Were fair but taxes have us in a quandary


Published in the Sydney Morning Herald, August 2011 by Peter Martin

When it comes to wealth, even the richest among us think the rich have too much - but we've no idea of how skewed the distribution really is.

A study prepared by Empirica Research and the Harvard Business School for the trade union movement as part of its planning for the October tax summit finds Australians of all incomes believe the richest 20 per cent of us have about 40 per cent of the wealth.

We think that's too high. 

We would prefer a more egalitarian society in which the top 20 per cent have somewhere around 24 per cent of the wealth. 

We would also like the poorest 20 per cent to have 15 per cent, which is a good deal more than the 10 per cent we think they have.

The survey finds us oblivious to the far more skewed truth that the best-off 20 per cent have 60 per cent of the wealth and the worst-off 20 per cent a mere 1 per cent.

The Australians least in touch with reality were the very richest and the very poorest, each believing the richest 20 per cent had 40 per cent of the wealth and the poorest had 9 per cent. 

Those most in touch with reality were the second-richest group who believed the best-off 20 per cent had 45 per cent and the worst-off 8 per cent.

Presented with two unlabelled charts showing the actual Australian distribution of wealth and the more unequal distribution in the United States, only 22 per cent wanted to live in the US. 

Among Coalition voters the proportion preferring to live in the US was 24 per cent, among Labor and Greens voters, 20 per cent.

Australians apparently favour a significantly more equal distribution than they believe currently exists and a dramatically more equal distribution than actually does exist," the researchers conclude.

Asked how much tax Australians on a range of incomes actually paid, the survey group overestimated every one.

Those on $200,000 were thought to pay an average of 38 per cent instead of 32 per cent. 

Those on $79,000 were thought to pay 27 per cent instead of 22 per cent, and those on $36,000 were thought to pay 18 per cent instead of 12.9 per cent.

The group wanted all tax rates cut, but curiously wanted them cut from the high rates they imagined to near the actual rates.

People on $79,000 were felt to deserve an average tax rate of 21 per cent, close to the actual rate of 22 per cent. 

Those on $36,000 were felt to deserve 12.1 per cent, close to the actual rate of 12.9 per cent.

The researchers were perplexed by the finding. 

"While people strongly favour increasing wealth within the lowest 20 per cent of households, they do not spontaneously translate these attitudes into support for policy mechanisms that could realise that goal," the report concludes.

The ACTU secretary, Jeff Lawrence, said the survey showed tax reform need not mean an unending series of tax cuts.

"Real tax reform is directed towards satisfying Australians' needs and preferences. 

It must reflect the type of society the majority of Australians aspire to be," he said.

Separately, the National Alliance for Action on Alcohol has complained the October 4 tax summit will have no public health representative. 

Its co-chairman, Todd Harper, said it showed the government had "taken alcohol tax off the agenda - even as an issue for discussion".


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