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Aussie businessman exposes why $200k a year is NOT a big salary anymore

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I’m guessing you make less than $200,000.

And I suspect you think you’re missing something. People keep telling you that.

Anthony Albanese says someone who makes $200,000 a year “cannot be described as one of the best in the city.”

On the other hand, Scott Morrison balked at interviewers when asked whether people with $180,000 to $200,000 have “high incomes.”

“They are hard-working people who work in mines and in difficult parts of the country,” he says. “They deserve a tax cut.”

Hardworking or not, Australians over $200,000 are rare. And a lot of them don’t work at all.

$200,000 is unusual

I’ve never quite understood why politicians were so eager to tell us that such incomes are normal. It could be because they’re on it. Each backbencher will receive $211,250 plus a $32,000 electoral allowance (increased by $19,500 if they refuse the use of a private vehicle) plus home internet and travel allowances.

Very detailed figures from the IRS tell us what the rest of us earn, all 14.3 million of us.

Only 2 percent of those who had to pay taxes made more than $211,365. Only 3 percent made more than $188,667.

Everyone else — the other 97 percent — made less than $188,667, most a lot less, and many more made even less and didn’t have to pay taxes.

What you report to myGov, the ATO reports to us, with some delay.

The figures released on Monday are for 2018-19, as it takes time for the IRS to receive and process all the forms. In 2019, Albanian said $200,000 was not the “top end of town”; In 2018 Morrison unveiled Stage 3.

Typical taxable income (typical in the sense that half earned more, half made less) was $59,538. If that’s what you do, you’re more likely to find people who are close to what you do than someone who earns more or less.

We can get an idea of ​​how lonely it is at the top by examining the top 1 percent, those Australians with taxable incomes over $350,134.

There are not many, only 110,613 – 82,258 men and 28,355 women.

Only 39,209 have taxable income over $500,000, and only 14,467 have taxable income over $1 million.

Life at the top shouldn’t be taxed

You probably think there is a difference between taxable incomes and actual incomes, and the IRS figures show you are right.

In all, 15,358 Australians reported a total income of more than $1 million. By the time they applied legitimate tax deductions, the number had dwindled to 14,467.

Some of these million-dollar earners were able to cut their taxable income very little – 45 reduced their taxable income to less than the $18,200 tax-free threshold, meaning they didn’t have to pay anything, not even the Medicare levy. .

Another eight escaped the Medicare levy even though their taxable income exceeded $18,200, and another 21 escaped income taxes while paying the Medicare levy.

Many of these millionaires were not “hardworking” in the Morrison sense. Only 9,144 of the 14,467 Australians with taxable incomes over $1 million were employed. Only 17,883 of the 222,813 Australians with over $250,000 were employed.

Only nine of the 45 million earners who cut their taxable income below the tax-free threshold were working. And 27 received so-called prepaid dividends from companies that had paid taxes, which allowed them to lower their own tax bills or receive rebates from the IRS. On average, they each received a dividend of $2.25 million.

Many who are not taxed are generous

Seventeen of the $45 million earners received capital gains, averaging $6.4 million each. And 38 received interest averaging $290,000 each.

On the other hand, there were costs, small and large. Three claimed work-related auto costs averaging $27,340 each, 13 claimed expenses averaging $57,200 on tax assistance, eight claimed past farm losses averaging $684,000 each, and eight claimed other business losses averaging $408,000.

But by far their biggest expense was donations. Fourteen gave away a total of $161 million in gifts or tax-deductible donations — an extraordinary average of $11.5 million each.

Most of us are not like these people.

Most of us claim more modest deductions

Three quarters of Australians in the tax system earn less than $89,173.

Those on that income typically claim between $1,500 and $1,900 in deductions (men claim more than women) and, thanks to negative gearing, claim losses on property between $1,800 and $2,600 (again, men claim more than women).

Such Australians typically report between $1,200 and $2,100 in capital gains (more for women than for men).

If higher-income Australians don’t know how most of us live, it’s understandable. Surgeons mingle with other surgeons. On average, each of Australia’s 4,150 surgeons earn $394,303, making surgery our highest paying profession.

We deal with people like us

And they are getting married more and more. In 2010, the Productivity Commission found that 68 percent of high earners in Australia were married to other high earners. A decade earlier that was 49 percent.

And high earners live near each other. The median income in Double Bay in Sydney (Australia’s highest earning suburb) is $202,598. The median income in Ruse in Sydney’s Campbelltown is $55,100.

People in Double Bay don’t drive through Ruse on their way to town.

In the United States it is often the other way around. There, low-income suburbs are more likely to be near the city, meaning that high-income Americans at least see them when they go into the city.

That most of us have little idea of ​​what others earn fits well with those in charge when proposing tax cuts that are skewed to high earners.

They may deceive us that most of us will be better off, and those with high incomes may deceive themselves that they are not already better off.

Peter Martin is a visiting fellow at the Crawford School of Public Policy, Australian National University. This article originally appeared on The conversation.

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