The Redistributional Effects of Personal Income Tax in Australia

The purpose of this paper is to show that the progressive income tax in Australia has achieved some equity in terms of income redistribution by personal income taxation. There are many redistributional aspects associated with the actions and policies of governments. For example, public education is primarily a redistribution of income from the wealthy to the poor, from small families to large ones and from older to younger generations. Debate also centres on whether the redistribution should be in terms of public goods, cash benefits or progressive income taxes. This study aims to refute the argument that has been expressed that the progressive income tax system has failed to achieve any equity through redistribution of income. Data examined in this study show that annual levelling of incomes has occurred through taxation especially in the last decade. It is not the purpose of this paper to argue whether the primary (or pre-tax) income redistribution is more equitable in 1979-80 than in 1950-51. Rather comment is made on what can be established in terms of the incidence or redistributive impact of income tax, i.e. whether the secondary (or post-tax) income is more equitable than the primary in each year considered.