At various times in Australia's recent history, the Commonwealth government has used the tax system to support its public health policy goals. Tax concessions to particular industries or groups of taxpayers cost the government the same as direct subsidies. However, the income distribution of these tax ‘carrots’ and ‘sticks’ has not previously been analysed. This study breaks new ground by examining how the benefits of tax concessions for health expenditures were distributed among taxpayer income groups in the four decades since 1960, and how this affects the progressivity of Australia's system of funding health care. It is found that around half of the $2 billion tax subsidy for private health insurance accrues to the taxpayer group with the highest third of incomes.
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