How much income tax do you pay?

Hi Ashley,

As a statistician, I was also surprised by your findings presented here. In order to better understand your findings, I attempted to reconcile the data that you have presented. However, after looking at the source you quote from, I now realise that the data you have presented is not the data actually published by the ATO. Rather you seem to have re-interpreted what the ATO has published in Table 2.13 in the source you quote in the diagram. (Please correct me if I am wrong.)

This table shows that there were a total of around 9.3mn income tax payers in Australia in the 2010-11 income year. Of that 9.3mn, 2.7% have a taxable income of $180,000 or more, accounting for 26.2% of the income tax raised. You have then assumed that there is around 17mn “adults” in Australia, hence your 1.5% figure above.

In a similar way, you have assumed that any of the 17mn “adults” that do appear in this table pay no income tax and as a result, almost 8mn or 45% of “adults” pay no income tax. Importantly, what you have assumed to be “adults” seems to include anyone of “working age” or above.

Taking the latest data from the ABS, we can see that 66% of the Australian population was of "working age" (ie between 15-64). Further, 16.4% of the population where aged 65 or over. This means that roughly 20% of "adults" were eligible for retirement and far less likely to pay income tax. Additionally, a meaningful proportion of those in the bottom-end of the working age population could be expected to be in full-time education, so would also be unlikely to earn enough to pay income tax.

If you adjust your data for the working age population, the statistics look far less alarming. In fact, your 45% figure above would become 31%. One then needs to consider how many young people are in full-time education and how many households have one adult member staying at home. Once you consider that, I'm sure your figures look far less extreme and much less surprising.

Kevin, thanks for the feedback. It's all a question of definition. I start with a simple, everyday definition of adults - people over 18 years of age - ie all those entitled (forced actually) to vote - all those who enjoy the privileges of living in this great country - with clean air, safe water, safe food, safe streets, rule of law, protection of property rights, public institutions, national security, etc, etc. It is not an issue of equity, morality, inaliable human rights to welfare, etc - it is a simple fact that all of this must be paid for. One could argue that all people receiving income - of whatever type, whether of "working age" (whatever that is) or not - enjoy the benefits of this great country and ought to contribute financially in some small token way as a proportion of that income, however small that is. On the other hand if you narrow the definition down to those adults who are liable to pay tax after all of the tax breaks, rebates, subsidies, supplements, tax-free pensions, negative income tax transfers, income-splitting and other paper shuffling tricks - then of course close to 100% of people required to pay tax actually pay tax.
cheers.