By Lisa Marriott*
Aotearoa New Zealand’s new Prime Minister, Chris Hipkins, has said we should look at ways to make the tax system fairer. Associate Finance Minister David Parker made a similar point almost a year ago, though there was little real action after his comments.
Generally, people don’t object to fairness. The problem is that we don’t all agree on what fairness looks like – especially when it comes to tax.
Nonetheless, several commentators and politicians have outlined what they believe to be the ideal structure of a fairer tax system.
Tax everyone, or tax those who earn the most?
Some of these ideas include reducing income tax rates and increasing the goods and services tax (GST).
Whether you think either of these is fair will depend on whether you see fairness as everyone paying the same via GST – or people paying differently according to their ability to pay through income tax.
Of course, a tax system generally has components of both.
A GST could be considered fair as everyone who buys the same good or service pays the same amount of tax.
But a GST cannot take into account ability to pay. Higher income earners generally pay more GST overall, as they can afford to buy more goods and services. However, they pay less GST as a proportion of their income.
"Some people are doing quite well and a lot of people are struggling," said Dr Jo Spratt, Oxfam Aotearoa Communications & Advocacy Director. In Oxfam's latest inequality index, New Zealand ranked 136th out of 161 countries for fair wealth distribution. https://t.co/TLo2TFDfaB
— Oxfam International (@Oxfam) November 16, 2022
Increasing GST to fund lower income taxes would have the greatest impact on those who have the least income.
The current economic environment is also a factor. At a time when inflation is over 7%, is it fair to increase the tax on almost every good or service that will be consumed?
Targeting wealth
By way of contrast, if you believe fairness results from ability to pay, then Cameron Bagrie’s suggestion of a wealth tax is relevant.
Data from Stats NZ shows that household wealth inequality in New Zealand is significantly greater than income inequality. The richest 20% of households own around 184 times the median household wealth of the lowest 20%: NZ$2,024,000 vs NZ$11,000. The median net worth is $397,000.
As the top 10% of New Zealand households hold around 50% of New Zealand’s total household net worth, there is a strong argument that taxing some of this wealth is fair.
Bagrie also suggests reducing income taxes. No one would argue that there hasn’t been a certain level of bracket creep in recent years. But whether reductions in income taxes are fair depends on how they are reduced and, again, your views on fairness.
When the lowest income tax rate is reduced, this benefits not only the lowest income earners, but all other income earners. When middle or higher income tax rates are reduced, only those who have middle or high income benefit – low income earners miss out.
That said, income inequality is less pronounced than wealth inequality. Data from Stats NZ shows that, as at June 2021, the highest 20% annual household median income was around four times that of the lowest 20%. This also supports an argument for focusing on wealth taxes.
A further argument for a wealth tax comes from the suggestion that the wealthy pay a small proportion of their total income in tax. This is because we comprehensively tax income in NZ but we do not comprehensively tax wealth. Is it fair that 42% of millionaires pay tax rates below those of the lowest income earners?
Capital gains under the spotlight
Taxes become particularly politicised in election years, but perhaps none more so than the suggestion of wealth taxes.
So, what are wealth taxes? These are taxes on assets, such as land or shares.
A capital gains tax is a wealth tax, as is an inheritance tax or a land tax. The different terminology refers to what is specifically included in the tax.
One of the benefits of wealth taxes is they can be flexible by way of what is included or excluded. This flexibility means some assets can be excluded if there are good policy reasons to do so, such as productive land or owner-occupied homes.
Fairness might be just collecting what’s due
The challenge for any proposed tax reduction is how it will be paid for.
If we want to think more broadly around tax and fairness, we could invest more resources into collecting tax that is due.
Inland Revenue wrote off $688 million of tax debt in the year to 30 June 2022 and $812 million in the previous year.
For me, this is the key graph from the Tax Working Group report: New Zealand's tax and benefit system does far less to reduce inequality and enhance fairness than those of other, comparable countries. (The Gini coefficient is a technical inequality measure.) pic.twitter.com/kIDSmbF1gU
— Max Rashbrooke (@MaxRashbrooke) September 20, 2018
This write off is not the result of tax evasion or fraud. This happens when people, such as those who are self-employed, have earned the income but do not pay the tax that is due.
Non-payment of tax is not an option for a wage or salary earner: is it fair that this is an “option” available to others? Greater investment in debt collection is another way of increasing fairness in the tax system.
Whatever your perspective on what a fair tax system looks like – whether it be increased GST, changes to income tax, or targeted wealth tax – one thing is certain. Tax is going to be a 2023 election year issue and we’re all going to be talking about it in the months to come.
*Lisa Marriott, Professor of Taxation, Te Herenga Waka — Victoria University of Wellington. This article is republished from The Conversation under a Creative Commons license. Read the original article.
118 Comments
I'm gonna throw the radical idea out there that we spend less on business cases and consultants. More money will have been spent consulting on various transport initiatives that didn't ever start than is needed to fix our roads.
I'm also concerned at the growing welfare state and especially the growing community housing provider sector. Rent for a house under a CHP is paid for or subsidised by the state, plus the CHP's overhead, staffing, etc. I want to know how big this has ballooned under Labour.
We have a growing list of people who do not work and do not pay for their own housing, and if KO and other CHPs are indeed rapidly acquiring properties as the news suggests, a shrinking list of homes not directly under some form of charity.
So nah, not buying the idea after 5 years of this government that we need to tax more and keep up this spending "growth".
Somewhat to your point, I'm concerned about the future of a country where there seems to be an inexorable rise in the proportion of the population who are net "beneficiaries" of the tax take and effectively take out more than they put in, and a corresponding decline in net tax payers.
I can't find the stats, but off the top of my head aren't we already at a point where about 50% of the population effectively pays no tax? And it only seems to be getting worse over time.
How is this sustainable long term?
Superannuation, an ever-expanding public service (some of which we clearly need like teachers, cops and nurses, but some of which seems very nebulous - just look at the growth in KO management headcount as an example), welfare/benefits like WFF ... the list goes on.
I do believe there are opportunities to make the tax system fairer, for example trying to find ways to shift the tax burden somewhat off labour.
However, I have zero faith that any kind of "tax fairness optimisation" would result in a mere rebalancing of where tax is collected from - it would be about creaming more off the top to feed a beast of seemingly insatiable hunger.
Has no one heard about inflation? And that governments like to put people out of jobs to 'curb' inflation. Do we really think it is the fault of the unemployed that they are that way, or that governments, their respective central banks and big business are deliberately creating unemployment to hold back wages and inflation?
What is really required are enough jobs AND the training required to get the employable into jobs. All the complaining about having to subsidise the unemployed is total BS.
I can't say I look forward to the day the welfare state is dismantled and all the very vocal neoliberals and neoconservatives then have to deal with the poor and homeless banging on their doors begging for food, stealing, lying around, peeing and defecting in the streets. THAT IS the inevitable result of no welfare state and high unemployment to 'curb' inflation.
Yeah, over 50% of the welfare budget is handed out to older folks regardless of need, and another $3 billion to landlords as rental yield welfare subsidies - and property price subsidies over that, not even counting Reserve Bank handouts over the last few years.
Working Kiwis are really tired of carrying these folk when they haven't or aren't contributing their share. Enough of property speculators freeloading.
As John Key pointed out, if you make $100k one way and you pay tax on it then it's fair that you pay tax if you make $100k another way, it's really just voter entitlement mentality that stops the application of this. And taxing income from productive work has so many more negative external effects than - for example - taxing unimproved land value, something conservative economists have pointed out.
As far as public sector spend goes, the more folk attack public servants and clamour to outsource everything, the more will get spent on contractors and consultants. Folk have voted for that then still complain.
As John Key pointed out, if you make $100k one way and you pay tax on it then it's fair that you pay tax if you make $100k another way, it's really just voter entitlement mentality that stops the application of this.
Too bad he's never come to think about it when he had the power to change it or are you just being cynical?
Absolutely right Rick.
It’s easy to point at the folks living in state-funded rental accommodation and label them bludgers, but the enormous sums paid for superannuation and elderly health care are often ignored.
GenX is the first generation who paid for everything under user-pays, is now economically productive and contributing significantly to the tax take, and is the first generation who will likely receive minimal health care & state superannuation when they’re old.
Its always a debate about more tax, never about stopping waste. In my previous multinational corporate life we were required to generate sufficient internal business savings to offset inflationary cost increases - every year.
Also, there's a great big tax hole enjoyed by quasi "charity" businesses including religious & Iwi organizations that never gets mentioned.
Having spent plenty of years doing efficiency reviews in the public service, I can say with absolutely confidence that reviews tend to conclude that services need more money to meet consumer / voter expectations. This is the irony of the Nat's line by line review - it will increase costs. You might get some pen pushers on the dole, but the largest cost of public services is at the understaffed, undertrained, and underequipped frontline. For example, how many teachers and classroom assistants do you need to provide a quality education? Well darn, we are thousands short.
The compensation in the public sector for subject matter expertise is pathetic. It wasn't a good situation to begin with in 2017 but Cindy's attempt to achieve pay parity across various skills within the sector and increasing focus on the message instead of outcomes has sent good workers packing.
As a result, agencies have to pay multiples to get expertise back on board as consultants or contractors. New joiners are now welcomed with a table of steps in their pay band as guaranteed future income with little to no room for factoring in the individual's performance in their annual pay increases.
"Higher income earners generally pay more GST overall, as they can afford to buy more goods and services. However, they pay less GST as a proportion of their income". ... However they do pay a more income tax overall and a higher proportion of thier income in tax. Not always the case but some people are earning more because they work more, their extra earnings are taxed at the higher rates.
For those that lack wealth and earn well, to get ahead they must work alot. low income earners also get topped up with supplements and WFF which closes the gap further. Generally your household income for a couple with kids needs to be base 120k combined, for overtime to make sense.
If we are all equal, why is an hour of my time worth significantly more than an hour of the average person? I was lucky to be born white and gifted in math. I don't have children needing my time either. I really struggle to see how an hour of my time is worth so much more than the average kiwi.
I know why my time is rewarded considerably more than average and it has somewhat to do with math abilities as it is essential for a few of the qualifications I hold. I don't think my race has anything to do with it to be honest. I choose to work where the money is rather than choosing a superficial title.
Tax everyone equally on profits. It's as simple. Take the creative accounting out of the system.
This brings equality to the society.
Never seen such a system anywhere in the world where you buy something and put it on rent and get tax deduction on expenses but when you sell it at a huge profit, there is nothing tax to pay on these profits. This has been the main reason of inequality in the NZ society for A very long time.
This has created house prices to baloon and those greedy geriatrics who kept this going have stolen any chance of a decent living from next generations.
Fix it now please, so the society doesn't keep suffering and comes to a point where it breaks into chaos.
In New Zealand inheritances are not taxed. So the assets of your old person flow directly to their children. My cousins in their thirties just inherited about $4 million. Each.
I don't really care. They already had set themselves up due to having a work ethic. To be honest if you want to distribute wealth more evenly a staggered death duty seems like where you would start and there are a lot of older folks who will die soon owning a lot of property.
Or start by looking at everyone who doesn't work. My migrant friend (and IT engineer said it best) - the New Zealand government exists to give money to people who don't want to work. When I lived in Japan if I lose my job the payments stop in a matter of months so I have to find work to survive.
What's wrong with that? Who I give my money to is my business, it's already been taxed once. In the 1980's thousands of wealthy NZ'ers abandoned the sinking Muldoon ship and moved to the Gold Coast where Premier Joh Bjelke-Petersen promised he wouldn't gouge their estates on their deaths.
It falls into the CGT bucket, should that be on the table again. If it's not then carry on soldier.
- If I buy something and it doubles in value and I sell it = tax.
- If I buy something and it doubles in value and I die and you sell it = no tax.
Slight inconsistency...
Value is an interesting term?
- If I buy something and due to poor govt and RBNZ policy the nominal value doubles over time - should I pay tax?
- If I buy something and due to poor Govt and RBNZ policy inflation triples over time, but the nominal value only doubles - should I pay tax?
In NZ - earn a $ pay tax, spend a $ pay tax, use a public service pay tax, invest a $ pay tax on profit even though the capital to invest is net of tax, now there are calls for buy land, grow food pay wealth tax on the increased land value and on the profit from the food then when you die pay more tax on all the assets paid for out of taxed income. We may be at or close to peak tax so time to put same effort into reducing spending waste on project that are late and over budget run by more bureacrats who are not held accountable in a meaningful way. I reckon the savings by eliminating as much waste and unnecessary and incompetent bureacracy would largely plug the shortfall of public spending on infrastructure.
I own rentals. I had no issue with a CGT as long as it is broad-based and factors in inflation. I did have an issue with it not considering inflation at all and just being taxed at your top tier, which is nonsense when you've owned something for 20 years... you're being taxed on the devaluation of the currency.
If the tax working group under the first labour government had simply tabled something like the Australian system it would be law by now. Their recommendation was so awful that the working group itself splintered and Jacinda issued her famous "not on my watch" speech. It was idiocy of the highest order and all of the other laws that have come in since to wedge different taxes in on property owners are what we get as a result.
I hate this government. They can't seem to deliver anything at all.
Tokyo - not quite right this rabble of Beehive Bunglers have delivered in abundance - lies deceit non deliverance more taxes more waste, more child poverty, more homelessness more division between races and an international reputation as being run by a tyrannical incompetent bunch of muppets - Canada seems to be going the same way.So please give them credit for this abundance of sh*te and kick em out of office - Labour Greens returning to the Beehive in a small minibus and ACT with 20+ MPs may be the start of the solution to NZ issues.
Taxing high performers more was the lever that drove many to embrace landlording as a form of tax avoidance. This really picked up with Clark Govts 39c envy tax.
Look where that got is today. Just do the simple and obvious thing. Land tax on all land and reduce the tax penalty on working so we reward actually working.
Capital gains tax if flawed by its potential lack of regular timing due to the irregular nature sale and or inheritance.
Perhaps we should distinguish between earned (generally wages and salaries) and unearned (interest, rent, etc) income. At present we treat all income the same. However, since taxes on earned income could impact negatively on production while unearned income doesn't affect production a case could me made for shifting the tax burden more towards the unearned variety.
Also, it is probably sensible to tax more heavily those factors of production, eg land, which are more scarce.
I would argue that renting property requires some level of actual work so a reflection of its taxability is required, perhaps a flat % of gross rents. This Govt seems to consider rental property as not a business so if its not a business its a hobby and not taxable. And whilst looking at the tax base time to tax faux charities like NGA Tahu and Sanitarium unless 75% of net profits are distributed to their tribal members. Ditto Maori Land being rate free - just because it is not individually owned is no bar to rates apply same idea as shares the individual owners are identified and billed and non payment like other property has consequences.Some will say I am racist, not so just asking for fairness.
NZ's tax system is reasonably fair. Any unfairness is minimal compared to the benefit system. I challenge anyone to check out the govt 'What you might get website'.
https://www.workandincome.govt.nz/online-services/eligibility/index.html
For my daughter her1st child made a massive impact but the second didn't. She could get $305pw accommodation benefit unless I choose to gift her $8000 in which case she got nothing. Or she could have moved to rural NZ where empty house dot our zombie towns in which case the $375 became $120. Or like the ex-leader of an NZ political party she could refuse to identify the child's father. If identified ensure he lived elsewhere.
A complex arbitrary system designed to be rorted. IMHO should be replaced by a generous child benefit paid to both parents if they are cohabiting.
The usual socialist straw people.
Is it fair that:
- Half of nz households pay no net income tax after credits etc
- WFF requires the minority of net taxpayers to pay for other people's choices to have children they can't afford
- 12 per cent of individuals pay just under half of all personal taxation, and the top 3 per cent account for almost a quarter of all personal tax paid.
https://i.stuff.co.nz/business/opinion-analysis/114628351/an-inconvenie…
- progressive tax policy requires higher incomes to pay more % tax than lower. Why not proportional, what's fair about higher incomes paying higher tax rates.
- Wealth earns income, which is taxed. NZ had wealth taxes/ death duties for 100 years along with ticket clipping abominations such as stamp duties.Getting rid of these economic inefficiencies and distortions was part of the electoral mandate for the original introduction of GST.
Any system of taxes and benefits redistribute money. It seems reasonable that half the population will winners and half losers.
Children are expensive. Worse than buying new cars. But children are an investment - when they grow up they will be paying the taxes for our Super and health costs. So it is rational for our govt to pay for their primary and secondary education - a wise universal benefit - so why not a generous child benefit for all children - why are we paying for the schooling of children living in cars and motels?
"It seems reasonable that half the population will winners and half losers.
... - when they grow up they will be paying the taxes for our Super and health costs."
Or will the multigenerational welfare dependency ensure that the majority of those not paying tax continue their entitlement mentality through subsequent generations ?
Not sure how reasonable it is to consider about "half the population will be winners and losers". I would have thought that with only a 5M population in a country blessed with a political democracy, temperate climate & natural resources the odds could be substantially improved.
50 years ago the population weren't that mobile, but now they are. Any attempt by the government to gouge will inevitably result in migration, mostly to Australia. I can remember going to work and thinking about having to pay 66% of my remuneration in taxes under Muldoon, so about that time I started thinking hard about my future and set about renovating houses.
A good point. If you have a mobile (= English speaking, educated) population then any tax system is constrained by what other countries are doing. We can concentrate on fairness, minimal admin costs, avoiding systems easy to rort. That describes NZ's GST for example. However our benefit systems are a dog's dinner designed to punish the honest person looking for work.
Tax systems are governed by the government's need for our money to pay their expenses. If that only requires 5% tax on lawyers' incomes, then that would do it. But their expenses are totally governed by self interested people's needs for other people's income.
The only solution is a total slash and burn of all government departments, and only those I consider necessary to the functioning of our country would stay employed.
Which is just highlights why taxing the land (not mobile) per The Opportunities Party (TOP) policy is such a good idea. Even if the wealthy fly out (or as many overseas owners do never arrive) they will still pay for the privilege of owning a piece of land in NZ (and by definition increasing demand/price for it for those who live here). Then take that land tax and reduce PAYE to incentivize people here to work. What's not to like?
I'm not sure I understand your reply but will give it a go.
If an area gentrified (I assume improved and land prices increased as a result) then yes more land tax would be likely (as the area is more desirable).
If you're saying land prices go up due to immigration (more demand all else being equal will increase price), then I'd agree. My solution to that would be to reduce immigration or at least ask the current residents what population they want).
I would be okay with retirees having the option to pay the land tax after death if they happen to have been fortunate enough to now occupy an expensive piece of land. Note that they would get a PAYE tax break with TOP policy too so we're mainly speaking about the top priced suburbs or people with multiple residences. Something like 80% are better off with TOP's taxation reform.
2 friends met at a cafe for a catch up. One of them is a socialist activist who champions social welfare and a salary earner. Another one is a salary earner who earns more than the former and believes each and everyone of us needs to work to push ahead.
The former friend orders a big breakfast, a smoothie and a coffee. The latter orders a coffee. The former believes the latter should be paying a lot more tax. The latter just wants to be frugal and pay off their mortgage.
The former, when spending other peoples money doesn’t care because someone else is paying for their big breakfast in the name of social welfare. The latter does not have that luxury. Everyone hates the latter because he earns more money.
I do believe there is work for everyone out there, everyone can contribute in one way or another.
Even a person with one leg and one arm has one brain and that's all it needs to do something useful and contribute. We need to spend to create an environment so this person can contribute. Giving free money has never resulted in any progress of anyone or anything.
There should never be free lunches or dinners in the name of getting votes to come into power.
If there really is no work and we have to give free money, i would make physical exercise if 3 hours in a day mandatory to get that money. I know harsh but might just help at the health front and exercise brings out the hormones of happiness and might just help them in their journey of life.
Sorry a bit of rant but I get a bit emotional when in society we create a space in which some try to exploit the system without contributing to it.
No it is not fair that ‘42% of millionaires pay tax rates lower that the lowest income earners’. Another ‘interest.co.nz article quoted that ‘wealthy New Zealanders paid on average 12% tax on their income’. I think that we need a wealth tax that ensures these wealthy NZ’ers pay their tax at the correct rates. I would call that fair if we all paid what the wage and salary earners have to by way of PAYE. There would certainly be more tax available to fund our very essential services throughout the country let alone the infrastructure projects crying out for repair or construction. Also make some steps towards raising the living standards of our poorest citizens who in my opinion have the right by birth or citizenship to enough income to feed, clothe and house their families to a decent level.
No mention of effective marginal tax rates in the article. The Bain of every middle income families existence since way back.
"Is it fair that 42% of millionaires pay tax rates below those of the lowest income earners?"
Even worse look when every extra dollar earned by the millionaire is taxed at the low rate (10%?) Where as the middle income family will suffer a 60% or so margin tax rate as WFF etc is clawed back. Fair?
Higher income earners generally pay more GST overall, as they can afford to buy more goods and services. However, they pay less GST as a proportion of their income.
if someone does not consume and spend, it means whatever money they don't spend is in investment, such as TD, Shares, Property, even stupid things like crypto currency. and in general, those money in investment will grow the economy, creating jobs, and building houses, roads, bridges etc.
is it really unfair because 'the rich' pays less proportionally on GST when most their wealth is creating more wealth for the society?
I can see the argument that investing in shares helps the economy as companies can use the higher share prices to issue more shares and invest it (for a high profile case see Tesla a few years back).
Bidding up house prices or crypto higher is a bit more tenuous, likewise investing in TDs.
I am very surprised that Lisa , who is a Professor of Taxation at Victoria Uni does not mention the single solution to many of our tax inequalities :
Land Tax !
... a small 0.5 % tax collected from all landowners in Zealandia , no exceptions ... collected annually by the local councils , and remitted to the IRD ... impossible to evade , cheap to implement ... rivers of gold from the wealthy into the government's coffers annually ... and , as land values rise over time , the tax take rises proportionally with it ... sweet !
If central govt try to control 3 waters then I can see this happening as a natural extension.
Question is - how efficient will central govt with voice from the "first new Zealanders" be at providing 3 waters? Not saying local councils are efficient or any good at this either. When it's not your money you seem to be happy to throw it away or to bad actors or (cuzzy-bros or nephews if you are Mahuta).
Small NZ sux. Bring in 2 million more quality working age skilled people and sharpen up everything.
China and Japan would have fixed all land slides and roading issues from floods already. Economies of scale.
By comparison in NZ we are just to the point of getting some photos of the damage/ landslides so we can think about how we might set up some working groups who might come up with several alternative plans to fix things - provided the first new Zealanders agree.
Happy Waitangi day all.
Don't be surprised GBH, it's important to keep 'working' on lots of options you know. Very hard to present a land tax with other options when there are no con's to talk about for the land tax. A solution to a problem must be complex enough not to be considered practical...
Do they consider council rates as a tax????
Bet they do not.
I pay more in council rates than most PAYE and certainly net tax (once wff etc all considered) pay my fair share even though apparently I'm "wealthy" by net worth standards.
Bet they don't consider "tax back" via all the wff accommodation allowances etc when looking at who pays the most tax either.
Labour need to go asap, all they want to do is tax tax tax
Irrelevant. Rates factored in and still net 8% return at pp which is well under a half of present day value.
But with that yield at 2% rates I've paid a lot of tax at my marginal tax rate - 39% - plus 10s of thou rates.
So don't say the top 10% net worth don't pay their fair share is my only point
Britannica Dictionary definition of TAX. : an amount of money that a government requires people to pay according to their income, the value of their property, etc., and that is used to pay for the things done by the government.
Rates are still a tax, they are just paid to a different level of govt.
Most councils have switched over to Capital Value over Land Value, because you can charge more as a percentage.
The larger issue with councils is the net negative return on investment to expand council boundaries via investment in infrastructure vs the rates return on spread out suburbian housing.
To design a fair and equitable taxation system then we first need to understand its purpose and that it has nothing to do with financing the governments spending.
The government has its own money which is NZ Dollar Currency and this is created as new central bank reserves whenever the government spends. The banks receive these reserves into their exchange settlement accounts and they then create a deposit in the account of the recipient of the payment. No tax payments whatsoever are involved in this process.
All taxation does is allow for both the bank deposit and the reserves created by the governments spending to be deleted again. This regulates demand within the economy and frees up the resources which can then be employed by the government for the public purpose.
For "public purpose"
This "public purpose" under labour is less and less available to the general public and more and more available to the 10% working age that can't or choice not to work.
I could get a med cert tomorrow saying I can't work - at I see dead people - schizophrenia - easy diagnosis - get a permanent pay out from hard working tax payers and be in the line for a free house. Early retirement. Sell drugs or if female other obvious non taxable income (cash jobs if you know what I mean). Live a decent lifestyle if you perfect it as much as all the growing number of gangs in NZ have.
Labour's being kind has allowed all this.
I'm not saying this sort of behavior is rampant in NZ but 10% working age not working is big is it not?
perhaps that is just as much a failure of the private sector in having insufficient training and job opportunities and wages that make work worthwhile. its a world wide problem and our rates are lower than most other countries and we also have a central bank which is actively trying to increase unemployment at the moment.
Two points:
• Tax take as a percentage of GDP (wrote GST by mistake) is too high now so any extra tax should be about funding tax cuts - lowering the rate on the lowest tax bracket.
• I’m for the last option - increased enforcement of existing taxes. In particular, I suspect compliance with things like the brightline tax and other property related taxes is significantly below what it should be as evidenced by the relatively low amount of revenue.
GST is a tax where lower income people pay a higher percentage of their earnings in tax. Higher income people may have the same outgoings and therfore pay the same GST, but it will be a lower percentage of their earnings. This is unfair. Instead we need higher tax rates for higher earners. Australia have higher income taxes than NZ
The Green Party's proposed wealth tax has a threshold of only one million dollars, and includes the family home. Such a tax would have two results. First, many people who invest in NZ and create jobs would leave. Second, the tax would simply kill investment in NZ.
The Aussies don't have an annual wealth tax, from memory. They do have a CGT - and stamp duties - but I don't think overall wealth is taxed the same way as the Greens were proposing.
Either way, they sure as hell don't have one that captures anyone with a median house in a major city the size of Auckland. Wheras the Greens would tax a person with a three bedroom family home in the 09, yet someone could own 4 rentals in a small town, have a much bigger impact on local supply of accommodation and still be under their cap, which was the same nationwide.
It was a dumb soundbite policy with no logic. Activists trying to win votes from their activist base who are literally never going to vote any other way.
In Oz the family home is exempt. Your main residence (home) | Australian Taxation Office (ato.gov.au)
I bought my house in the late 90’s for $350k and it’s now worth $2.2M. Under the Greens wealth tax policy I would have to pay $20,000 per year which I simply cannot afford.
I’m just an ordinary kiwi on slightly higher than average wage but the Greens label me as a rich privileged pr**k.
No , you wouldn't pay that much . First any mortgage or debts you have are taken off it . it is based on net worth. Secondly the first million is tax free .
So even if you were debtfree , you would pay $ 12000. If you couldn't pay it because of low income, it can be deferred until the asset is sold.
One thing most agree on is that inequality breeds crime and part of a tax system should be to reduce inequality.
If you don't want to pay more taxes because you are successful and have more then you should not be surprised that we have more crime. If your business is effected by crime you can't expect any response from a system you don't want to fund.
Not sure about "...most agree...". Multigenerational welfare entitlement, poor parenting & a political / judiciary culture of endless excuses & few consequences breeds crime. Many of us/our families have been poor in the past (in my case more than once) & didn't see any need to assault & steal from our neighbors - who were usually no better off than ourselves.
As regards increasing taxing to reduce inequality "most" seem to have forgotten that its supposed to be hand up not a handout.
I think the issue is that people who have no stake in society are not as afraid of committing a crime because they have nothing to lose.
As the rate of home ownership has declined since the early 90s equality has decreased and crime increased.
The increase in rental property ownership has been a stake through the heart of NZ society.
This tax written off by IRD. I'd say there Is some original tax in it, but most of it is penalities and interest they've piled on, which ensures anybody that owes IRD tax will more than likely be bankrupted by them , sooner or later.
There's plenty of unpaid tax, but it's never calculated and paid for, as the rich can afford accountants to reinvent it.
Fairness might be expecting everyone to actually pay in more than they take out.
But agreed, the notion of what is and isn't 'fair' needs to be considered before we go through another election cycle with people trying to convince us a small group of people propping up the tax system even further is how 'fairness' works.
No, I clearly mean the small pool of taxpayers who are contributing on a net basis to the country.
It has nothing to do with essential workers and everything to do with who is actually paying to prop up the state. That kind of reality doesn't play nicely with notions of a 'fair share' when it comes to tax.
It's a simple over-under exercise. And we're forever being told that GST is unfair because the people at the lower end up paying a far higher portion of their income into it than the people at the top, even if higher earners spend more and end up paying more in GST as a total. Again, complete nonsense. And only sustainable through a complex series of transfers at the income tax level - which has nothing to do with GST.
But unsurprising in a country where indexing things for inflation more than once a decade is called a 'tax cut'.
It's not all about direct monetary return though.
For example the wealthy benefit a lot more from the police and justice system. Were that disbanded, the poor would shrug as they have little to get stolen, maybe they'd join a gang for protection. The wealthy would see massive increases in insurance premiums, and would end up hiring private security at significant cost.
I'm curious how you can be paying close to nothing, if not negatively taxed after transfers and be considered to be paying far too much.
The reality is there is a convoluted and ridiculous series of net income supplements required to top people's take home pay at the bottom which could be eliminated, provided we accepted that these transfers end up being a payroll subsidy for businesses - who might have to pay people enough to survive on after tax, without the state coming to the party to make that happen.
Merely accepting one definition of a 'fair share' without being prepared to delve into the effect the transfer system has on helping people survive (but the subsidy it in turn gives others) is the politics of convenience and useless sloganeering. The status quo does not work and we need to be prepared to pull everything to pieces to get a better outcome, rather than just swallowing the same tired arguments about 'fair shares' without stopping to think about whether any part of the system is fair in the first place.
I think that everybody should work a 20 hour week, pay hardly nothing in tax, and then claim all the government handouts that are on offer ( which means that your topped up to a decent income through various schemes and government handouts) actually have a life , and not spending most of your waking day at work and in traffic to pay lots of tax to pay for government handouts,, everybody should do this it’s called living the dream..
The inconvenient truth is that someone has to bake the pie before it can be divided. All Central & Local Govt Public services, welfare benefits & support are funded ultimately by taxes on the profits & jobs generated by private enterprise capitalists who get out of bed in the morning.
Tax cuts for the wealthy are often attractive because they are cheaper than reducing the bottom rate. I.e. do lawmakers give everyone $20 a week, which doesn't shift the dial for anyone, or do they spend the same amount giving $1000 to a smaller number of people, which makes a real difference to those people near the boundary of a threshold. A cut in GST would make the most sense, but would also be expensive.
I'd like someone in politics to do the numbers so we can vote on it, not just headlines like "chewing gum tax" or "nurses get $20 pay rise per month".
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