The report is based on a Labor press release which appears to be based on the income tax statistics for 1999-2000 and 2000-01. The central claim
JOHN Howard’s battlers are going backwards, with new tax research showing that lower and middle-income earners suffered a reduction in real incomes of up to $430 a year between 2000 and 2001.
Analysis of Australian Taxation Office figures carried out by the Opposition, which adjusts earnings against increases in the cost of living, has found the incomes of Australia’s middle class shrank by between $150 and $430 a year.
The figures also show the gap between the rich and poor has widened, with the incomes of the wealthiest 5 per cent of taxpayers increasing by $4159 a year in real terms over the same period and their average taxable incomes increasing from $146,661 to $150,820.
I wouldn’t put a lot of weight on this – it’s only a couple of years data and the numbers were affected by the introduction of the GST in that year. That said, there’s no doubt that the basic claim of the release is true. Almost everyone (even, as I recall, the Centre for Independent Studies) agrees that the inequality of market incomes has been increasing over the past twenty years or so, though different studies date the increase at different times and attribute different causes.
Although real incomes have generally risen for all income groups over the past decade or so, the bulk of the gain has been concentrated among the top 20 per cent of income-earners. The rate of growth of real incomes for everyone else has been very slow. So it takes only a modestly bad year, or a price shock like the GST to see real incomes going backwards.
Under Hawke and Keating, the increasing inequality of market incomes was offset to some extent by progressive changes in tax and welfare policy, but the reverse has been true under Howard. One of the experts cited in the report suggests that the figures are distorted by tax concessions associated with negative gearing and encouraged by the cut in capital gains tax under Howard. That’s probably true, but, contrary to what he says, implies that the real picture is even more unequal than that given in the statistics.