The ATO have published their annual tax data (for 2016-2017). I first started playing with this data in the early-mid noughties. It was so unknown then that I once had a referee to a journal article claim that the data I was using was confidential to the ATO. I had to point out that this ‘confidential’ data were available at zero-price on the ATO website. Nowadays everyone crunches these data and the statistics are widely known.
Not widely enough though. There is a still a lot of ignorance about the Australian tax burden – so I’ve pulled out some statistics on interest.
First up – the original analysis I did (updated). The net tax share of the top 25%, middle 50%, and bottom 25%.
I calculated these numbers because the then shadow Treasurer Wayne Swan had argued that the tax burden was increasing falling on the poor, the disadvantaged, etc. At the time the argument that the top 25% of taxpayers bore 63.4% of the net tax burden was heresy. People carried on and on – I was ignoring tax incidence (as if individual taxpayers could pass on the income tax), I left out the GST, …, according to Swan I was a Neanderthal should go back to the dark ages where I belonged (demonstrating his knowledge of history being as good as his economics). What none of them argued was that this is precisely how a progressive graduated income tax is supposed to work.
For 2016 – 2017 the top 25% paid 67.6% of net income tax collected in that year. The bottom 25% paid 2.8% of net income tax collected in that year. The middle 50% paid 29.5% of net income tax collected in that year. The share of the middle 50% has been declining over time – that represents Director’s law at work.
Now let’s have a look at that by tax bracket.
The minority in the top bracket pay 29.9% of net tax collected. True – less than the totals for the two brackets below then, yet nearly ten times the amount than their population numbers.
The average effective tax rate for that year was 24.6%. Anyone earning above $86,434 would have paid a higher effective tax rate. On a salary of just $86,434 you are – according to the logic of the graduated progressive tax system – rich. Those individuals are in the 78th percentile (or in the top 23% of income earners).
Let’s drag out some other numbers – the top 1% of net tax payers earned 9.4% of all taxable income, paid 16.7% of all net income tax and faced an average effective tax rate of 43.6%.
I wanted to look at those individuals earning above $120,000 – a good salary – but the ATO segments the data slightly differently – so incomes above $121,568. These individuals make up just 11% of taxpayers, they earn 33.4% of taxable income, and pay 46.4% of net income tax collected. They face an average effective tax rate of 35.3%.