What is the typical Australian Income in 2013?

[sydboy007]

Personal tax rates from 1984

1983-84

Taxable income
Tax on this income

$1-$4,594
Nil

$4,595-$19,499
30 cents for each $1 over $4,595

$19,500-$35,787
$4,471.50 plus 46 cents for each $1 over $19,500

$35,788 and over
$11,963.98 plus 60 cents for each $1 over $35,788

Electricians in 1984 were getting around $18k. Supervisors were on around $30 - $35k. Also there were no baby bonuses. Our four children were born between 1976 and 1985, so no bonus.

So it is obvious, either we were paying too much personal tax in 1984. Or we aren't paying enough personal tax now.
I agree with your conclusion, welfare needs to be focused, also personal tax rates need to be adjusted.

If as you say you are near the top 10% of wage earners, you would have been paying 60% tax on a large proportion of your wage.
This in turn payed for a more robust welfare system.

Australia has followed the USA where tax cuts have benefited the higher income earners more than at the lower end. I'd say I've benefited very nicely from all the tax cuts I've received over my 20 year working life. Certainly a lot more than my brother who's only a couple of years younger than me. I also benefit hugely from the low taxes on super, though not as much as I could simply because I don't want to lock the money away for another 19+ years depending on what rule changes are made. On the other hand, I really don't get any other benefit from Govt, and don't expect it. I do get annoyed at the huge level of middle class welfare being spread around. It's a HUGE waste

IF we look to Scandinavian countries, a lot of the right would be horrified at the tax levels and Govt sector spending to GDP. Far far higher than here. Yet they have highly educated work forces, with so many more getting trade qualifications and able to compete at the high end of the export sector where price is less of a concern compared to quality. The Germans have been doing this for decades.

I reckon we've hit the bottom of how low taxes can go without really cutting into the services that we require to have an equitable modern society. We have hundreds of billions of dollars of infrastructure that needs to be built, and no money for it, and Govts that dither on getting it built. We want low taxes yet whinge that new roads have tolls applied to them.

To move forward we need a consensus on what income threshold Govt support should be cut. My preference is targeted at the bottom 30%, tapering to nil within the 4th lowest decile. Use the savings to make public schools competitive against the private sector, then a lot of families struggling to make ends meet to pay for private school fees can get rid of that cost. Use the savings to provide low income students free TAFE courses.

The problem with politics these days is that consensus is viewed as weakness, and it's all about wedging your opponents and finding short term political gain. A lot of the changes needed can't really happen without bipartisan support.

While households on $150K think they're "poor" we wont have a rational debate about this issue. While the majority think they're middle class, when the reality is they're a decile or more to the left or right of the middle, we wont get anywhere. Maybe the ATO needs to add a little statement to everyone's tax returns providing this kind of information. Then it might sink in if you see that you're beating XX% of tax payers in the previous financial year.

 

[FlyingFox]

Personal tax rates from 1984

1983-84

Taxable income
Tax on this income

$1-$4,594
Nil

$4,595-$19,499
30 cents for each $1 over $4,595

$19,500-$35,787
$4,471.50 plus 46 cents for each $1 over $19,500

$35,788 and over
$11,963.98 plus 60 cents for each $1 over $35,788

Electricians in 1984 were getting around $18k. Supervisors were on around $30 - $35k. Also there were no baby bonuses. Our four children were born between 1976 and 1985, so no bonus.

So it is obvious, either we were paying too much personal tax in 1984. Or we aren't paying enough personal tax now.
I agree with your conclusion, welfare needs to be focused, also personal tax rates need to be adjusted.

If as you say you are near the top 10% of wage earners, you would have been paying 60% tax on a large proportion of your wage.
This in turn payed for a more robust welfare system.

The problem with just hiking up tax rates when there are other avenues such as welfare is that participation is reduced. Scandinavian countries are just discovering this. There is a big debate there that their welfare system is too generous.

Need to have a balanced system.

 

[sptrawler]

The problem with just hiking up tax rates when there are other avenues such as welfare is that participation is reduced. Scandinavian countries are just discovering this. There is a big debate there that their welfare system is too generous.

Need to have a balanced system.

I'm not saying we should return to the previous tax regime.
I'm only trying to highlight, there is only a certain size tax pie. To give more to one section, you have to take more from another section.
Also as you rightly point out, when welfare is a lifestyle option, there is a large number of people who will opt for it.

 

[basilio]

Good points Julia.

Nobody in the debate though considers quality of life data.

I am comfortable.

If my income and assets were gone tomorrow, as long as I had regular contact with my family, 3 feeds a day, a roof over my head, connection to friends and community I would not miss all my assets.

We in Australia live in a "Lucky Country" imo.

Many of the most grounded people living simple lives of my acquaintance are millionaires, and many of the most unhappy bludge on Centrelink.

Conversely I know many high income people who snort their excess as cocaine of a weekend, and many on benefits who volunteer and give to their communities

We need to harden up as a nation and forget about "typical income" and look at "typical happiness", community, service and our families.

This talk about "typical incomes" is a Labor Party, Union, distraction.

gg

Great post GG. Particularly liked the second last paragraph which I bolded.

 

[chops_a_must]

Warm feel good statements, like welfare for those who really need it, are very general and hard to argue.
I personally, am from a period in history where, if you worked and earned a wage you didn't get welfare.
Therefore I don't agree with the baby bonus and in the same breath I disagree with ridiculous handouts to landlords for pink batts.

Like I said, just up the personal tax rates, as I suggested. This would allow the tax free threshold to be lifted to say $50k. That must be good for low income earners?
One would also expect it would encourage more workforce participation.
So I guess the point I'm making is, cut out the middle class welfare, up the marginal tax rates and lift the tax free threshold.
That helps the low income earner and the 'higher income earners' who can afford it pay for it. Just like it used to be, when I was your age.

I agree entirely.

I don't know how I feel about that.

Your suggestion would reduce the massive churn at the lower end of the income scale as well.

Not only is paying tax under about 50k a year a massive disincentive to work, the reality is you don't pay much tax after refunds anyway.

The $500 to a $1000 tax bill is hardly worth the administrative cost to the ATO, especially as a lot of these people would be getting some form of assistance in any case. It makes no sense.

 

[sptrawler]

Not only is paying tax under about 50k a year a massive disincentive to work, the reality is you don't pay much tax after refunds anyway.

The $500 to a $1000 tax bill is hardly worth the administrative cost to the ATO, especially as a lot of these people would be getting some form of assistance in any case. It makes no sense.

I agree entirely, this is where the chardonay socialists lose the plot.

The line between low income earners and just opting to live on welfare, is the hardest line to draw.

Encouraging people to engage in meaningfull work is massively important.
It gives them a feeling of self worth.
It gives them a feeling of achievement.
It gets them out of the house.
When the system makes it financially advantageuos to sit on welfare, there is a massive problem.
It is a hard balancing act, I haven't seen any government get it right yet.

 

[sydboy007]

I agree entirely, this is where the chardonay socialists lose the plot.

The line between low income earners and just opting to live on welfare, is the hardest line to draw.

Encouraging people to engage in meaningfull work is massively important.
It gives them a feeling of self worth.
It gives them a feeling of achievement.
It gets them out of the house.
When the system makes it financially advantageuos to sit on welfare, there is a massive problem.
It is a hard balancing act, I haven't seen any government get it right yet.

I think it starts by giving people the truth and pushing back onto each of us that WE are responsible for our own lives and that the Govt / society is only there to help as a last resort.

Currently the Govt is pretty much telling us all that it's there to help with pretty much every facet of our lives. So now you have families in the top 30% of household income thinking they deserve thousands of $ a year in Govt support, feeling they can't make ends without it.

How we get people to take that responsibility seriously, not sure. How we stop stigmatizing people who need the help, not sure. it will require amazing political leadership, something Australia hasn't had for decades, except maybe for Howard's gun buy back, though that took Port Arthur to get the political and voter support required.

 

[Julia]

I think it starts by giving people the truth and pushing back onto each of us that WE are responsible for our own lives and that the Govt / society is only there to help as a last resort.

Currently the Govt is pretty much telling us all that it's there to help with pretty much every facet of our lives. So now you have families in the top 30% of household income thinking they deserve thousands of $ a year in Govt support, feeling they can't make ends without it.

Agree. Hopefully the new government will make a genuine effort to dispel this sense of entitlement.

I wonder how the population will divide up between those who just resent removal of the handouts to which they've become accustomed v those who accept the need for this.
Self interest is pretty powerful in most of us.

 

[sydboy007]

Agree. Hopefully the new government will make a genuine effort to dispel this sense of entitlement.

I wonder how the population will divide up between those who just resent removal of the handouts to which they've become accustomed v those who accept the need for this.
Self interest is pretty powerful in most of us.

Julia, I have little hope that a Tony Abbott Govt would in any way try to cut into the middle class welfare they gave us. Tony is still trying to support his parental leave scheme. It seems either he is just too pig headed to stop flogging that dead horse, or whoever is doing his focus group polling is doing a bad job because it seems the current scheme introduced by Labor has majority support across gender and age groups. Just look at the angst over the baby bonus. If Joe Hockey hadn't scared the Liberal front bench with the budget projections they'd be fighting that too.

First is to get a large enough proportion of society to understand just where in the income scale they really reside. Then we need to force people to accept that if they have a huge mortgage making life difficult for them, it's NOT the Governments fault and they shouldn't expect the rest of us to prop them up for their choices. Next is to get a consensus that Govt support is for the bottom ~30% at most.

We also need to make it much clearer just how much of our taxes are going into these middle class welfare policies. Show what kinds of tax cuts are possible with their removal, and I have no problem if the majority of the tax cuts are received by the bottom rung of tax payers. Heck make it so income of around 40K a year don't need to do a tax return.

Work this in with simplifying the remaining Govt support policies, and make the tapering off of the assistance much gentler at the very low end so these people don't face 80% tax rates for picking up an extra shift at work - now THAT is a disincentive to work.

It's a complex policy area. I don't see any politician liking to get their hands dirty with complexity. It's all about 1 line slogans and simple solutions.

 

[sydboy007]

this youtube video helps to sum up the tax churn merry go round quite nicely

https://www.youtube.com/watch?v=WGHY8XpM6oI