in 2021-22, New South Wales and Victoria were only allocated about half of that sum — 96 cents and 92 cents respectively.

What the experts say

Professor Freebairn told Fact Check that a broader scope was required in order to make meaningful observations about taxation.

"Discussions should focus not only on taxation revenue but also its composition, efficiency, equity and simplicity properties — and also on expenditure choices and their effects, and budget outcomes," he said.

Similarly, Professor Hayward said, Mr Minns' comments missed important context about the relative composition of taxation revenue and spending.

"It is equally important to know the distribution of the tax burden — is it regressive, progressive or proportional? — and, also, whether governments are spending enough, and doing so wisely and well," he said via email.

Principal researcher: Sonam Thomas

Editor's note: (March 21, 2023): This article has been updated to clarify that taxation revenue figures for the ACT include rates collected from property owners.The change does not affect the verdict.