New pre-tax income stats out

Data on pre-tax incomes for New Zealand in 2013 have just been uploaded to the World Wealth and Income Database. So what do they show?

In 2013, the richest 10% got about 30% of pre-tax income, and within that the richest 1% got 7.7%. In both cases that’s about the same as in 2008, or indeed 2000. That’s in line with other things I’ve written about recently. You have to go back to the mid-80s, when the richest tenth got around 25% and the 1% got 4.9%, to see when the increase occurred.

Of course, these figures – crucially – leave out capital gains, which to my mind are income and which probably go disproportionately to the rich (as they do in other countries). And pre-tax income doesn’t directly tell you about living standards, since post-tax incomes, after taxes and benefits are taken into account, are what really matters. New Zealand’s (developed) world record increase in inequality, mid-80s to mid-2000s, was in large measure spurred by cuts to taxes and benefits.

So you don’t want to make too many generalisations from these figures. But they certainly don’t show that the rich are grabbing an ever-larger slice of the pie, for pre-tax income at least. For the real verdict, on post-tax incomes, we’ll have to wait for the next Household Incomes Report.

The data also bear out the point sometimes made by the NZ Initiative’s Eric Crampton, that our inequality is nothing like as bad as America’s. There, the richest tenth get nearly half of all income, and their 1% get 18%.

I don’t think that in any way makes our problems less real, or that it allows us to ignore the cumulative impacts of at least twenty years of large income and wealth imbalances. But it does show that things could be worse.

Technical note: the data on the WWID are essentially the same ones I’ve written about in other posts, but the WWID team makes adjustments to them to standardise across countries, etc, so their appearance there constitutes a ‘new’ publication of data in the long-term series going back to 1921 and across many nations.

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