By Susan St John*
What a strange debate we are having about tax. First there is tax partnership OliverShaw’s dense 200 page commissioned report from a firm called Sapere released last week. Sapere had been asked to;
“cast an eagle eye over the tax system and answer this question: We know the tax system is undeniably complex, but is it fair?”
The triumphal message from Sapere is a resounding yes.
KEY FINDINGS FROM THE REPORT
The good news is, it’s working, and it’s fair.
Progressive Income Contributions
Don’t be fooled, high-wealth individuals ARE paying their fair share, with tax payments increasing as their income grows.
Lower Effective Tax Rates
Most individuals pay less than the statutory tax rates due to deductions, exemptions and other contributing factors.
Disparities in Tax Rates
Singles paying rent and low-income earners face some of the highest tax rates in the system.
Tax Policy Impact
Government tax policies encourage high-wealth individuals to invest in low-taxed activities, such as investment in business, as well as buying and building homes.
Holistic Tax Consideration
To evaluate income tax requires considering benefits like Working for Families, which can greatly impact effective tax rates and overall tax burden.
OliverShaw hedge their bets a bit but interpret the main messages (of what must have been a very expensive report) to be:
In general, as should be expected, average effective tax rates are lower than statutory tax rates at all income levels because of policy decisions not to tax all types of economic income.
Overall, high income earners pay the most tax and fund most government expenditure.
Even taking into account the above, average effective tax rates increase as the real economic incomes of all households increase.
What do we make of that? The ‘rich’ pay the most tax? That all is well, and everything is fair? The report is long and difficult to absorb quickly as Terry Baucher has noted. So here are some of my very preliminary thoughts and reactions.
Sapere have their own ideas about how to evaluate the overall tax burden that have little to do with standard tax principles. They only considered income tax and excluded GST- so it is hardly holistic. Their idea of effective tax rates, to be honest, doesn’t seem to take us far.
But lets think about a very different, but more intuitive and yet standard approach to evaluating tax. That is, for a required level of spending for our collective needs, taxes must be raised in accord with the well-worn principles of horizontal and vertical equity, efficiency and administrative simplicity. The tax system as a whole, has to meet the equity principle; for example a regresssive GST requires a more progressive income tax to make the system overall progressive.
Measuring progressivity requires that the concept of full economic income is used, so all untaxed income and imputed income from owning assets must be included as well as windfall gains. The overall degree of progressivity is a political decision, but we may have got it right if our needs are met, voters are happy, and there are no extremes of poverty and wealth.
It does not require that selected payments should be netted off as Sapere does.
To evaluate income tax requires considering benefits like Working for Families, which can greatly impact effective tax rates and overall tax burden.
Let’s take the horizontal equity principle—equals should pay equal tax. In the household income analysis done by the Ministry of Social Development every year (Perry reports) the principle of equivalisation is heavily relied on. The idea is that households of different sizes, on the same income do not have the same standard of living.
Let’s take a couple on net core benefit of $607 per week or $31,564 per annum. They just scrape by. Add in three young children and they would need approximately $50,502 (equivalisation factor of 1.6) to have the same standard of living. Families with oIder children would need more.
So how does the family get that extra income of $19,000? Her Working for Families (WFF) tax credits at $18,720 go a long way. But note these tax credits are paid because children too have income needs. Children are invisible in the Sapere analysis where all WFF does apparently is to give the parents an unfair tax advantage.
Geoff Nightingale on Q&A repeated and entrenched this kind of thinking:
He told Q+A parts of the tax system were designed in a way to unfairly advantage different groups.
He said, for example, a low-income household with children may have an effective tax rate that is nil or a net positive thanks to the likes of Working for Families tax credit payments.
In contrast, a household with no children may have an effective tax rate that is higher at the same level of income.
But in terms of the equivalisation explained above the sole parent with three children is placed in a similar position to the single childless person only because of the WFF tax credits that recognise the children. Netting WFF off her income and claiming she has an unfair tax advantage encapsulates all that is wrong with this debate.
In the past, it was possible to pay less tax because of tax exemptions that were called ‘tax expenditures’. In the tax reforms of the late 1980s tax expenditures had to be recognized as an explicit item of spending and so be more open to scrutiny. New Zealand is quite principled on this score, so WFF is NOT treated as an offset to tax but listed as an explicit item of government spending. WFF is about $3.3 billion per annum and is the same kind of spending as childcare subsidies, doctors’ visits, subsidies for accommodation, education - all required by families because they have children.
To take the simple world of Sapere to its logical conclusion- we raise tax because we want collective goods and transfers. If we net it all spending off against tax the overall ‘burden’ is zero. Crude fiscal incidence studies will show that the poor are net winners and rich net losers, but the sum is zero. But how do you accurately apportion the benefits of all government spending? Fiscal incidence studies usually unravel on this score.
Fundamentally, rather than fiscal incidence studies we need to ensure on both equity and efficiency grounds that the wealthy are taxed on their full income.
Sapere note the data challenges:
Inland Revenue lacks hard data on individual economic income, making it difficult to develop targeted, equitable, and effective tax policies.
The principle of vertical equity requires that those with greater ability to pay (measured by full economic income) pay more. Of course the degree of progressivity required for fairness is a value judgement, but vertical equity is usually taken to mean progressive rates of tax. Critically all income must be included in the base - the asset owning class should have the income from their net assets imputed to them and taxed.
Let’s see if the Inland Revenue and Treasury progress the debate in a way that makes sense this week.
*Susan St John is Honorary Associate Professor at the University of Auckland Business School.
96 Comments
We need to understand the relativity of tax. A rich person paying $100,000 tax in a year might barely notice it missing, whereas if a poor person pays $10,000 tax in a year, the impact on their lives may be significant. It's easy to look at those two figures and conclude that the rich person is "paying" more, but that all depends on your definition of "paying".
It's expensive to be poor.
To be totally fair, one needs to know all active income (remuneration, benefits, deductions etc) as well as passive income (land, shares, trusts, etc etc), and tax the total, according to the rules, and this tax is for individuals as well as companies, trusts, religious entities, welfare entities and others. No one entity escapes the net, which is fair.
The fairest way is to tax all on gross income or revenue, and we would all pay approximately 10% tax. Now that would be fair.
If we look at the image of the $100 note it can be observes that it says Reserve Bank Of New Zealand on it and what it does not say is Taxpayers Of New Zealand. NZ Dollar Currency exists in three formats, cash, central bank reserves and treasury bonds and all of these formats can be exchanged with each other. Currency comes into existence and is created by the governments spending and not by taxpayers returning it in taxation where it is simply cancelled again.
'The asset owning class'
Thats all of us pretty much. Some of us spend money on cars. Lounge suite. Travel. Others land. Whats an asset? Who gets to say who pays, and for what sort of purchase? ..Joe went to Fiji, no tax there. Jill bought a car....hmm, Jack put a deposit on a house. Tax Jack!
Reward the profligate I guess.
Redcows, I was not discussing gst. But tax on assets. An old hilux is now worth more than it cost new. Does that become an asset that is further taxed? What if the asset in question loses value? The constant valuation of assets becomes an industry of bureaucrats. Do nothings. We have enough of those to carry already. Yes we carry them. Those of us that produce stuff to sell have to pay for this.
Imputed tax. I’m not sure this will ever be introduced as it collides too much with the main motivation that kiwis go to work for in the first place. One day escaping the rat race.
Imputed rents for example is where the government taxes you on the rent you would be paying, if you didn’t own your own house. This is what the author above is arguing for, although doesn’t explain it properly.
I wonder how quickly a politician would thrown out for suggesting this in plain English.
60 seconds ? 90 seconds? Would certainly be gone within the hour.
Imputed rents for example is where the government taxes you on the rent you would be paying, if you didn’t own your own house.
Not quite. It's a tax on the value of the benefit you are actually receiving by living in your own house.
This is not much different from, say, paying tax on dividends from shares which you also own. It's just that with a house, you realise the benefit of that ownership directly, rather than having to use money as a means of exchange.
Now you can argue whether or not this is a good idea, but it's not just a tax on hypothetical earnings as you suggest.
but no one is going to work by owning their own home. Nothing is being paid to anyone else in potato’s or any other exchange.
A more accurate example from you would have been that we should tax people who grow their own vegetables for themselves, because others have to buy their own vegetables from the supermarket.
my main point though, is that you need to leave motivation within the system for people to strive towards.
but no one is going to work by owning their own home. Nothing is being paid to anyone else in potato’s or any other exchange.
It doesn't matter. People are taxed on benefits derived from things they own all the time. Think about it.
A more accurate example from you would have been that we should tax people who grow their own vegetables for themselves, because others have to buy their own vegetables from the supermarket.
Strictly speaking, this would also be a valid form of imputed tax. So yes, that it also a good example, as is an imputed tax on driving your own car.
Years ago, our very own Terry Baucher co-wrote a book called "Tax and Fairness". Great read, and I'd recommend it if you can find a copy (there are probably a few laying around in the interest.co.nz offices, I would imagine). One of the things they cover in this book is what makes a "fair" tax system, and one of the requirements is that it's easy to understand, and actually enforceable.
While private vehicle use and home-grown vegetables would be valid subjects of imputed tax in theory, in practice it would be way too difficult to enforce or understand. So a line has to be drawn somewhere.
my main point though, is that you need to leave motivation within the system for people to strive towards.
There is still plenty of motivation for people to do things, even if 100% of the derived benefit might not end up in their back pockets.
”It doesn't matter. People are taxed on benefits derived from things they own all the time. Think about it”
can you give an example of this where no money is exchanged. But people are taxed anyway.
Also, are you suggesting imputed taxes should be introduced in nz?
can you give an example of this where no money is exchanged. But people are taxed anyway.
You keep getting hung up on the exchange of money thing. Again, it's not money which is taxed, but value. In the case of PAYE, that value comes in the form of Earnings, which don't necissarily have to be money.
There was a bit of noise around WWOOFing a few years ago, where tourists are invited to Willingly Work On Organic Farms in exchange for food and board. Great way for tourists to get around on a shoestring, and good opportunity for farmers to get some "free" labour. Well the problem that IRD had with all this is that the workers are in fact being paid: in the form of accommodation, which has a value, and therefore should be getting taxed. It was argued that WWOOFing should be made illegal because of this, but the whole issue kind of fizzled out eventually. So the workers aren't being taxed on their own labour, something which they own and control. But the point is that they should be, based on how our tax system works. The fact that no money gets exchanged is irrelevant.
Also, are you suggesting imputed taxes should be introduced in nz?
No, I'm simply trying to clarify what they are (and aren't). I obviously have my own opinions on the matter, just like everyone else.
That wasn't an evasion, it was a concrete example of what was asked for. But since that one didn't seem to sink in for you, another example would be Fringe Benefit Tax (FBT). If you use a company vehicle for personal use, you pay FBT on the value derived from that usage. No money changes hands.
Fringe benefit tax is paid for something that is supposedly part of a pay or employment agreement. In other word people would have a car as a part of their pay package, in lieu of being paid actual money. The benefit had a clear established and agreed value. Much of what you argue for is not about money.
I do many things every week that I don't pay tax for, but have value for me. Should I be taxed on those too?
Fringe benefit tax is paid for something that is supposedly part of a pay or employment agreement. In other word people would have a car as a part of their pay package, in lieu of being paid actual money.
No, that's not right at all. FBT applies equally to self-employed business owners too, for example. You'll need to go and find someone who can explain these things to you.
Really?
"Fringe benefit tax (FBT) is a tax payable when the following benefits are supplied to the employees or shareholder-employees" From the IRD itself.
Plus you didn't answer the second part of my comment. I notice you avoid answering many parts of other comments. The bits that really point to the flaws in your theory.
Share based compensation is taxed, no money is exchanged. Or in theory any other payment in kind, but there is definitely evasion there.
Fringe benefit tax often involves no exchange of money between the employee and recipient, but is taxed.
FIF rules mean taxes need to be paid when no money is exchange.
Then there are a plethora of taxes based on assumed use of services such as vehicle licensing and rates, based on ownership of assets.
Just the core concept, execution and turning the IRD into a reverse mortgage provider. All perfectly rational and above board, definitely something we should do ahead of addressing the series of regulatory and political failures that have led us to that point. Far more logical to just sigh and find a way to clip the ticket.
No, the core concept is not insane at all.
The execution and "turning the IRD into a reverse mortgage provider" could be considered 'insane'. Depends entirely on how it is executed, and IRD needn't be turned into "a reverse mortgage provider" - that would be a choice of how it could be executed.
Levy Economics Institute.
Publications
Working Paper No. 244 | July 1998
Can Taxes and Bonds Finance Government Spending?
This paper investigates the commonly held belief that government spending is normally financed through a combination of taxes and bond sales. The argument is a technical one and requires a detailed analysis of reserve accounting at the central bank. After carefully considering the complexities of reserve accounting, it is argued that the proceeds from taxation and bond sales are technically incapable of financing government spending and that modern governments actually finance all of their spending through the direct creation of high-powered money. The analysis carries significant implications for fiscal as well as monetary policy.
https://www.levyinstitute.org/publications/can-taxes-and-bonds-finance-…
An alternative might be to make landlords' rental income tax free: if a "family homeowner" is not being taxed on the benefits he receives from ownership, why tax a landlord for the benefits he receives. Of course none of the landlord's expenses would be deductible, which would mitigate the advantage to the landlord of such an arrangement. It may well mean lower rents having to be paid by tenants.
what a load of rubbish. How is tax on imputed rent comparable to dividends from shares? Imputed rent is a BS theoretical income derived from living in your own house. Dividend from shares is actual money from real profits made by a company. Not even close to comparable!
And to you 'imputed rent' argument. What about the situation where two families int eh same street paying different levels of rent for essentially the same sized house? should the people paying the lower rent have to pay an additional tax because they pay less than someone else? The imputed rent theory is utter rubbish.
Imputed rent is a BS theoretical income derived from living in your own house.
No, it's not. It is the real value of the benefit you get from living in your own house. Taxes are levied on value, not money, and it is people's inability to understand this which causes them to get all upset and start using words like "socialist" and "envy".
We could start small with well easily calculated stuff. Every hour that a child under 12 is not in childcare is an hour of labour that the parents should be deemed to have derived a benefit equivalent to the cost of childcare for. To keep this tax simple just tax parents 30% of min wage for every hour of the year and give them a credit for the hours that the child is in paid childcare.
You are arguing that people who live in their own home should pay tax on an imagined, oops sorry - imputed, rent they don't pay, as opposed to someone who rents a home. How is that different from someone having to pay a tax because they get to rent a house at a rate less than someone else? Just in case you really don't understand the concept; home owners do pay rent, its just broken up into things like rates, insurance, and maintenance. Plus your argument avoids acknowledging the sacrifices homeowners make so they can own their own home, which renters do not.
To all intents he is. While arguing the concept, he makes no comment at all that he does not agree with it, or that he believes it is flawed. He even produces some flawed arguments to support his description of the concept. If he disagreed with it, perhaps he could have said so and explained why?
It isn't mandatory that one state their opinion on a subject when they are educating others on that subject, you know.
His arguments aren't flawed and he wasn't making them to 'support his description of the concept'. He was using them to educate people such as yourself as to what rent imputation actually is, because you have some clear misunderstandings about what it is.
Finally, he did say this:
Also, are you suggesting imputed taxes should be introduced in nz?
No, I'm simply trying to clarify what they are (and aren't). I obviously have my own opinions on the matter, just like everyone else.
Fairly arrogant to believe you're 'educating' others who disagree with your perception of a concept. His supporting arguments have holes in them, and I disagreed with their relevance and said so. While imputed rent is what somebody who believed in their own infallibility presented as a viable concept might be seen by others as legitimate is not grounds to claim it is. It is grounds to have a debate on the topic. And as in all debates, if you persist in presenting a view from a certain perspective, is it not then reasonable to have others assume you support that perspective in the absence of any evidence or information to the contrary?
Except you have multiple misunderstandings evidenced in your comments, for example you believe home owners pay rent in the form of expenses on their properties. No, those are expenses that are also paid by landlords who do not live in their houses. They aren't rent. Rent is a different thing. Landlords are taxed on rental income, homeowners are not taxed on the rent they 'pay to themselves' to live in their own home. That's literally what imputed rent is.
If you don't understand what rent is - and it is clear that you don't - then it's no wonder you don't understand what imputed rent is.
You also tried to quote the IRD to prove chebbo wrong about FBT, but actually the IRD quote you found agrees with him.
So yes, educating is indeed the correct term to use here.
It is clear you are the one who doesn't get it lanth.
let's simplify this concept and just for the point of discussion accept that there is a cost to putting a roof over your head? Lets call that cost "Roofing" (just to differentiate from conventional terms)?
Almost everyone who lives in a house has to pay "Roofing". 'Almost' because children and other dependants don't pay.
Take just three people, A, B & C.
A doesn't own his property and so pays his roofing as a single sum to his landlord who does own the property, at an agreed rate and frequency. Whether the landlord makes a profit from the rent is irrelevant to this discussion. But the landlord must then break up the "Roofing" he receives into components. One component of his "Roofing" is call Rates (a tax on the property), another is called Insurance, another may be broken up into many smaller components and is called Maintenance which may or may not include a component aimed at renovation. A part may or may not also be called Mortgage. There may be some left over.
B has purchased his own property. He might or might not have a mortgage. He does not have to pay any "Roofing" to a landlord. But he does have to pay "Roofing", except that it is broken up into components. One component of his "Roofing" is called Rates (a tax on the property), another is called Insurance, another may be broken up into many smaller components and is called Maintenance which may or may not include a component aimed at renovation. A part may or may not also be called Mortgage. Depending on where he lives and what he lives in, the total of his "Roofing" may be more or less than what A pays to his landlord.
Now lets look at C. C doesn't own his house. He too must pay "Roofing", and his needs are identical to A's, but because his negotiating skills are better, or perhaps where he lives the amount of "Roofing" he has to pay to his landlord is less than what A pays.
Now let's look at what should be taxed in the example given above. Your imputed "Roofing" tax assumes a standard "Roofing" charge. If A is paying more than this charge should he get a tax deduction? If he is paying less should he be taxed on the benefit he is receiving? These same questions apply to B and C, or should C only be taxed on the difference between his "Roofing" and A's?
Or after all that is your argument not about the amount of "Roofing" being paid, but about something else?
Essentially buy a property and rent it to your mate who does the same then have a contract allowing either party to organise a swap of the house they rent their mate for the one they live in at any time. This way you control the actual rent amount and can set it below the imputed rent? Or if imputed rent is a flat rate does that become a new floor on rent prices?
I understand very well. It is you who is avoiding the detail in this. What revenue does a homeowner (owner occupier) receive. Don't talk about imputed rent, or implied benefit because none of those are revenue, and owning a home as an owner occupier is not a business. A landlord, who happens to be in the business of renting out houses does receive revenue in the form of paid rent, but as I indicated in my example he must then pay a bunch of expenses, which strangely enough an owner occupier must also pay. And for the land lord many of those expenses are tax deductible, which is not the case for a owner occupier. Where is this wrong? And go back to my example and explain where that is wrong.
We could start small with well easily calculated stuff. Every hour that a child under 12 is not in childcare is an hour of labour that the parents should be deemed to have derived a benefit equivalent to the cost of child for. To keep this tax simple just tax parents 30% of min wage for every hour of the year and give them a credit for the hours that the child is in paid childcare. After trialing this for 4 or 5 years run a referendum on if the system should be repealed or extended to the next stage (tax the benefit derived from leisure time for which no money is paid), repeat until everything is taxed. Time is the easiest asset to tax because everyone gets exactly the same amount of it every year and you can require receipts for the units to be excluded.
Hi Susan,
Thanks for the straight talk, Susan. Well done calling for a back-to-basics assessment of the tax system. We need this as a country. But still New Zealand's debates about tax seem stuck in a time warp that seem to ignore the major developments in tax theory in the last fifty years, as well as the experience of what almost all countries other than New Zealand do.
As you note, optimal taxes are a trade-off between fairness, equity, and simplicity. but this does not mean people with equal incomes should be taxed at equal rates. The foundational work of the Nobel prize winners Sir James Mirrlees and Peter Diamond, who together developed optimal tax theory, demonstrated it is unlikely to be optimal to apply income taxes to people earning the same amounts the same if the source of income is different. Income taxes applied to labour incomes and capital incomes should not be equal, because the efficiency losses associated with different types of taxes are not the same. Almost every other country in the OECD now takes this as a foundational principle and taxes labour incomes at higher rates than capital incomes, largely to ensure that firms invest heavily and raise wages and living standards. Most countries do through by having large social security taxes applied to labour incomes but not capital incomes. But other countries - notably the much-richer-and-more-equitable-than-New Zealand countries in Scandinavia, such as Sweden, Finland, and Norway - have pushed this principle further and deliberately tax capital incomes at lower rates than labour incomes to ensure their industries prosper at home and offer high wages at home. New Zealand is basically alone trying to tax equal incomes equally, although it has moved a step in this direction by taxing corporate income at 68% and allowing for PIES. New Zealand started to move in this direction under the Kirk Government back in the 1970s, but the next national Government scotched these attempts and left New Zealand with the most unusual tax system in the OECD - one which ignores the basic principles of tax theory. A principled discussion about tax would go back to these principles and see if the structure of NZ's tax system is fit for purpose - unfortunately this is something successive governments have not been prepared to do, and even the Tax Working Group took it for granted that income taxes on different forms of income should be the same, despite there being no good grounds for doing this.
You also appear to presume that income should taxed when it is earned, not when it is consumed. This can lead to considerable inefficiency, as most countries realise - which is why most countries (other than New Zealand) have shifted towards progressive expenditure taxes in the last fifty years. Debates on the relative merits of consumption and income taxes date back to at least JS Mills, who, incidentally, when not campaigning with his wife for universal suffrage, argued that consumption taxes have the merit of taxing what you take from society not what you contribute to society. One of the advantages of consumption taxes is that they lead to more horizontal equity in terms of what you consume, not what you earn. New' Zealand's tax system means that someone who earns $50,000 one year and $100,000 the next pays more tax than someone who earns $75000 in both years - something salary earners might think is fine, but which hardly seems fair to those earning fluctuating incomes. (The Nobel prize winner Vickrey discussed this 85 years ago, but we still ignore him). It also means a household with one person earning $100,000 and the other $50,000 pays more tax than a household with two people earning $75,000. Again, it is a strange to emphasise horizontal equity in terms of income taxes but ignore horizontal equity in terms of consumption, which one think is more important.
Andrew C.
Very interesting comment.
I find it baffling that we have normalised taxing productive activities rather than extractive and exhaustive activities. Morally and practically our tax burden should be targeted at those holding natural assets and consuming natural resources, and at redressing negative externalities where necessary. Tax on median personal income from capital and labour should be minimal, but with a (highly?) progressive marginal rate on higher earnings - to incentivise reinvestment in future production rather than immediately extracting value for personal consumption. I'm not sure about the practicalities of distinguishing between capital and labour income for this purpose, but it's certainly an interesting idea.
Under our current tax settings it's intimidatingly hard to achieve personal prosperity through long term, sustainable productive enterprise. Meanwhile other paths to prosperity are relatively unobstructed, many of which are zero-sum or even a net drag on society. Housing crisis, staffing crises, trade deficit, environmental degradation, declining self-sufficiency - virtually everything that we moan about - it's all happening because our tax system rewards making money in ways that hurt society, and punishes making money in ways that help society.
"I find it baffling that we have normalised taxing productive activities rather than extractive and exhaustive activities." Not that I disagree but I would reword it for clarity to being about how NZ has normalised that productive workers and businesses are taxed, yet unproductive rentier behaviour like land banking is tax free. Ethically this sort of 'unearned income' should be heavily taxed because it is not the result of effort or enterprise.
Untaxed rentier extraction is a key problem that NZ faces with implications re - productivity, the infrastructure funding deficit, inequality (gen rent), the environment (land banking in cities means land is not put to its best use i.e. it encourages sprawl), the brain drain, and so on.
Strangely, none of the tax experts who wrote the Sapere report, nor Baucher or St John raise the ethics or practical implications of NZ under taxing unearned income and over taxing labour and capital.
P.S The housing crisis is a wicked problem with multiple causal factors that have been ignored by a generation of policy makers. Improved tax policy, such as the TOP party tax switch proposal would help - especially if it was part of a wider package of policy changes.
Frank noticed something that is missing from NZ discussions around tax, that is the shared tax burden.
Frank worked a hard life on the docks whilst Mrs Sobotka stayed home with ziggy in the early years.
Franks income was taxed extensively as a single earner, and yet mrs S (and zig by extension) eligibility for benefits was predicated on Franks income, as he looked after his family. But it’s strange that an income stream is treated as one persons solely for income tax, and a family income for benefits.
frank knows from his travels and discussions with other stevedores that other countries allow the income to be shared ie a 100k income is split into 2x 50k for tax purposes. Which aligns it with benefits eligibility’s
Susan, you use the family on a benefit as the example. Benefits are short term solutions to get you from a previous employer to the next eg after being made redundant. A month, 2-months, 3-months of unemployment benefits. The issue is too many choose to stay on a benefit. Tuck into the state house, plead hardship and ask for more money. How about taking personal responsibility and providing for the family? My empathy extends only to superannuitants and genuine sickness beneficiaries. The rest I couldn’t give a F about.
Because in the last 5 years under Labour, the number of people on JobSeeker has gone up 30%. This is despite a 44% increase in the minimum wage over that period, and a current period of record low unemployment and employers desperate for staff. There has also been a 30% increase in the number of people on the sole parents benefit, primarily due to Labours removal of the requirement tyhat these beneficiaries need to look for work. And then the bureaucrats scratch their heads and wonder why child poverty has increased.
Cheetah you know that 65% is social security spending here is the non-means tested inflation linked age benefit aka superannuation?
800k currently receiving it which will move up to 1.2mm within next 20 years.
The same folks who didn’t adequately fund it during work years because they opposed taxes. The same folks who also opposed any political parties that attempted to fund it properly (viz Muldoon ending our fledgling super fund in 79 and the nats not funding Nz super fund during 8 years in power under key et al).
The same ones who viewed propert investment as their right to fund their retirement, and caused the biggest economic fiscal demographic and social timebomb in this countries history.
This was my understanding, yes. It is not fair at all. If you choose to have kids, or work less and have more time to yourself then these are personal choices. Need to encourage prosperity, not penalise it. There is a disconnect between people who see a pie and wanT to cut it up equally, than those who want the pie to be bigger but the slices might be unequal. If the smallest slice is still the same size then does the inequality matter? We are individuals, not identical robots. There will always be inequality in some form.
If they decide not to have kids, that's their decision. Not sure why the government should give them a pat on the head for it, the assistance for families is clearly to help raised healthy, well-adjusted children who will ultimately be the future workers and taxpayers that all Kiwis are reliant on. I'm guessing the child-free ones will be happy to take the pensions that will actually be paid for by the kids other people ended up raising and financing.
I would say that the tax system is grossly unfair. a small percentage (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. How is that fair? Why shouldn’t everyone be expected to pay the same?
Beardsley Ruml was a chairman of the New York Federal Reserve Bank and he had this to say about taxation,
"since the end of the gold standard, "Taxes for Revenue are Obsolete". The real purposes of taxes, he asserted, were: to "stabilize the purchasing power of the dollar", to "express public policy in the distribution of wealth and of income", "in subsidizing or in penalizing various industries and economic groups" and to "isolate and assess directly the costs of certain national benefits, such as highways and social security"
In the 2020 election the Opportunities Party advocated everybody should be taxed at the same rate: 33 cents/dollar. They advocated also introducing, at the same time, a UBI of $13,000 p.a.. Simple arithmetic tells us that these two measures taken together would be the equivalent of a progressive tax regime. Therefor, since both measures seem fair, it is logical to assume that a progressive tax regime would be fair.
Widening inequality of wealth and income is toxic for a country's social fabric - a recipe for a doom loop of gated secure communities, carjackings, sink estates, ram raids, drug overdoses and a two-tier school system for the haves and have nots.
Our tax and welfare system is supposed to counter inequality and ensure that our limited real resources are more fairly shared across the population. It is failing miserably to do that. Let's hope this week sees some much needed proposals for change.
If all the wealthy people move to a wealthier country, where they are "more equal" leaving behind all the poor people who are "equally poor" then you have achieved equality. Are the poor better off though? And without the resources of the wealthy any more, will they ever be better off?
My view: Tax is theft, and distorts economic activity, but we are stuck with it. This would not be much of a problem if govts were as small as they were a century ago. But now they are enormous parasites, and we place commensurately huge expectations on them. So it's an unsolvable problem - there are only tradeoffs.
Endless fiddling with the tax system to try and make it "fair" is such a waste of effort compared to strangling govts down to sizes that do minimal damage and then ignoring them as much as possible. Obviously, this is not going to happen, so instead we will watch them both go broke, and destroy the value of currencies and therefore our savings.
Absolutely nuts that there are people out there longing for a return to the 1920s. Life wasn't better then, not is it better for the many countries with small governments today, mostly languishing at the bottom of economic and social ranking lists.
People fixate on small examples of government waste and ignore that 90% of government spending is unambiguously good, in many cases providing very high returns on investment.
If one of the guiding principles for a good tax system is that it is easily understood then our one falls down flat on its face based on the comment threads over the past week. Sounds we need to have a plain language debate in this country on the matter and I hope the two reports out this week will help clarify the debate rather than cloud it further. Some facts about how much actual tax the 400 wealthiest individuals and families pay on all their increase in wealth (if this is the right word) rather than the rather confusing words income and imputation I hope will be informative. For me that is the important number. The next question was that increase in wealth earned or unearned? Next question is should the unearned bits be taxed? I could be wrong but there could be a large amount of unearned wealth that is not taxed in this country. Might help pay a few bills in the upcoming decades to help the country out.
NZ Gino co-efficient is?
Rates are evidently tax
Also everyone knows that more kids correlated to poverty and ethnicity.
comparison to OECD for capital taxes also needs showing
Clear election winner for Lab would be to say that they will raise tax on top 20% and cut it for rest.
Of course, still have to be honest about what tax is needed for and why v borrowing which is v low in NZ by comparison to other western economies
Rates are a tax, and one that we are getting les in return for.
I agree with increasing the top tax bracket but I think we have to be aware of the consequences of doing so. People with capital, that is required to start a business will likely look at the returns I.e. income available in NZ and take their business elsewhere. A lower tax rate gives them more capital that can potentially be used to fund business which in turn can lead to jobs and shared prosperity. No the minimum wage earner is not taking as much as the owner but they are earning more then they otherwise would.
Now since NZ is focused on partnership under the Treaty isn’t it fair that Iwis start paying tax, I guess they would pay 33% in line with family trusts? Please correct me if they do pay tax but I’m pretty sure they don’t.
I read Susan's article yesterday to the point where she assumed that the academic revisionists "principle of vertical equity" was both fair & accepted.
Then I decided that my Anzac day was better spent reflecting & remembering my ancestors who fought & were severely wounded to protect NZ democracy over the last 160 years than debating the evils of socialist envy theft.
That's communism. Or may as well be.
I'm sick of these people.
And the IRD report today is from a heavily compromised IRD that is policised. This Labour government has corrupted everything it touches.
I'm over New Zealand.
(Yes, yes, I know the commenters here, sheep: I'll leave.)
Mark it is just over swing. Under capitalism inequities have increased dramatically. Business owners, big money and the wealthy have lobbied Governments to rewrite laws which have virtually allowed them to recreate a modern version of slavery, where workers are bound into employment while only being paid a pittance on which they have no chance of surviving in society. All the which the major beneficial owners are getting wealthier.
But democracy is supposedly about everyone, irrespective of capability, being able to participate. Employee's deserve to be paid fair value for their labour and commitment to their employer, not demanded of ever increasing time for much less reward.
While St John's perspective seems extreme, she will understand that in the wash it will be negotiated back to some sort of middle ground, if it actually gets any traction at all. The real fault lies with the politicians who have change the laws and regulations to allow workers to be exploited to the degree they are, and ultimately undermining the very fabric and fairness of our societies.
Wrong on all counts Murray. This is the worst government in my lifetime.
Over my career I've paid millions in tax, a lot in rates, but my roads in Marlborough Sounds were buggered two years ago, and we are still stuck in an endless consultancy via the incompetent NZTA and the useless Stantec NZ who are making a business case (business case FFS) for continued public road access to our bloody houses. It's going to be three years before all the thousands of affected road users there even know if we are going to to have the particular roads we live on fixed: most of us have no sea access, without roads we're ruined, as it is can't sell, property values are in tatters, our lives in limbo, not one cent of our rates or taxes spent on our road (140 houses) all of it going to consultants who don't even live Marlborough.
Michael Wood couldn't care less.
Our MP Stuart Smith (National) has never gotten off his lazy arse even to represent us. ACT nowhere to be seen.
They're all swine. Believe me the only reason I continue to pay tax is the penalties otherwise, but it's all the lazy arses grumbling for CGT that already in no way pay their way, they're net tax takers, tax paid almost wholly by the top 20%.
It's a shitty little country now. Wellington can go to hell.
Mark, now you're looking like the extremist. You argue that I'm wrong on all counts but don't counter my points. But then you go on for a rant against the current Government (which I don't disagree with) but ignore the fact that the previous National Government was just as bad or worse. Indeed I'd go so far as to say the state of and the ability of NZTA to properly manage our roads has been questionable for at least a couple of decades. I've seen them carry out road improvements in areas where not much was needed, but a little further on in our area a shocking State highway is being ignored. As to the politicians squandering our taxes? Frankly that is not and has never been new!
NZTA has spent months, and probably hundreds of thousands of dollars installing speed humps on all my local roads (and all over town) in preparation for the new 30 kmph speed limits they've imposed everywhere. They've been doing lots of those kind of road works, just not the kind that involves repairing pot holes or widening lanes.
One does not need to look far to see many inequities in the tax system.
For instance the mortgage I have over a property with tenants who sell Vape products has its interest fully deductable but the mortgage over a house people live in is not deductable. A commercial property with a mix of residential and commercial tenants has its interest fully deductable because it is easy to see it is a commercial property. IRD do not bother to see what the tenants are doing.
The tenants who work at different jobs pay more tax than those who jointly own a business they both work in and split the income between themselves.
Sole ownership landlords, trust ownership landlords, and trading company landlords all pay a different rate of tax.?
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