The Tax Working Group released its long-awaited report today on recommended changes to the tax system.
Main features are:
- Alignment of company, trust and top marginal tax rates – financed by:
- increases in GST (to either 15% or 17.5%)
- possible land tax (though not all members of the group agreed with this recommendation)
- removing tax depreciation on buildings,
- removing the 20% depreciation loading on new plant and equipment,
- a risk free rate of return method for rental property and changes to thin capitalisation rules.
At this point, Labour’s stance is to carefully consider the report’s recommendations and their implications for ordinary New Zealanders, develop scenario analyses around the recommendations, and wait and see what recommendations the government adopts before commenting on specifics.
We are, however, concerned that at this stage the recommendations seem to deliver big tax cuts for those earning substantial incomes (for example, if the top marginal rate was reduced to 30% without any adjustment to other rates, someone on $100k would get over $500/month tax cut and someone on the average wage nothing). The potential increase in GST would also have a much larger relative impact on those on lower incomes, superannuation, benefits etc than those in the top income brackets.
Labour’s bottom line is that any tax changes have to address structural issues in the context of broader economic and social goals.
The allocation of scarce resource (in this case government revenue) is always about choice – how and where to direct money and who will benefit and who will miss out. In a fair and equitable society, those in the positions of greatest privilege should not receive more government gain and benefit than those less fortunate.
Very interested in peoples’ thoughts on the tax working group’s recommendations and how they may impact on all New Zealanders.
Ok so it gives the top payed section a tax cut, that if they earn much less than 100K will be swallowed up by a GST rise (and remember it will be cumulative extra GST on petrol means increased prices for almost everything). And this may be offset for the lowist earners by a benifit rise, but people like me (middle income earners)get nothing from the tax cut, and get hammered by the GST rise. Also if you (like me) saved up to get an investment property, you get hammered again, whereas if your on 100K plus you can offset the loss by what you make up from the tax cut, dosn’t sound too fair.
So I say 0-10K no tax, 10-40K 20%, 40-70K 25%, 70-100K 30%, 100-125K 35%, 125-150 40%, 150-200 45%, 200-250 50%, 250-300, 55%, 300+ 60%, no GST on basic food stuffs, 15% on most other things, 25% on luxury goods (alcohol, tabacco, junkfood, jewlery etc). If you make 150K you can damn well pay more tax, if you want to buy a 52 inch TV you can damn well pay more for that too.
Greg thanks for demonstrating why non economists should never comment on economics. Ask any economist (and by this I mean people who have studied economics and actually pay attention to what is happening in the field) and they will tell you the ONLY way a GST type tax will EVERY work and not cause massive problems/difficulties is by not distorting relative prices (this means it is the same rate across the board). As to income tax what makes you think that a rich person should have to pay more for the same legal rights? What makes them owe more to the country?
Off topic but may I answer Spud.
@ spud Jan.20 6:37pm
Been very busy – only just seen your message. Trevor isn’t being personal Spud. He is just asking you to reduce them to two per post. At the present rate that is still around 10 -15 per day. Please don’t go away. Your contributions are appreciated – especially that puckish sense of humour.
Stuart Hawkins:
Why do I think that the “rich” should pay more, because they can, without significantly effecting their basic quality of life. How much someone earns has, usually, little to do with how “valuble” their contributiion to the economy/public is, it has more to do with how much they ARE/WERE paid, or what their percieved value is. Is it fair that a tax accountant gets paid a high wage to help others avoid paying their tax? Its valuble to their clients but not anyone else.
If you look at what this extra money is spent on its things that no one really needs, you don’t need a $100,000 BMW, or a 25K ring.
I can see why a variable rate of GST would be an issue, how about a flat 25% luxury tax? Imposed on those goods and services which you don’t need, no one NEEDS jewelery, or alcohol, or lotto tickets, if you want them fine, but pay more. As to “As to income tax what makes you think that a rich person should have to pay more for the same legal rights” who said anything about legal rights? I suggested that those who earn significantly more than the averasge wage should pay more in income tax, precisely because they have the disposable income to do so without preventing them from surviving day to day.
@Greg – even under a flat tax regime those who earn more pay more.
I think that the gripes many have are against the expectations by some that the middle classes (for it is those, not the “rich”, who bear most of the burden of the top rate of income tax) should pay *even* more, and at the definition of *rich* which some seem to take as “anyone who earns more than I do”.
The top rate of tax in NZ kicks in at a level where many classroom tachers end up paying it. Hardly a definition of rich in many first world societies…
George:
“@Greg – even under a flat tax regime those who earn more pay more” true, in absolute terms, but in relative terms (that is the amount of money left after tax)they have more.
By your definition I am “middle classed”, but very little of what I earn is in the top tax bracket, if they impliment all of the tax bracket changes they suggested (which included the lower brackets as well)then with a 15% GST rate and land tax I (might) break even, but only because I do a lot of shift work. However someone on less than me will be worse off, and someone on more (~80K+) will be better off. If you make over 100K then you can afford to pay more tax without it severly impacting you, sure you might not be able to afford a luxury car, or go on an overseas holiday this year, but other than that you will survive. Also I (like others) am in a highly specilised field (and yes I have a degree) but thanks to most people in my field working for DHB’s, but not in “public roles” we get paid less than nurses or teachers, and thanks to legislation we can’t even strike effectively.
@ Stuart on
“. . . why non economists should never comment on economics. Ask any economist (and by this I mean people who have studied economics and actually pay attention to what is happening in the field)
you’re talking about Roger Douglas, right?
I am actually 25, still young, but not so young. I took time before uni to work, as a hotel cleaner, on min wage, and I got rejected from even McDonalds. I soon realised that education was in order to go farther in life, and I went to uni to learn, which no assistance except continuing to work and my loan. I will go a lot further with this degree than I would have with no education. I happily pay tax, I happily donate to charity and I think the real difference is money is not what I value in life. SO even after I have worked my ass off etc to get my own home and its “all swallowed up by tax” so be it, thats why I vote Labour. I have no want or need for luxuries, just happiness.
I can hear you all scoffing at my naivety now, but I was raised this way and I find materialism extremely distasteful. I have purchased all the things I feel I need – a bed, a computer to study and work from, I have a tv, and a camera and a cheap car… what else do I need? Admittedly I live in a cheaper part of the country and agree house prices are criminally high. However, we have a housing shortage, so we need investment in building and need to discourage property buying and selling. Let’s do that then.
@ the person who said people would desert Labour because the rich are being rewarded. What planet do you live on? Vote Labour because National rewards the rich. That is what these tax cuts are, just think and do the basic math. Most tax cuts under a National government will put you a few dollars off better a week – they freely admit that this has to be made up elsewhere? Where from? not the rich because they are getting tax cuts… its from everyone else. Maybe we get a tax cut under National, but then it costs $20 more for the doctor, or you need to get private medical insurance, which costs a lot more than $10 a week.
Just think about it. Lastly, have you all noticed that the promised election tax cuts that you all voted for NEVER happened. The tax cuts you are getting are Labour policy. But you got DID get all the bad things that were meant to be balanced by the never-happened tax cuts.
@ Kaine T – Thanks.
@A Mother – No, I don’t know how long this moderation was intended to last.
@ Anne – I’m very busy too, working 7 days a week at the moment.
“At the present rate that is still around 10 -15 per day.”
For me it’s not about the amount of times I can post in a day, it’s about having freedom and flexibility. I may only comment once or not at all on some posts, but have more to say on another thread. I also want to be trusted to make good decisions as to where and how often I post. I wasn’t happy with myself on the monarchy thread and stepped away from it, that was all that was needed.
hey guys, all this tax stuff that nationals doing better make us better off or heads will roll, Im hearing labour whinging about everything nationals doing, but they forget all the things they did ( and didn’t do when they were in power, cut it out labour!.
working for families was ok, but for me and my partner and her 3 kids its not, I pay child support for a child in australia, they asses me as single with no dependantsd ( the kids here not mine) so i pay max child support. my partner loses her working for families ( in new zealand) because of my income ( total family income) im not responsible for her kids, only mine, might sound unfair to some. so the tax man dodges paying the due( working for families) to my partner that earns a low wage because they shift the expense to me, so im hit by child support and end up supporting 4 children. the child support that i pay goes to the mother ( in australia)who gets it on top of her benefit ( included in new zealand ( so the children here are no better off( but the tax man is ))) no wonder new zealand is slipping behind the other oecd countries ( but labour could have worked on this). England does not have a Reciprocal aggrement with new zealand but we are a monachy country, why is that ? in the ” too hard ” basket, a guy at my work pays no support for his 2 kids in england.wow he can save for his retirement faster, I had a retirement fund, but the national govt in the early 90’s cut benefits ( i was a solo dad then, and because of jenny shiply and her financial adviser ( ruth) you know her, i lost my retirement fund because i was in it just under the required time( years) thousands lost, thanks Jenny. The political parties have had ample time to right things in new zealand, but when the governing party does something, the other non governing parties whinge and complain, isn’t about time the parties actually did something that betters new zealand rather than ruin it and make it desirable for our brightest and hard working people to leave this forsaken place. grubmuncher@hotmail.com