Who is paying the $21 billion of individual PAYE

Who is paying the $21 billion of individual PAYE

By David Chaston

Information from the Budget shows how the tax burden is shared and how 'progressive' the tax system is.

Data released with Budget 2011 reveals that those on annual incomes of $100,000 and more - at least, those who declare their income at this level - will be paying 30% of all PAYE taxes in 2011/12, the highest share that this group has ever paid.

They make up just 4.9% of all taxpayers.

In fact, those declaring $150,000 or more – just 1.7% of taxpayers – will be paying 17% of all taxes, ten times more than an equal share

At the other end of the income range, those on $50,000 or less make up 75% of all taxpayers, and will be paying just 22% of the PAYE taxes, less than one third of an equal share.

Between these two groups, those between $50,000 and $100,000 per year will pay 39% of all PAYE, but these people make up only 20% of all individual taxpayers, twice an equal share.

Less is more?

It is a working proposition among some public policy analysts that a lower marginal tax rate generates a higher tax take.

The adoption of a top 39% rate in 2000 may have distorted how some top-rate taxpayers ‘organised their affairs’ but the growth in their share of tax collections grew from about 18% to 25% over a ten year period.

However, the reduction of that marginal tax rate to 33% last year will see their share rise to over 30% of all tax paid in only three years.

That will represent an additional $1 billion from that high-income group, the fastest rate of growth over the past ten years.

A closer inspection, focusing on the top 5% of taxpayers, the 'middle' 25%, and the bottom 70% - which both removes the bracket-creep aspect on one hand, and on the other reveals how distorted the income tax distribution has become – shows that a quarter of all taxpayers will pay almost half of all PAYE tax in 2011/12.

This analysis is broadly consistent with that published by the OECD earlier this month in an international survey of "Taxing Wages". That showed that in all eight senarios they monitored, New Zealand taxed wages at the lowest level in the OECD, or in the lowest four countries. The senarios they reviewed (1=lowest in OECD) were:
- single, no children, 67% of average wage = 4 out of 35 countries
- single, no children, average wage = 3
- single, no children, 167% of average wage = 4
- single, two children, 67% of average wage = 1
- married, two children, average wage = 1
- married, two children, 133% of average wage = 2
- married, two childgren, 167% of average wage = 2
- married, no children, 133% average wage = 3

The cut in income tax rates in 2011 came as part of a 'bargain' that saw GST raised at the same time. It reinstated a trade-off that was sold to taxpayers first by the Lange government in 1986 - but one that was not offered when GST went to 12.5% in 1989, nor when the top marginal tax rate went to 39% in 2000. For the record, here is a chart of our tax rate history, to keep things in perspective.

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116 Comments

But what about those who aren't measured at all because they don't pay PAYE?

In particular those who shelter assets in family trusts and companies.

Seems to me PAYE payers eventually made to look like mugs by those who don't play by the rules.

cheers

Bernard

Does PAYE include self-employed?

Don't family trusts and companies pay a tax rate of 33% and 28% respectively? If so, and if this tax is being paid as it should, why is this "not playing by the rule"?

Anyway, seeing those figures I'm thinking it might be time to give myself a pay cut :)

I'm beginning to realize....Mr  Lawn....that aside from delusions of grandeur...you obviously have more than one I.P. address........you really need to stop giving yourself one or more ....as it is not satisfying you ,and you are clearly becoming more and more frustrated....and angry.

My guess is that you exist here as an overlooked regular.......would not be too hard to connect your other identities. 

Then it is your right  Tor Lawn (anagram..?) to report the comment and insist on censure.

 

As no apology will be forthcoming.....good day to you Sir. 

The Gummster is a tadge miffed , Count , that you're spending all your time with Mr For Lawn . Come and play with the rest of  us  kiddies in the Giant Hickey sand-pit .... Come on , buckets and spades at the ready !

On my way Gumster...with lashings of bacon for timmy in hand....

Do you reckon it's time we mowed the Lawn , Christov?

Nah , he's kinda fun , 'like one of those little dogs that roots on yer leg ...... and no matter how many times you kick him away , he always comes back and latches on again ......

.......... Bloody funny as hell at the family picnic when one of these randy little critters dry humps a maiden aunts leg .

If no dog was around , you could rely on Gummy to have a go , and do that ........

........ aaaaahhhhh , happy days !

You have a point there GBH........normally I enjoy the comedy of it all....but there's something aboot  this one  that can't see the humour.....for the language barrier.

Get fishing ya scamp.

Not just yet Robo....good to see you about the place again....saw your post the other day..! but I was really referring to Annettes Bovine qualities....

 

goodo...haven't really got into being on here much anymore as it's always pretty much the same players with the same rave...although i see below that I am The Man has returned?

it's all a bit like art for fart sake really??

Your right about that ..Robo..which is why I was mentioning my ...sighness....to GBH in the hope of obtaining some Antihickeystamine....it can all get a bit grounhog day..and now that Worlds end has been postponed (due to lack of interest)  till October 21st...what the hell do we do till then...?

We need meat....we need to see some guts on the table...blood on the floor..Guyon tearing some of those turds to pieces in the interests of political forensics.......God we just need something more than a slow run up to a non event.....!...that said...what if...what if...what if ...we lose...the unthinkable....the rage of the mob on home soil...!...bye bye Smiley...bye bye Billy Bob.

You know what gauls me ...it's an election year and with the exception of Guyon and a couple of others all the T.V. interviews run more like infomercials. 

definitely a problem with the lack of investigative journalism.

i agree that Guyon esp. on Q & A on sunday morns tv 1 etc is really good ,as is fran o'sullivan...q n a is p/ly the best around and the nation on sat morn on tv 3 with plunket and garner is not bad either.

fran o'sullivan tried to float the idea of a similar model as NZ OnAir (which pays a lot of the cost for Tv docoes ) but for a pool of funding for good journalism to chase economic and political stories.

but the bunnies that spew outta journo school can only spell " hairspray " correctly so it's a dying art.

this site is pretty good but it's becoming passe" and stale.. not through any fault of BH ( waaaal )...it's the nature of the feast...wolly and co have been listening to that immortal line for toooo long..." you can check out any time you want..but you can never leave? "

uru..see ya on the dark side of the hoon, Christove, me ole china plate !

Horrie...Voir dire for now ROBO.

Oh for fecks sake you two , bloody well cheer up ! ...... The world didn't end ....... Peak oil wasn't reached ........... House prices didn't slump 30 % ........ And best of all , Winsome is rooted 'cos Donny nipped in first ,  dunk in an and garnered the country's attention .

It's the cold oppressive wind GBH....it just blows no bloody good.

Anyhoo i'm just off to hang myself untill I cheer up a bit.......won't be longer.

A bottle of Antihickeystamine tablets is on it's way to you , good sir ....... Do you prefer  mango flavour  or fish ? ...... Just to be on the safe side , I incorporated both into your batch . I had some calamar- bait left over anyway , so no need to thank me  .... . Enjoy !

[ water murky today , no fish from surf-casting  ...... or it could be that the Gummster is the world's worst fisherman ? ...... ]

Gummy,

Can I have some of those tablets too? My wife wanted some. ;)

cheers

Bernard

Thanks for that GBH...fish will do fine...although squid by any other name is still just bait.....as it happens I am an avid fisherman and if I may say so in all modesty a reasonably successful one........ I will impart to you some tips on a drip feed basis or at least till my cure-all arrives.

Tip 1.         Stay in touch with your rod

Tip 2.         Don't leave slack in the line once cast  or set in position.

well that's it for today....don't forget patience...and never use the weather as an excuse not to fish.....the fish are already wet....they don't care.

 

Count : Considering that they're in the water 24/7 , how is it that fish smell so bad ?

GBH....But for Elley's...sweet sensitivity I would tell you the real reason ...and it pre-dates biblical.

For now it suffices to say it's the speed of oxidisation when exposed to air...and what we call fresh water.

Although I have had great difficulty in smelling them in their natual environment....you may rest assured they don't smell that way all the time.

Jeez, Christove...this one's escaped from Fruit Loops Anonymous...

I guess in the reincarnation something got lost in the translation. Mind you some of it didn't either.

Dear Mr Lawn......in response to your post of 9.45 Pm of this thread...perhaps better entitled 

"Keep off The Grass"

I would refer you to my post of the previous day 9.48 am same thread.

However I will attempt to address your points.

 "or you can run off to Mr Hickey and Co. and complain."

No Sir...that as I pointed out is for you to do as ...you...are portraying yourself as the offended party.....and so should have reported my comment  as the need required.

 

"The second will restore your honour and you can admit to making false accusations."

I decline your invitation as the proof of my opinion would require a number of services you recieve to breech the privacy act.....so on that point ..." to prove" would be highly unlikely.

"The third will make you a coward."

I find this logic incomprhensible gibberish...therefore offer no response.

"I am called many things Mr Christov, but i am not a forger as you accuse."

I have no recollection of "forger" being used.....please learn to understand the ambiguity of "giving yourself one or more"

"So back up your accusation, or back off Mr Christov."

This is the keep off the grass component Mr Lawn and in that you may well be successful as my folley has been to indulge you with comment...albeit a tad derisive....I shall not be so desperate to find humor at your expense in the future as you appear not to have the skin for it .

P.S  Re your friend, the Philandering, fat arse, Mr Lange.
 A complete waste of a gastric band.

Was that necessary....?Yes he was a friend and I stand by what I said in the earlier post...we did not agree politically speaking....but I will wager he was a better man than you on his worst day....

You Sir are little more than floatsom from a sewage containment area..."in my opinion"

 I trust the contact ban will be mutual........you will have less to fear then... little man.

S'pose a kick in the balls was out of the question for Mr Lawn , C/stov ?

One must assume Robo...there would be balls to kick first..?    yes..?

"or it could be that the Gummster is the world's worst fisherman ?" Can't be, this glorious title is already held by my husband (don't tell him I said that). The one time he didn't come home empty-handed he admitted the next day that the guy fishing not far from him had given him that nice trout. LOL.

Give it up Chairman Hickey - your politics of envy are wearing thin......

More informed commentary from David and less ill-informed populist rubbish from Bernard please.

Kermit

You don't think there is an issue with trusts being used to avoid tax?

Some of the reasons may have gone away (for now) that the trust rate and top personal income tax are equalised at 33%, but they're still being used for all the wrong reasons.

Here's plenty of evidence.

How about this from the Chairman of PwC and a partner at KPMG who were both on the Tax Working Group.

http://www.stuff.co.nz/national/politics/3712092/Wealthy-dodge-tax

The Tax Working Group says sheltering of income in trusts cost the Government about $300m in tax revenue in 2007.

John Shewan, chairman of PricewaterhouseCoopers and a working group member, said trusts were "breeding like rabbits in the South Island".

"And that's what happens when you have silly tax rules that provide that incentive. The tax rules have driven people into using companies and trusts.

"People aren't stupid. The shockingly poorly designed tax package of 2000 has caused all sorts of things to happen."

Financial author Martin Hawes said he would be surprised if any of the richest Kiwis paid the top income tax rate and, if they did, it would be on only a tiny fraction of their worth.

KPMG partner John Cantin said it was relatively straightforward to set up a trust or company and make investments through it. The wealthiest were usually structuring everything through their companies and paying themselves a modest salary.

And here's the Tax Working Group's 73 page report that details the problems with trusts and tax avoidance

http://www.victoria.ac.nz/sacl/cagtr/pdf/tax-report-website.pdf

Pages 29 and 30

Reported trustee and beneficiary income NZ$11 billion by 2008.

Or how about the Law Commission's ongoing investigation into family trusts

http://www.lawcom.govt.nz/project/review-law-trusts

More detail here

http://www.lawcom.govt.nz/project/review-law-trusts/publication/issues-p...

cheers

Bernard

Yes that issue is now dead. Tax rates are even. The 39 cents has gone. Thats how trusts saved tax. It wasnt a lot it was more the principle of the issue. Really 300m for all those outside of the PAYE system isnt a lot percentage wise. If you can tell me how trusts can save  tax, over and above non trust methods now, please let me know

It probably cost the country that much in consulatnts fees and lot oportunities Waste

Until the top rate is raised again...and it will have to be raised to ensure we stop borrowing.

My solution would be to keep the top rate and the trust rate locked together.

So raise them both.

But I suspect many people will keep their trusts (or open new ones) just in case.

And let's not mention the way trusts are used to protect assets from creditors, the Justice Department and Social Welfare to ensure interest free loans, working for families and legal aid is paid to (not so) poor families.

Just look a the way Rod Petricevic, Andrew Krukziener and Mark Hotchin have used trusts to protect their trusts.

cheers

Bernard

 

"Until the top rate is raised again...and it will have to be raised to ensure we stop borrowing." Or, (not so) novel idea, we could spend less to ensure we stop borrowing... I guess this other option doesn't have as much appeal to some people though.

The top tax rate does not need to be raised.  As Elley says, the spending needs to be cut.  In addition the tax base needs to be broadened with CGT or similar to allow a flat tax rate on all individuals.  The progressive tax rates are creating the imbalances in the share of tax paid.

An individual earning $65k pa will pay tax of 19.3%.  An individual earning $130k will pay tax of 26.04%.  A couple earning $65k each will still only pay 19.3% tax and it could be considered that they are in a better postion as they get to keep more of their income after tax.  Of the services provided by their taxes do any of these earners use any less or more than the other?

The imbalance between the bottom 70% and the middle 25% is also caused by the progressive tax rates, specifically the point at which the 30% rate kicks in and the variance from the lower rate. 

up to $14,000                                                 10.5%

$14,001 - $48,000                                         17.5%

$48,001 - $70,000                                         30.0%

$70,001 and over                                           33.0%

 

Yes but any good thing can be abused. So do we throw out any thing that can be abused simply because of a few bad people. If we remove asset protection from genuine hard productive workers then, why should they bother. Like when price controls are introduced and it becomes not worth it to sell or deal in a product. It will seriuosly damage the risk takers not to invest and not to hire. Chop of the leg because the toe aches?? Not easy answers to these issues

 

But I see you are in agreement over the tax issues??????????????? Or ???

 

The government has closed teh loophole on WFF and trusts why the hell they didnt stop it years ago beats me. I do not know about legal aid or the welfare loans. I suspect it wouldnt take much of a tweek to fix those. Again why wipe the huge benefits of trusts when all that is needed is tweeks. Hey my colleages and I have seen the WWF issue and known the tweak for years in fact I beleive the suggestions were made to the appropriate parties. Gee we even told the government and IRD to stop allowing tax avoidance schemes and leave the poor hard workers alone. That fell on deaf ears. Still its easier to bully  the busy honest hard worker than the dodgers

 

Ahh but Bernard, surely you can see that a few tax rules won't change the behaviour of these white collar criminals.

You need a few public floggings for that/

Bernard,  the points you raise are a separate issue altogether and cannot be inferred from the article above.  How about discussing the actual issues highlighted by the evidence presented?

 "A closer inspection, focusing on the top 5% of taxpayers, the 'middle' 25%, and the bottom 70% - which both removes the bracket-creep aspect on one hand, and on the other reveals how distorted the income tax distribution has become – shows that a quarter of all taxpayers will pay almost half of all PAYE tax in 2011/12."

 

Yep, us PAYE earners (real workers) are mugs.  Raising the top rate is NOT the answer - the answer is sorting out the dodgers, trusts, bogus companies and other rorts and don;t get me started on public service waste. 

Someone asked how does a trust still save with the rate at the same as the top marginal rate? - easy - elect a PIE tax rate of zero (with tax deferred until distributions potentially decades later and then to low tax payers who've ceased working).  The other dodges are self-evident, but not available to the real workers paying PAYE (aka PAY for Everyone else)

The telling fact here is that the progressive tax system is more than alive and well... fortunately Labour and their cohorts have no show until 2014... but then National is doing pretty well taxing the "rich" right now including removing about the only break the real taxpayers got (KiwiSaver 2% nil ESCT rate gone from 1 April).

Whilst I agree with the overall sentiment, I would like to see an alternative view if the data. Surely it is the aggregate income of these groups compared to their share of PAYE that is relevant? It is hardly surprising that a small number of very rich people are paying a higher proportion of tax, but does each group pay a fair share according to their total income? That's what the tax scheme us designed to do, so is it being achieved? Bernard's point about non tax payees could also be factored in as well. No doubt any group will claim personal unfairness, but let's get mire clarity on how much each sector of society is paying according to their income.

Cheers.

Give us a break comrade Hickey – your socialist propaganda is getting too boring and irrelevant.

M. Zhvanetski: “Those who can't succeed in life always demand to forbid, expropriate and redistribute". 

Socialist?

I'm arguing for spending cuts, tax increases and much less tax avoidance to balance the budget and stop borrowing.

cheers

Bernard

 

Bernard, what foundation do you have to say that a person put income in a trust or company and not pay tax? I was a tax auditor for 17 years. Evasion by this group was basically non existent, but cash paid wages, is in the millions. Ridiculous

Spirk,

See above my response to Kermit. Pay less tax rather than no tax is what I was referring to.

'Evasion by this group was basically non existent"

Not according to the IRD, Treasury and the heads of PwC and KPMG (and the Law Commission)

cheers

Bernard

You are a reporter and do they not like to find out the truth? Actually as I said earlier you are quite good at finding out the truth so why stop now?

Why did you pick the one year that diary farms made huge losses to report their tax payment figures?

Why did you not report that IRD told the banks it was OK to not pay tax? Then why didnt you point out when IRD were claiming they collected 2 billion in back taxes from the banks that they let them off, billions more in the ealier years. IRD also gave them legal binding rulings that it was OK what they were doing, then IRD changed its mind. Shit if IRD tells you its OK and leaves you to it,  who would not do it?

Why do you not report on the business people who have started up risky ventures and succeeded but only  they some safety by the use of a trust which has balanced the scales to take the risk. How about reporting the jobs they created.

Why not report on business people whoi have risked and lost because the government has decided to change the rules EG the plasterer who only followed instructions of the government, local council and material supplier, who is being blamed for a leaky home. They are the ones paying so if they decide not to bother who will blame them? Why shouldnt they have the protection of a trust when they are almost totally not to blame?

Why not ask the government why they didnt close loop holes earlier in respect of trusts and get the tweeking done back then rather than simply wiping a good thing if used properly? Rod Petrivich did the same thing in the 1987 crash? So lets wipe a good system that helps jobs and productivity because the issues were not addreesed years ago. Overkill. Leaky homes are the same. The building code went to H3.2 timber as a knee jerk reaction. Guess what the new building standard saysH1.2 is OK after all

Still I suppose its all human nature

Socialism is right..Ive seen that first hand. Social disater. Poor hungry, orphans madness, 100 times more than democracy

Like the USA you mean? where more americans every day are collecting food stamps.

Great that.

regards

No not the US. it was 20 years ago after communism fell, in Europe. It has bought back almost war shock type memories. Others, with me, tolerated the conditions by heavy drinking, but I do not drink. Socialism can work, as Bernard is trying to point out with say Scandinavian countries but you need basically all individuals to have a sense of commumity responsibility. The poor and the rich and in between. That isnt the case in NZ so it will not work. It seems  most certainly not the case in the US particularly with the rich and the poor for that matter

Seems to me that all political systems have been a failure thus far.

Bernard says 'shelter assets in family trusts and companies' as a means of not paying PAYE.  Hello?  Since when have assets had anything to do with PAYE?  To help you Bernard let me explain the following

1) PAYE is paid on earnings,  not assets

2)When funds are withdrawn from either a FT or company,  tax is payable in the hands of the beneficiary or shareholder,  allowing of course for tax already paid (imputation credits etc).

Seems fairly straightforward to me ........

I fully expect this site will be sponsored in the future by IRD.

While PAYE is not paid on assets, Rates are a tax that are paid on assets.

As to all the noise about trusts and companies, it is immaterial in the scheme of things as the tax rates are now more closely aligned, the cost is now not worth it and given that of the top 5% only a small proportion would do this, it is an immaterial number, I would hazard a guess that blatant tax evasion makes makes this type of tax avoidance look miniscule. But there is more envy points in tax avoidance as the group is small than tax evasion where the group is large.

Interesting to see that the bottom 70% of tax payers have decreased there PAYE tax contributions from 28% to 23% over the last 10 years.. Who says tax reductions have benefited the high earners!

Also from what I understand, companies and trusts do pay tax.. so not sure how that is an issue.

Goofy really is barking up the wrong tree , blithering on about JK's " tax cuts for the rich . "

.......... The figures and graphs clearly show that high income earners are paying 10 times their fair share in PAYE tax .

Change the tune Goofy , it is tedious , and it is wrong .

[ ... crikey Bernard , the troops seem agitated with your comments ...... any more of that , and  I'll have to get you banned , me old chum ! .... ]

Forget about who pays what...think about why the pot of tax needs to be so bloody large...it really does amount to govt expanding like a bloated stomach until like the Monty Python sketch...kaaaaabooooom.

The real problem is the stomach....and unfortunately the Master in control is Sir Humphrey which explains why Treasury eats nearly 5 billion every year!

If we rid ourselves of Treasury...cut it out as we do a cancerous lump....that'll mean 5 billion can be chopped off the tax...or paid off the debts....then we need to swing the axe on the 'Welfare Humphreys'.....slash and hack away at the fat....bingo another 5 billion comes off tax...wack Parliament in half and more is saved...before long there will be no govt debt and the peasants will pay 50% less tax and oh byjeez looky here we get saving and spending without the bloody borrowing and real jobs start to emerge from the shite....

Can't have that can we Goofy...must not let the working fool wake up to this simple way that real incomes can be much much larger....got to convince them they need to be governed... they need pollys...they need Sir Humphrey.....and they will do the paying....right Smiley!

 

are you alright wolly, you're making sense...

Yes , that was so straight-forward that even Gummy could understand it , so much so that   obviously the message I got from Wolly was not the one he intended to  convey .

P of P, you having a laugh ?

Miles "the bottom 70% of tax payers have decreased there PAYE tax contributions from 28% to 23% over the last 10 years.. Who says tax reductions have benefited the high earners!"

So how have the majority (70%) been able to get away with paying a lower share of the income tax? The top tax rates and average tax haven't changed significantly over the past  decade. What has happened is the average wage and the median wage have diverged. The median wage ($27K) is now little more than half the average wage ($50k).  

So, OK, the higher paid are paying more as a percentage of their wage in tax but also receiving a less visible subsidy from the working poor that provide most of their goods and services.

We could could, some say should, set a flat inome tax at the average rate - looks like about 22% from the chart  and raise the minimum wage to $20+/hour. The transfer of wealth is not all about taxes.

 

Cheer's for the figures on average and median wages.  Shocked to see that less then 5% of workers earn over 100k. 

Why do we talk about median house prices in the same breath as average wages?

Shouldnt we compare averages with averages and medians with medians? Three kinds of lies, there are lies, damn lies and statistics.

This progression is simply a natural reflection of the fact that over the years the rich have got richer and the poor poorer.  Over time you are simply creating an ever-growing underclass without the ability to pay any meaningful amount in tax. 

The bizarre corollary of this is that many - eg BRT Roger Kerr - are demanding that tax rates be reduced for the rich. 

So we will end up with a world with a few ultra-rich paying a minimal amount of tax as a result of political pressure, and a huge poverty stricken mass unable to pay any.  What does that mean for the state and NZ?

This is the brave new world that many Interest.co.nz bloggers are demanding...

Cheers to all

Philly, it's the other way around. Because the "rich" have to pay more taxes, they demand more income.

By a " few ultra-rich", do you mean the 1.7% on 150K+? Funny, I wouldn't have thought 150K gross/year was ultra-rich. I thought this kind of description would be reserved for Bill Gates, Warren Buffett and the likes.

This is NZ , Elley , we are different . Anyone earning over $ 60 000 p.a. is a " rich prick " , over $ 150 000 and you're " ultra rich " ...... . Neither state is desirable , so steps have always been in place to bring the top income earners down , to sit in the gutter with the rest of us .

....... Glory be to socialism , brother ..... ummmm , sister !

lol. That's a weird attitude. That said, I am shocked to see how few people earn over 100K, let alone over 150K. It does make one on this kind of income feel a bit marginal...

I know quite a few in the over 100K bracket, but I can't say they are worth it.

Fair point, when I think of people earning under 30k I think they are worth more.  I was lucky and was given an opportunity to earn more, but I still earn less then my boss, yet I work and he inherited a business.  

I believe in civil liberties, but the libitarian economic philosophy makes the fraudulent claim that wages are a fair compensation for labour.  The guy who pays his workers the least possible even going as far as employing staff in a foriegn country just to pay people less, in conditions that should be illeagle is assumed to be succesful, and relates his wealth to his own hard work.

 

As Andrewj reminds himself, and us, when he travels:

"It's not until you get away that you are reminded just how poor, the rich are, in New Zealand !"

And since I was "away" before moving to NZ, I couldn't agree more...

Philly - don't the numbers show you that reducing their taxes ends up with them paying more - if  you want them to pay less, then lets raise them

 

What's the point you're making ?

Grant:  well, that is specious.  In some instances, eg eastern Europe where tax gathering systems are pretty crap, a flatter rate has resulted in less motivation for tax avoidance. 

I would not actually suggest raising the top tax rates, which you seem to think I am suggesting.  Labour showed us that this just leads to avoidance thru loopholes which in NZ you can drive a Mack truck thru. 

I would suggest closing the more egregious loopholes - untaxed assets - thru a combination of CGT / property tax / inheritance tax. 

Failure to do this is just creating a hereditary landed aristocracy.  Remember that NZ now has one of the most polarised ranges of wealth in the OECD, & it is getting worse ("better", Roger Kerr would put it)

Cheers to all

How about taking these numbers and modifying them showing how incomes have changed in real terms?

By this I mean the bottom 70% are poorer off and so every year, so its not surprising the tax take is declining....where the far better off are earning far more, so its not un-surprising they are paying more tax.   NB are they paying the expected amount more? So by this I mean if they are earning double, they should be paying double the tax....if tey are nly paying say 5% then oops.

Also you are taking total income....when in fact a more interesting stat is tax paid on spare/disposable income....so if that bottom 70% are using all their money just to eat/live while the top 10% have huge disposable incomes, how is that consistant?

and yes PAYE is only part of the issue....at the rate its going ppl are picking endevours/enterprises based on minimising tax.....thats silly.

regards

"By this I mean the bottom 70% are poorer off and so every year, so its not surprising the tax take is declining....where the far better off are earning far more, " - Any data to support this (eg a graph showing how the salary of someone on say, 50K a year has evolved over 10 years compared with the salary of someone on 100K or 150K over the same period)?

Yes, there are graphs on wealth...

regards

 

The rich should pay more taxes, because the rich get more from the government.

Consider law, for example, protecting the community benefits everyone; but it benefits the rich more, because they have more to protect. It's the same principle as insurance: if you have a bigger house or a fancier car, you pay more to insure it.

Investments in the country's infrastructure-- transportation, education, energy etc.-- again are more useful the more you have. 

 

Well, then you don't have to worry. The "rich" already pay more taxes! Or did you really mean to say they should pay all of the taxes?

As for "protecting the community benefits everyone; but it benefits the rich more, because they have more to protect." Just because you earn a good income doesn't mean you feel the need to splash it on flashy stuff to impress the neighbours...

Eg the "bigger cars" -  we have two old (>15 yrs old) cars worth probably less than 10K between them. On the other hand, our good friends have 2 flashy, brand new cars worth many times that (paid for by the bank of course). They also have a big, nice flat screen TV (or two). We don't (we enjoy the great NZ outdoors more). Yet we earn significantly more than they do so I don't think you can draw conclusions simply from how much material stuff one has.

Willy - are you seriously comparing the higher insurance cost of insuring a higher value house with say the cost of the police protecting a higher value house with a lower value one ?  In truth I'd say the later is the morely costly for police considering the neighbourhood is probably in.

"This is an outrage!

I earn more than $150,000 per year and so I pay far too much tax!

My employees are paid bugger all and so they aren't paying enough tax!

Low paid employees should pay much more tax so that their employers on high incomes can pay much less tax!

Otherwise IT'S JUST NOT FAIR!"

A nice and accurate summation.

The right vs the left and the nanny state from the US

A young woman was about to finish her first year of university. Like so many others her age, she considered herself to be Labour Party minded, and she was very much in favour of higher taxes to support her education and for more government programs - in other words, the redistribution of wealth.

She was deeply ashamed that her father was a rather staunch blue-ribbon Conservative, a feeling she openly expressed. Based on the lectures that she had attended and the occasional chat with a professor, she felt that her father had for years harboured a selfish desire to keep what he thought should be his.

One day she was challenging her father on his opposition to higher taxes on the rich and the need for more government programs.

The self-professed objectivity proclaimed by her professors must be the truth, and she indicated so to her father. He responded by asking how she was doing at university.

Taken aback, she answered rather haughtily that she had a 90% average, and let him know that it was tough to maintain, insisting that she was taking a very difficult course load and was constantly studying, which left her no time to go out and party like other people she knew. She didn't even have time for a boyfriend, and didn't really have many university friends because she spent all her time studying.

Her father listened and then asked, "How is your friend Audrey doing?" She replied, "Audrey is barely getting by. All she takes are easy classes, she never studies and she barely has a 50% average. She is so popular on campus; university for her is a blast. She's always invited to all the parties, and lots of times she doesn't even show up for classes because she's too hung over."

Her wise father asked his daughter, "Why don't you go to the Dean's office and ask him to deduct 20% off your average and give it to your friend who only has 50%. That way you will both have a 70% average, it would be fair and you would both be equal."

The daughter, visibly shocked by her father's suggestion, angrily fired back, "That's a crazy idea; how would that be fair! I've worked really hard for my grades! I've invested a lot of time, and a lot of hard work! Audrey has done next to nothing toward her degree. She played while I worked my tail off!"

The father slowly smiled, winked and said gently, "Welcome to the Conservative side of the fence."

If anyone has a better explanation of the difference between Conservative and Labour/Greens, I'm all ears.

If you ever wondered what side of the fence you sit on, this is a great test!

If a Conservative supporter doesn't like guns, he doesn't buy one.

If a Labour/Green doesn't like guns, they want all guns outlawed.

If a Conservative is a vegetarian, he doesn't eat meat.

If a Labour/Green is a vegetarian, he wants all meat products banned for everyone.

If a Conservative is down-and-out, he thinks about how to better his situation.

A Labour/Green wonders who is going to take care of him.

If a Conservative doesn't like a talk show host, he switches channels

Labour/Greens demand that those they don't like should be banned.

If a Conservative is a non-believer, he doesn't go to church.

A Labour/Green non-believer wants any mention of God and religion silenced. (Unless it's a foreign religion, of course!)

If a Conservative reads this, he'll forward it so his friends can have a good laugh.

A Labour/Green will delete it because he's "offended." 

"That's a crazy idea; how would that be fair! I've worked really hard for my grades! I've invested a lot of time, and a lot of hard work"

And about sums up the voodoo economics of the right.....its simple there is no correlation between working hard and high income.

Classic proof, the likes of GS gambling with oithers money and even betting against their own customers....just to make profit....

regards

Thanks for that, I was under the misconception that effort and reward where on the whole related, i.e. not voodoo.

At the ends of the scale your statement may be true, as political power and economic power can skew the outcomes, but on the whole in the middle space I occupy, effort and reward are not mutually exclusive and its the only way I know how to get ahead, as opposed to getting a head through a handout where effort and reward can be mutually exclusive, but even there if you game the system(emergency grant) by using some effort you will be rewarded. ;-)

  

The implication is that everyone is equall and has exactly the same opportunity as anyone else.  Some people are smart and some are just dumb, some people are strong and some are weak.  The reason for laws is to stop the strong harming the weak.

 

Without poor people you could never have rich people.  Time and chance happen to everyone and to refuse any obligation to those less fortunate is sad.  Does someone on $6mil work harder then anyone else in the country, have they put the most effort in, or was chance a big factor in thier success?  I doubt it is even possible to work 200 times harder then the median kiwi.

 

No argument from me, as the extremes lead to undesirable social outcomes, that is frm both the right and the left political spectrums.

All I am saying is that its not voodoo, to link effort and reward.

Makes me wondewr John, do you have kids in public school? Do their teachers work hard? For their average wage?

Ever had to spend time in hospital? How about the nurses looking afer you, do they have it easy? So they are only entitled to an average wage because they don't work hard enough?

Ever been burgled or had occasion to demand the services of the Police? So when they work night shifts they are just slacking about? Not entilted to good pay at all eh because there job is just too easy.

Do you pay insurance, just in case your house burns down or someone runs a red light and t-bones you? But the fire brigade and ambulance, they just slack around all day and don't deserve much pay at all right?

I can agree with bits the tail end of your post, but the work hard bit is a quite a thin argument.

Agree with you, again its not voodoo to link effort and reward, yes its not fair and does depend on supply and demand, that why different types of hard work may not be fairly rewarded.

Just because a nurse fireman or who ever is not actively engaged does not mean they are slacking which you imply I think, it a rather narrow interpretation, in fact being prepared is an actual activity and should be rewarded as there will have been effort involved.

If you want to seperate effort and reward so be it.

Of course it's not just about how hard you work.  I could carry the same heavy suitcase up and down the same flight of stairs 27 times and that would be very hard work, but I'd be hard put to persuade anybody to pay me good money for it.  Playing in a rugby match would be much harder work and far less enjoyable for me than it would be for Richie McCaw, but he'd still get paid far more for it and I couldn't argue that that wasn't fair.

It's about how effectively you use your resources, which includes but is not limited to your labour, and how you respond to economic signals.  If you want to be well paid, go into a well paid profession and work hard at that.  If other things are more important to you, do that instead and accept that you're not going to be rich.

 

 

And if your good at what you do and earn a lot of money accept that you will be paying more tax. 

Very good.

If a conservative doesn't want to pay tax, they are rich enough to hire a good accountant to help them aviod paying as much as possible.

If a Labour/Green doesn't want to pay tax, they get Working for Families

;)

John : Well said , a big bag of Gummy Bears to you .... You've earnt it ... Brilliant !

The Political Compass

A little test (should have saved it for tomorrow really). 

A cross between the Dalai Lama and Nelson Mandela... blimey, what was I reading as a kid?

Thanks for that , KW John , the Gummster had fun . ...... So I'm a right libertarian , smack bang in the middle of that box ...... Who'd have thunk it ... . I am the exact opposite of Sir Robert Mugabe , best to cancel the trip to Zimbabwe then .

Yes definitley put it up again tomorrow KW john....or better yet get bernard to run it .

Great fun n good test.

Me By the By....1light green square left of dead center.....

It was well worth the effort John.......!!..titter chortle titter..!

Of course the majority of welthy people are wealthy because of family or inheritance.  the daughter should be complaining about how she has to work for her 90% average when 9 of her other friends get 90% without turning up to school at all.

If you define " wealthy " as having $US 1 million or more in assets ( excluding the family home ) , then statistics from the USA show that only 20 % inherited their wealth .......

..... 80 % are first generation wealthy . And the vast majority of these achieved their wealth through business ownership .

Of the richest 400 richest Americans over half started with signifigant inherited wealth.  Less than 1/3 could remotley be considered self-made.  Half of all inherited US wealth is expected to occur within the richest 1% of the population.

There is the occasional 'self-made' person who is constantly paraded out by the conservatives as justification for inequality, however they are not the standard. 

 

If you think we live in a 100% meritocracy you're dreaming.

Isn't this debate really about whether you should be taxed on what you earn or what you own?

If you own assets that are perceived as valuable but earn little, e.g. rental property or a dairy farm (at least in 2009) then you pay not much tax. 

What annoys many of us is that our current system encourages pushing further money into these under-productive assets to reduce tax paid which can further drive up these asset prices in capital gain. It's not really in NZ's best interest and in the long-run will all end in tears.

Agree totally. Rather than a table of income earned vs. tax paid I would like to see a table that shows assets owned vs tax paid. ;-)

Simon P

Good point. This is why I'm in favour of a Capital Gains Tax and/or a Land Tax

cheers

Bernard

More land tax is a nasty idea.  It means you can never own your own house without the threat of losing it hanging over you the whole time.  If you lose your income through sickness or whatever you shouldn't have to also lose your home to pay land tax.  

Is that any different to the current situation ,  if you're unable to pay your rates to the local council .....

... Do council  officials pop around for a cup of tea , hold your hand , and whisper sweet assurances that all will be well ?

You're right it is exactly the same - nasty.

What this table has missed of course is the net tax paid. Payee tables before rebates and subsidies back are quite meaningless. In terms of net tax paid i did the exercise on a solo mum school teacher earning 50 k per year with two school age kids. She increased her net income by 5 k after working for families credits and a number of other subsidies.

In other words at present we are redistributing the tax paid from some taxpayers to others and we need to actually tabulate who is oaying the net tax. I would suggest that the top 5% of taxpayers are paying far in excess of 37% of the net tax.  

See the 2010 OECD report "Taxing Wages" as this addresses your point for the NZ senarios they cover.
http://www.oecd.org/document/34/0,3746,en_2649_34897_44993442_1_1_1_1,00.html

The level of WFF payments over the past 4 years are detailed here >> and here>>, but there seems no easy way to apportion them to the various income levels used in the IRD data releases.

I wonder. Once upon a time, if one was going into business and wanted to obtain some protection and limit the risk, you started up a limited liability company to house the business. Then the clever ones, the usual rotten apples (those few who spoil it for everyone else) formed $1 companies, ran it for a while, folded, and then pheonixed it. The banks soon wised up and got around that scheme by obtaining joint and several guarantees of all the directors and sometimes the shareholders. So after a while there was nowhere to hide. Until the cogniescenti discovered trusts. By shifting all their substantive assets into trusts they could sign up as many worthless bank guarantees as required by the banks. So .. the question is .. how do the banks get around that one?

I'm still shocked at the median wage of 27k

I wouldn't even pay a school leaver that little, there must be some misrable buggers out there if half the workforce is getting less then that.

Haven't you heard of the informal economy?  There's those who 'supplement' their income in ways you might not approve.  Some actually despise/look down on those who work hard and earn an ok income, think you are a mug if you do that.

Should that be a median income of $27k not median wage. Beneficiaries are taxpayers too but not necessarily wage earners.

Hourly earnings are higher for full-time wage earners than for those working part-time. In the June 2009 quarter, the median hourly wage was $20.83 for people employed full-time in wage and salary jobs and $15.00 for part-time employees.

http://www.socialreport.msd.govt.nz/paid-work/median-hourly-earnings.html

Capitalism works for profit, this makes it right to give employees the lowest possible reward for effort.  The distrubution of wealth is unequal in the labour market.  If wealth distrubution was more equal in the labour market then it should also be equal in taxes.  The evidence is that wealth distrubution is not equal and neither are taxes, kinda balances things out.

The rich believe in socialism when it suits them, when they want a road to drive down, a police force to protect them, a sewer and water system, an air traffic control system, Now they could say that all of these things should be privatised, but hey would still be socialist  in form, a collective answer to a problem.

A land tax is the only way forward at present. Easy to collect, fair and equitable. enforcable etc. It will hapen when the pollys work out that there is no other way.

Actually , the rich believe in capitalism . Because they know that all the services that you just listed will be provided more professionally and far cheaper by private enterprise than by government departments .

....... The rich didn't get rich by being stupid . They know full well that socialism is a fool system designed by control freaks to keep a select hierarchy in charge of an obedient proletariat .

GBH:  Yeah right.  Just like the private health system in the US.  Where the cost of health care is double the OECD average, for mediocre health results. 

So tempting!  Lets all go down that track!

Cheers to all.

"Price" of health care is different from "cost" of health care.

The problem is we look at  market "price" without looking at "cost" i.e. we look at the  manipulated market value rather than  intrinsic value before we make a decision.

The market needs cost vs price divergence indices to make us pause , reflect and question perhaps ?  If only people were able to see market signals on profit margins !

When I say "cost", I mean as a percentage of GDP.  The US is a high-wealth country, so whichever way you choose to look at it, it is bloody expensive & a total train wreck.  Their private system is riddled with inequities and perverse incentives, coupled with high-level corruption thru lobbying (what in developed countries is called "corruption"). 

Cheers to all

If you are suggesting a Land Tax in place of PAYE or partly in place of it then I think you'd find

many  low/middle income earners paying a higher proportion of the tax take.  

SimonP | 25 May 11, 10:36am

"perceived as valuable but earn little"--that phrase is gold !

So you want to tax something that is "perceived as valuable" on its "perceived" value ? 

I lament the fact that perceived value is so different from "actual value" calculated using potential earnings.

Is economics about surfacing the the true "cost" of a good, or the true "price" of a good.

If the answer is cost there would be no "perceived as valuable" -- you would apply a reasonable return for the risk to the cost and get a "price"

If the answer  "price", then to account for marketing bullshit, asymmetry of information and hysteria, there should be market indices which measure the degree of divergence between "cost" and "price" to provide a measure of balance in the information ?

Isn't that good economic management than the cheap knee jerk reaction to tax someone on the basis of "perceived value".

Bernard is just stirring things up. I know he is against bad/cheap money flowing into the country and good money flowing out.

What a srtange and pointless article.

Without any information on the share of income of each group it is meaningless.

So 5% of earners pay 30% of the tax - so what?  They are likely to earn 30% of the wages.  You can't just say they are paying 6x their fair share.  THe richest 1.7% pay 17% of the tax - they probably earn over 17% of the total income.