Writing in New Matilda, Tristan Ewins contrasts the Beazley tax plan with the actual distribution of pre-tax income:
Speaking earlier this year at the National Press Club, Beazley had identified â€˜middle Australiaâ€™ as those earning around $60,000 per year. At the same press conference, the Labor leader said he would like to target his tax cuts at people on around $55,000 a year.
But the real â€˜middle Australianâ€™ does not earn the average wage. Economist Andrew Leigh pointed this out in On Line Opinion, where he explained that the median income (i.e. the income of the person at the 50th percentile) is a far more reliable indication of what most people earn than the average, which is distorted by a minority of very high income earners at the top of the scale. The median Australian wage is around $26,000 per year; less than half of that characterised by Beazley as comprising â€˜middle Australiaâ€™.
I don’t agree with all of the proposals that Ewins goes on to make, but it does seem striking that a Labor leader is offering a tax plan targeted at those earning $55,000-60,000 (about the 80th percentile of the individual income distribution).
Incidentally, I updated those figures recently for a paper in Public Policy. The table is on the left. I think Beazley has in mind the median household income distribution, which I calculated to be $69,000. If we had the 1950s model of one earner per household, tax cuts targeted at individual incomes of $60k would benefit the median household. But because many households have secondary earners, a tax cut targeted at individual incomes of $60k is likely to flow almost exclusively to above-average households (a tax cut to those getting $X is almost always a tax cut to those getting $X and above).
It seems clear that the government’s highly regressive tax cuts have skewed the political debate – this is the first time I’ve seen a raised eyebrow at the prospect that Labor will go to the next election with a tax package that only benefits above-median income households.