Top Incomes and Inequality in Australia: Reconciling Recent Estimates from Household Survey and Tax Return Data

43 Pages Posted: 9 Jun 2016

See all articles by Richard V. Burkhauser

Richard V. Burkhauser

Cornell University - Department of Policy Analysis & Management (PAM); University of Melbourne, Melbourne Institute

Markus H. Hahn

University of Melbourne - Melbourne Institute of Applied Economic and Social Research

R Wilkins

affiliation not provided to SSRN

Date Written: June 3, 2016

Abstract

We systematically compare differences in recent Australian income inequality estimates derived from tax records and survey data. We use customised tax tables provided by the Australian Taxation Office (ATO) to more precisely measure Australian top incomes as conceptualised in the international top incomes literature. We then document the inability of Household, Income and Labour Dynamics in Australia (HILDA) survey data, as well as the ATO 1% sample tax files, to replicate our top income share values. In contrast, accuracy is substantially improved using the ATO 2% sample introduced in 2011-12. Using HILDA data with enhanced income values from the 2% sample we better track top incomes. More importantly, we are able to use alternative income concepts and income-sharing units to provide more consistent cross-national comparisons than are currently found in the top incomes literature. Furthermore, we improve standard summary measure estimates of inequality found in the traditional survey-based Australian literature. Our findings show great potential value in linking tax records and survey data, but also show that this value is severely limited when using the 1% tax sample available for 2003-04 to 2010-11. Whereas the 2% sample substantially improves top incomes estimates, data without censored and perturbed income variables are needed and could be provided without unduly threatening tax filer confidentiality.

Keywords: Inequality, summary income inequality measures, top income share measures, Australian tax records data, HILDA Survey data

JEL Classification: D31, C81

Suggested Citation

Burkhauser, Richard V. and Hahn, Markus Hilmar and Wilkins, Roger, Top Incomes and Inequality in Australia: Reconciling Recent Estimates from Household Survey and Tax Return Data (June 3, 2016). Melbourne Institute Working Paper No. 19/16. Available at SSRN: https://ssrn.com/abstract=2790672 or http://dx.doi.org/10.2139/ssrn.2790672

Richard V. Burkhauser

Cornell University - Department of Policy Analysis & Management (PAM) ( email )

120 Martha Van Rensselaer Hall
Ithaca, NY 14853
United States

University of Melbourne, Melbourne Institute ( email )

Level 5, FBE Building, 111 Barry Street
161 Barry Street
Carlton, VIC 3053
Australia

Markus Hilmar Hahn (Contact Author)

University of Melbourne - Melbourne Institute of Applied Economic and Social Research ( email )

Level 5, FBE Building, 111 Barry Street
Parkville, Victoria 3010
Australia

Roger Wilkins

affiliation not provided to SSRN

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