Average income tax rates: Australia and the US

Mark Perry has an informative graphic showing average income tax rates and income levels for the US.

So I was wondering what the Australian equivalent would look like. Using ATO taxation Statistics I generated the following graph – I show the data a bit more disaggregated.

In case you missed it, the IPA put out a slightly different graph today showing the proportion of taxpayers by income and the proportion of net tax they pay.

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12 Responses to Average income tax rates: Australia and the US

  1. Sinc

    I grabbed this tax table from the paper copy of the Aus a while ago – you can have lots of fun doing graphs with the data. It’s from the Henry tax review, and I have never been able to find the original data in the Henry review.

  2. Well said. Can Sinc open an anti-Quiggin thread here, because in today’s AFR JQ totally denies your data.

    [Tim - please no more of your anti-Quigginism. If you want to debate him go to his blog and argue there. Sinc]

  3. Further to my previous, JQ’s ludicrous piece in the AFR today shows total disregard (despite my direct and acknowledged email to him) of the age distribution of income data.

    For example, in 1978 both Bill Gates and Steve Jobs would have been in the bottom 10% of US income recipients. As of the 2010-11 tax year both were in the top 1%. And JQ is not all that far behind, despite his discretion about his actual earnings now relative to what they were in say 1980.

    The headline to his Stalinist piece in todays’s even worse Leninist AFR is “Top 1% should tremble” – Steve Jobs is lucky he’s dead, but Bill Gates, watch out, JQ is after you, even though he’s in the top 10%.

  4. TerjeP

    Look we don’t care about this sort of breakdown. It’s the 99% versus the 1%. The 99% are all united as one. There is no division in the 99%. You’re just being decisive carving it up in charts like this. Evil statistician.

  5. WadeJ

    This is a typical conservative trick in the US. Show graphs for Income taxes, but talk about “All taxes”. Income taxes by definition are very progressive. BUT they fail to account for payroll taxes that are 9% for lower incomes, but are removed for incomes above $106,000. This makes the overall tax burden far less progressive than what Income tax only charts show.

  6. Sinclair Davidson

    I was unaware that the Australian payroll tax is removed on incomes above $106,000. Maybe a link from the various state revenue offices could confirm your claim.

  7. SimonSays

    If the graphs tempt you to think Australians are worse off than Americans, remember that:

    1) Americans also pay state income tax, typically around 7%

    2) Americans are not paying what they need to in order to fund their government’s spending. They are running a budget deficit close to 10% of GDP, and clawing this back through income tax alone would require rates close to double those shown. OK they are not going to claw (most of) it back with income taxes, but they will claw it back one way or the other – taxes, cuts, debasement of the currency etc. Sure, Australia is running a budget deficit too but it is chicken feed by comparison, so that our tax rates are more or less fully funding government spending.

  8. Peter Whiteford

    Sinclair

    I think WadeJ was referring to US payroll taxes.

    If you look at overall taxes, the point he is making is correct – the US tax system in total is closer to proportional than progressive. The Australian system is also less progressive once you include the GST and other taxes.

  9. boy on a bike

    Bugger, that JPG I linked to is unreadable. I’ll send you a spreadsheet of the data.

  10. Mark P

    The US chart would omit carried interest which is taxed at the capital gains level; 15%
    But, it’s income in all senses of the word. Just including what’s defined as income doesn’t mean it includes everything that is actually income.

  11. .

    The regressive US payroll tax is about one the dumbest taxes in existence.

    What really matters was revealed at the recent tax summit. A $640k house and land package in NW Sydney (near the median price) consists of $294.4k of taxes, or 46% of the total.

    However the tax rate on housing equates to 85.18%.

    Tax base = $345.6k x (1 + tax rate)

    = $640k

    What a disgrace. Is it any wonder why houses are unaffordable and nothing gets built? What other investment decision cops such a ludicrous UP FRONT tax on investments?

    Anyone who says we don’t pay enough tax, the system doesn’t need reform or this is in any way fair needs their head checked.

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