[PEN-L:2367] Re: Income inequality in Australia

[Peter Colley / Cathie Sherrington]

On 13 January 1995 Ken Hanly said:

>It is quite possible that income inequality as measured in Australia could
>be less over the time studied but WEALTH inequality increase. Many
>business people who are well off may wish to have relatively low taxable income
> but
>receive benefits in other ways, through various company rather than individual
>expenditures, etc. If you used net income as a measure of wealth,
> many farmers who may actually
>be quite well off would appear to be almost at the poverty level. Low net
>income is quite consistent with having
>assets in land and farm machinery worth millions. Perhaps the rich in Australia
>have been increasing wealth while decreasing income (relatively).
> I see another problem with the analysis. If social transfers to the
>less well off are to be counted in income, shouldn't transfers to
>companies such
>as tax breaks, grants, etc. be figured into the incomes of those who earn
>income from shareholding? There are surely umpteen examples of this type
>of transfer to the relatively well off. Were these counted in the study or
>only transfers for the poor and working classes?
>  Cheers, Ken Hanly

In brief, your points are valid but but they are not issues the study is
trying to address.

1.  The study measures _income_ flows, not stocks of _wealth_. It is
conventional wisdom in Australia that wealth inequality has increased, and
some academic efforts have been made to measure it (Phil Raskall?).
Governments of all persuasions are reluctant to measure it because of the
possible need/pressure to do something about it if it was clearly
delineated.

2.  The study is based on household income surveys, so the data does not
address company profits (which are assumed to end up as somebody's
household income unless they are retained for further investment).  I am
uncertain as to how significant the issue of people reducing their
"taxable" income to artificially low levels is to the survey data.

3.    Company taxes are regarded as a form of indirect tax by the study
authors (like retail or value-added taxes)  and they state that they have
not included it in the model because of the difficulty of imputing company
taxes to individual households or household types.

Peter Colley
Construction, Forestry, Mining & Energy Union
Sydney, Australia
[EMAIL PROTECTED]