So most negative gearers earn below $80,000? Well, here's the catch
On Friday, the Australian Taxation Office, as it does every April, released the latest batch of annual taxation statistics. And as ever, the data was used in rather contorted ways to suggest the budget needed to reduce the level of taxation paid by the wealthiest and to make it seem like the richest were the ones doing it tough.
The annual taxation statistics release is one of the biggest data dumps that occurs each year, and it is also one of the most poorly used.
The Australian, for example, led on its front page with the news that the data was a hit to the Labor party’s plans to cut negative gearing because “almost two-thirds of all investors who negatively geared property were on taxable incomes of less than $80,000 a year”.
Well, blow me down. That does sound like a lot of people.
Of course, it is rather less of a shock when you realise that more than three-quarters of taxpayers were on a taxable income of less than $80,000.
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The surprise would be if the 79% of individuals with a taxable income of less than $80,000 constituted a greater proportion of negative gearers.
Rather than constituting damning evidence against the ALP’s policy, the fact that those earning less than $80,000 account for only “almost two-thirds” of negative gearers actually demonstrates that negative gearing is skewed towards higher-income earners.
But that is common sense – something that is lacking when debate turns to negative gearing and the use of taxation data.
The other old chestnut that got a run in the Australian is that more school teachers actually use negative gearing than company executives. Again, is it really a shock that “while 72,000 investors were listed as company executives, 99,000 people claiming rental losses on their tax returns were either teachers, nurses or midwives”?
Given there are about 300,000 more people working as teachers, nurses or midwives than there are company executives, does anyone really think that because 27,000 more of them might use negative gearing is proof of anything?
The crucial thing is not the total number, but the proportion of teachers and nurses (and any other profession) who use negative gearing.
Those in wealthier occupations are much more likely to resort to the practice. Of the nearly 400,000 people who are chief executives, executives or general managers, 18% claimed a rental loss, compared with 13% of the just over 700,000 school teachers, midwives and nurses.
Anaesthetists and surgeons – the
two occupations with the highest median incomes, love to negative gear – 30% of anaesthetists, and 29% of surgeons do so.
But of course negative gearing is all about reducing your taxable income, so talking about what percentage of people under a certain taxable income resort to negative gearing rather hides what is going on.
Individuals with a total income of less than $80,000 account for 77% of all income-earning individuals, but just 58% of all negative gearers. Just 3.5% of all individuals earn more than $180,000, yet they account for 8.2% of all those who negative gear, and they take in 15% of all the negative gearing losses.
Negative gearing is, of course, done by those on low incomes – but only a fool would suggest they are the most likely to be doing it or benefitting from it.
And over the past four years, the big growth in negative gearing has been by those owning multiple properties. While about 70% of property investors own just one property, the number of those landlords has grown just 4% since 2012-13, while the number owning five or more has increased 13%.
The taxation statistics also give some counter to the suggestion made by the treasurer, Scott Morrison, in a speech this week, that somehow the wealthiest were being asked to shoulder too high a burden.
He suggested that “1% of taxpayers [are] paying 17% of the personal income tax collected!”
I’m not sure why Morrison would think that worthy of an exclamation point given that the 17% (technically 16.9%) is actually lower than the average of 17.1% over the past 10 years.
He noted as well that “the top 10% of taxpayers pay 45% of total personal income tax paid to the commonwealth.” Well yes they do, but the 44.9% (to be precise) of total net tax paid by the richest 10% in 2015-16 was actually slightly less than the 45.1% they paid in 2014-15. And again it was below the average over the past 10 years of 45.3%.
Little wonder that the treasurer sought to compare the present with 20 years ago, when he suggested that, back then, “the top 10% paid 36%”.
But things were rather different in 1998 – for a start we didn’t have a GST, and we had not had a mining boom, which helped push up the level of income towards the higher earners.
Back then, the minimum wage was also worth about 52% of average weekly earnings – not 44% like it is now. If he wishes the share of tax paid by the highest to fall, maybe he should first ensure that the income earned by the lowest increases.
And comparing tax paid by the top 10% is always a bit fraught. In the final year of the Howard government, the top 10% paid 46% of the total tax – the highest amount recorded. I somehow suspect Morrison would not argue that Howard and Costello were socialists asking too much of the wealthiest.
The treasurer also suggested that Labor was “happy to hit” people “earning more than $87,000 per year”, suggesting that “these are Labor’s fat cats”.
Fortunately the same taxation statistics that he referred to make it clear that if you areamong those individuals earning more than $87,000, you are also earning more than 77% of Australians. Now that might not make you a fat cat, but it certainly puts you on a higher income than the median Australian individual income of $55,540.
Morrison suggested in his speech that “we must always resist the temptation to play class warfare in Australia.” The reality is there has always been a class warfare – it’s just that it is mostly practised by those with the power and money. And as we saw this week, the main weapon is the dodgy use of data.
Greg Jericho is a Guardian Australia columnist