Should a healthy lifestyle be tax deductible?

Could a tax deduction for healthy lifestyles encourage better preventive care?

Three experts weigh up the benefits of providing a tax deduction for a healthy lifestyle.

Healthcare costs are on the rise. In Australia, health spending by the federal government is projected to increase from 4.2 per cent of GDP in 2014-15 to 5.7 per cent in 2054-55, according to estimates from the Productivity Commission. Could a tax deduction for a healthy lifestyle assist in the prevention of disease?

Garry Egger

Professor of Health and Applied Sciences, Southern Cross University

Garry EggerWe spend so little on primary prevention of disease in Australia. We need to look at ways of addressing it, and I think tax cuts or other economic incentives could be an answer.

Of course, we’d need to define what’s a proven healthy lifestyle. The main things that have an impact on our health are nutrition, physical activity and stress. Smoking and drug use also play a role. 

Doctors can measure physical fitness through VO2 max tests, which indicate the maximum rate of oxygen consumption during incremental exercise. They can also measure the level of stress hormones in the body, and a saliva test can indicate whether someone is a smoker or not. However, there isn’t really a simple test for good nutrition. 

In the Australasian Society of Lifestyle Medicine, we are continually battling certain government views that all ill health is the individual’s responsibility. People are often victims of their environment and of society. Rather than giving them a tax break, could we provide a different economic incentive?

“There could be other economic incentives to address primary disease prevention ...” Garry Egger

For example, when people are diagnosed with pre-diabetes, which is a condition where people have elevated blood sugars (and approximately 7 per cent of our population is pre-diabetic), could the government provide a financial incentive to encourage them to change their lifestyles? The patient’s progress could be tested through an HbA1c test, which shows an average of your blood glucose level over a few months. If we could prevent people from becoming diabetic, this would present a tremendous health cost saving for the government. 

Barbara von Tigerstrom

Professor in the College of Law at the University of Saskatchewan

Barbara von TigerstromIn theory, a tax deduction could enable or encourage people to make healthier choices. Perhaps it could bring healthy food or physical activities, such as gym memberships, within reach of people who otherwise could not afford them. It might also give others the extra encouragement they need to adopt a healthier lifestyle. 

Unfortunately, however, the evidence supporting this line of argument is quite weak. The impact of financial incentives on health-related behaviours is unclear, especially for a delayed incentive such as a tax deduction. People tend to discount the value of future benefits – a $100 incentive paid today has more effect than the same amount next month or next year.

This delay also makes a tax deduction less useful for those who need it most. If you cannot afford a healthy option today, getting part of the cost back later won’t help much. A Canadian Children’s Fitness Tax Credit study found that the credit was used more by those with higher incomes and wasn’t an important factor in most people’s decisions about their children’s activities.

“If you cannot afford a healthy option today, getting part of the cost back later won’t help much.” Barbara von Tigerstrom

Given the growing cost of chronic disease, it is certainly worth investing in prevention, but making smoking cessation, healthy eating and physical activity more accessible and affordable upfront would be more beneficial than trying to reward these behaviours after the fact. 

Tax deductions can also be difficult to remove once they are established – all the more reason to consider carefully whether the same amount of money could be better spent on other initiatives. 

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Jerril Rechter

CEO VicHealth 

Jerril RechterA tax deduction, in this case, is an interesting idea; we certainly need to do something to change the increasingly unhealthy lifestyles that too many Australians lead. Obesity levels are up, exercise rates are down and poor diets are becoming the norm. This is having major repercussions on our health and economy. Drivers of ill health, such as obesity and smoking, cost our budget more than A$150 billion each year. 

In terms of health-related expenses, we can deduct major items from our tax such as private health insurance. Many workplaces recognise the benefits of healthy employees and offer wellness programs and rebates off gym memberships and smoking cessation products. However, should the government follow suit? 

Behaviour change is hard and often the people most at risk are hardest to reach, so I think it’s unclear whether a tax cut would help our most vulnerable improve their health.

We need to do more to help people stay well and out of hospital. We know health promotion and prevention works and is cost-effective, but I don’t think individual tax cuts are the best way to go about it. 

“It’s unclear whether a tax cut would help our most vulnerable improve their health.” Jerril Rechter

We do know that funding evidence-based health promotion is effective – you only need to look at the reduction in smoking over the past few decades to see the benefit of funding prevention. 

A one-size-fits-all approach won’t work – good health promotion combines a range of strategies, including taxation and regulatory change. We need to look at the evidence and invest in what works. The health of our nation depends on it.  

The experts

Garry Egger
Garry Egger is a professor of health and applied sciences at Southern Cross University and an adviser on chronic disease prevention to the World Health Organization and several government and corporate bodies. He is a board member of the Australasian Society of Lifestyle Medicine and received an Order of Australia Medal in 2012 for his services to medical education and health promotion. He developed the National Physical Activity Guidelines for the Australian Government, and is the author of 30 books and more than 160 peer-reviewed scientific and research articles. In 1992, he started GutBusters, the world’s first men’s weight-loss program. 

Barbara von Tigerstrom 
Barbara von Tigerstrom is a professor in the College of Law at the University of Saskatchewan. Her research looks at legal issues in chronic disease prevention, including the regulation of food, alcohol and tobacco, and the use of taxes and subsidies to encourage healthier eating and physical activity. She is a member of the Law Reform Commission of Saskatchewan and several national committees advising on health issues in Canada.

Jerril Rechter
Jerril Rechter has been CEO of VicHealth for six years. Before joining VicHealth, she held executive positions at Leadership Victoria, Melbourne International Festival of the Arts and Footscray Community Arts Centre. Rechter knows the benefits of physical activity first-hand – she has been a professional dancer, choreographer and artistic director, and founded the Stompin Youth Dance Company in Launceston, Tasmania in 1992.

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