Thursday, March 28, 2013

Can you struggle on 250k a year?

So today Federal MP Joel Fitzgibbon decided to express reservations about the possibility of taxing the superannuation earnings of the wealthy, by asserting that families earning $250,000 in Sydney's west might still be classed as "struggling" rather than wealthy. He then went on to example his case with stories of miners in his own electorate who earn $100,000 to $140,000, and how not-wealthy they are.

The most obvious thing to be said about Mr Fitzgibbon's assertions is that there would appear to be a bit of a logical leap in his reasoning. After all, 250k a year is not equal to, or in the same stratosphere as, say, 110k a year. especially when you are talking about it as potentially a family income rather than an individual income. It would be perfectly possible to accept that a family on 110k with a mortgage might have some financial challenges, and still endorse the notion that a family on 250k is, in fact, wealthy by any sensible measure.

However, to be fair to him, he nuanced his point by referencing the fact that housing and living afforability costs are wildly variable across the country. This is, of course, quite true - buying or renting a house in inner Sydney is so much more expensive than doing the same in, say, Ballarat, or a regional city in Queensland, that it's a little scary. So it is not untrue to assert that a family living in Sydney or Melbourne might need a higher income to maintain the same standard of living as the same family resident in Albury, outer Adelaide or Albany. Asset levels also make a huge difference - a family on 110k who own their house outright are in a remarkably different position to that same family paying off a 300k mortgage.

That said, the argument is still pretty much rubbish if the core principle is that a family on 250k are, of necessity, struggling with money.

I'm not going to say that no such family has money woes - I'm sure some are badly indebted, some live beyond their means, some have confounding factors that drain resources (addictions and health costs spring to mind). But at the end of the day, I make no apologies for saying this bluntly - 250k for a family per year is not just adequate or ample, it's WEALTH.

Wealth doesn't mean that you never, ever have to decide between buying Thing A and Thing B. Wealth doesn't mean you can live anywhere you want and drive anything you want and holiday wherever you want and DO whatever you want. Wealth doesn't mean you are cocooned from economic circumstances completely. (Those things belong to the possessors of EXTREME wealth, and, let's be honest, very few people who work for a living, and don't start with inherited money, will ever fall into that category).

No, what wealth means is that your choices are all discretionary and tertiary. By this I mean, primary needs (food, shelter, temperature regulation, clothing, basic utilities) are never compromised or even considered, and secondary needs (education, transportation, hobbies / activities, allied health services) are always, as a given, covered. Any choice point comes in at the tertiary level, where it's conceivable that a family might choose, in any given year, between upgrading a car or a holiday in Fiji, between a new TV or a refurbished deck, between designer shoes and jewellery.

Of course people on those incomes can make choices that put them in financially struggling circumstances. They can buy property with mortgages so heinous that they swallow up most of the money. They can opt to send 4 children to extortionately fee-charging private schools and consider family ski holidays to Aspen every year non-negotiable. They can make poor investment decisions and they can pile up debt like everyone else.

The difference - and I don't think it's a subtle one - is that they can also choose NOT to struggle. They have access to enough money, at that income level, to live extremely comfortably, without the merest hint of struggle. This is not a choice available to families living on, say, 60k a year, with both parents working, for 4 people. (I deliberately do not discuss people whose income is from benefit support, because this is an argument about superannuation).

So when the question is whether very high income-earners should pay tax on the earnings of their very high superannuation, as opposed to the Opposition's previously expressed notion that the 15% super tax slug (about $500) for people earning less that 37k a year - 3.7 million of them, in fact -  should be reintroduced, I feel that the discussion needs to be shifted away from "But families on 250k might be struggling toooooooo!" and back to "What is fair and reasonable in the circumstances?"

Families on 250k are not struggling of necessity. To pretend otherwise  is insulting to the many individuals and families working their arses off and managing on less than half - or less than a third! - of that.

1 comment:

  1. Thanks for a balanced view, in providing the good, bad and ugly about earning the stated high income. The factor of choice is the key issue involved. I'm an unemployed librarian, in the 50 plus group. Since a bout of illness (not serious), and several months on, I am struggling to get my foot back into employment. So I am now learning what is means to be living on the newstart allowance - and I have a roof over my head, so don't know how others get by. My blog titled: 50 Shades of Unemployment - may interest you -