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.
The increase in GST is silly. It’s just going to make life harder for the middle class. People on benefits won’t be hit *as* hard because it would be adjusted to include the increase in prices. However wage and salary earners who aren’t in the top tax bracket will take the hit as their salaries and wages won’t increase but the cost of living will. I see that a capital gains tax wasn’t recommended, that leaves me slightly disapointed. Here come the tax cuts we’ve been waiting for…. oh no, wait……
I strongly encourage you to undertake the scenario modelling you described – note that the report is putting up a suite of options, centred around aligned/non-aligned and then options for base-broadening and efficiency improvement regardless.
There are likely some really good combinations of those options that you may want to support and highlight…
More failed neo-liberal rubbish. These proposals are meant to be “fiscally neutral” yet at the same time deliver a massive tax cut to business and the richest 10-15% of New Zealanders. You don’t have to be Einstein to work out who is going to make up the difference. Sure, benefits may be adjusted but what about all those low income working families, the seemingly invisible brown, beige and white battlers of South Auckland? These proposal will just shift yet more of the tax burden onto the vast majority of Kiwi’s who earn less than 70k per annum.
A land tax makes sense if land is being inefficiently used. that is what land taxes are for. A land tax as a method of pure revenue gathering is an utterly inequitable poll-tax like method of raising revenue because it is levied regardless of the landowners ability to pay. That is an appalling abuse of state power. The idea that inland revenue will force people off their land because they genuinely cannot find the cash to pay their land tax would, if enacted, produce a real, bone fide revolt.
Labour should be sure to tell anyone on a fixed or low income who happens to have a lovely home or a lifestyle block or such like will be FORCED off their land to pay their tax, all so the CEO of Telecom can earn even more.
This tax review approached the tax problem from the perspective of the unchallenged neo-liberal orthodoxy that still dominates this country, despite the GFC. As such, it produced utterly predictable and utterly orthodox reccomendations, totally what you would expect from a bunch of Brashites. It is just as revealing what wasn’t considered by this working group as what was. This tax working group didn’t consider in any meaningful way a Tobin tax, stamp duties or payroll taxes as sources of new revenue. No carbon tax, no discussion of a UBI or tax free threshold. It has been totally focussed on cutting tax for the rich.
Another wasted opportunity, hijacked by the new right to deliver more excuses for a tax cut for Paratai Drive while raissing GST on struggle street.
Well I think the changes to the taxing ( or loopholes more correctly) for investment properties should be supported while the others should be opposed or the tax reductions should be as in Labours tax cuts which English repealed.
The GST raise is a no brainer and just there so that they can ‘draw a line ‘ at what they wont do.
The area of trusts is just a rats nest as they arent policed and are treated as a private piggy bank which only causes a problem when there is a marital breakup.
Never fear. Between English and Key I am sure that nothing will change.
@ Anne, Paul, A Mother. I’ve been thrown into moderation and am only allowed two comments per day. I think this is really mean when I’ve been as supportive of this party as I could be for almost a year. I don’t abuse others. I don’t troll and I feel used. My punishment is excessive. My only crime was arguing back on a thread, which as far as I was aware was within the rules.
I’m nothing to this party.
Two comments per day per post spud. That about 12 – 16 a day when we are running at our average levels even without commenting on a second day if the debate is continuing. And in interests of transparency you should have made it clear you were warned. Trevor
Cactus Kate is probably right. Between Key and English we’ll get ten reasons why the current situation is unsustainable, ten reasons the changes proposed are impossible and ten reasons why we shouldn’t change the status quo.
I agree with the residential rental property tax and the tax cut for those in the top income threshold. Writing on a lefty website I know you will all object to this because you think that if a family is on over $80k (approx the top threshold to qualify for Working for Families) then they can’t possibly be struggling. However, rather than looking at what someone earns, how about you think about what it costs to live in today’s society when you have to pay your own way 100%. $80-100k is not a rich income when you take into account how much houses, rates, groceries, petrol, kids etc cost….and that’s not even taking into account luxuries such as life insurance or some kind of income protection insurance, holidays, or a second car, . The average house price is about $360k. If you manage to scrimp enough to pay a 10% deposit – that is $36k!!!!, you are still left with a mortgage of $324 which would mean approx $1100 per FORTNIGHT coming out of your pay packet. That requires a substantial family income to facilitate. Further, these tax cuts won’t benefit just the ‘rich’ as a good proportion of the rich are able to hide their income in various Trusts and companies and thus are not even paying the top rate of tax anyway. So in that sense they can’t possibly benefit any more than what they already are. Basically people in the higher income brackets – that is, those over $60k or so need to be given a break too as this group of people generate a lot of good stimulus for the economy. I just don’t see how it is fair that those who are smart enough AND fortunate enough to get to a high level of income should see their net wealth dwindle as each year passes with the rising cost of living & rising government costs like Road Users and ACC to the point that they are too rich to get any kind of assistance but have to line up at the food banks. How is that fair? As for GST – well as a self-employed person I definitely do not support it as that just means a higher cost on me both in business and at the supermarket. And the fact that the lower income bracket would have to be supported, well that just negates the purpose of raising it in the first place.
On thread Mel Trevor
This is gold for Labour. A rejigging of the tax system that delivers huge amounts into the pockets of the wealthiest 15% of the population and nothing (in fact a net loss) for everyone else could be shaped into a real point of difference.
I say bring on the tables that show who gets what and distribute it to the wider public – then we will see who supports this reward for those that have been using loop holes for years to avoid paying tax goes over.
Good approach Trevor, of taking a careful look and coming up with good, fiscally responsible Labour alternatives I completely agree with the comments on the top tax rate-a huge increase in income for the richest kiwi’s in the present climate but little or nothing for those at the bottom is obscene .
I hope that party will take a stand on GST : if its can’t be taken off food etc then the rate should be left alone.
On investment properties: there has to be lines drawn somewhere. The current depreciation and extent of negative gearing etc seems wrong-I can’t depreciate assets in small tiny business that feeds my family and employs 4 other families breadwinners in the way that investment property owners seem to be able to do. My plea to caucus would be if not a Capital Gains Tax then please come up with an alternative.
As a small business owner, simplification and keeping compliance costs reasonable are as important as reducing tax rates and I agree the comparison constantly made with Australia is not as simple as it looks-there are state bank taxes etc that we simply don’t have. We need good functioning govt departments for our business and that costs money. So square up anomolies yes, slash and burn , no.
Cheers
“Essentially it is proposing a new set of taxes on property investors to pay for cuts in the top personal income tax rates and possibly a cut in the family trust and corporate tax rates. It has also sensibly steered clear of a wholehearted endorsement of an increase in the GST rate to 15 per cent or a full Capital Gains Tax.” So speaketh Bernard Hickey. Why not let’s see what they come up with? I predict GST will remain the same and the MaoNacts will have the guts to fix the property mess.
ps What is a neo liberal? Cos I think I might be one.
I’m more in favour of a tax-free income for the first few thousand dollars. That would also be a better incentive for beneficiaries to move into work as the take-home on the starter jobs would be higher than benefits.
Although I do agree that the top rate, company rate and trust rate need to be aligned over time. There are too many clever people using the existing system to get around paying 38 cents in the dollar. Closing the loopholes would just make clever accountants busier as they find new ways of ducking and diving.
Funny, there was a thread on downward envy on this site, lambasting people seen as “having a go” at beneficiaries and low income earners. That’s not unfair, except it seems perfectly acceptable to have a go at so-called “rich pricks” in other threads like this one… Why is that?
GST and the funding of some Governmant departments.
Currently some Government departments i beleive receive there funding and then have the G.S.T removed and taken back by there respective ministrys. Stuart do you beleive that National will increase funding to government departments by the amount of increase on G.S.T, or will this allow for an effective cut in funding by 2.5% – 5% on some government departments. Yes i know that the goverment department could then claim back the G.S.T, but there are some things that dont include a G.S.T element. Stuart can you please clarify this for us, and let me know if i have it wrong.
“Self Employed” – great points and well put, thanks for your post and I couldn’t agree more.
The only thing I had to add is that I can see the merit in GST rising, although, like most thinking people, it needs to come off the basics and be what is meant to be – a ‘consumption tax’ – ie, if you want to buy a 50 inch tv, then why not put a bit more in the pot?
At least they are doing something and agree that the tax system is stuffed.
You don’t think this is more softening do you? Timing, message and tone all seem to feel like spin. Considering the options – result will likely be a much softer version, without the GST componant, the most controversial… or am I overly suspicious?
Poor Spud
I agree that the scenario modelling needs to be done and I will be interested to see what you come up with. We really can’t debate it without seeing what the ramifications are.
@Selfemployed – agree with what you say re the so called ‘rich’. I have said before that this group of over 60 – 80k is NOT rich – as SE stated, by the time you take into account mortgages and the cost of actually keeping your family in shoes, food and getting through each week, there is very little left over. Its a myth that this bracket are ‘rich’. By the time you compare people with smaller mortages on lower interest rates with WFF eligibility etc you will find that the so called rich are not better off at all. A bit of extra cash from a tax cut to that top bracket is not a bad thing – in fact, go after those that can hide it and don’t pay what they should – or raise the threshold that the higher tax bracket comes into. It is a complete falsehood that this group is rich.
@Spud. I am sorry. I’m sure that you do mean alot to the party. I enjoy your posts.
. Did treveor say how long for?
@Self employed. That is the avg amount for rent that people on the benefit are made to pay due to the lack of housing NZ houses. At least you have a house at the end and good on you
, But please look at the price of rent in your local area, this is the amount in my local area anyway, and think how you would live on it if you had to pay that amount and you had less than $540 and maybe 2 children to support? It is a huge amount and no doubt you do work hard for it, but GST will hit hard for everyone.
I don’t like the GST one at all. I think that it will hit low income earners, and I think that if they raise the benefits to compensate then it would be by so little that it won’t make any difference and will make it harder in the long run. I do feel like AUS that fresh food should have no GST added on. This would encourage NZ to eat healthier food and make shopping more affordable if the GST was to be raised then take it off unprocessed food at least.
@Self employed.
Sorry I looked at the $324, (which is avg rent where I am) and thought you said that a week. I’ll put it down to needing new glasses.
Again sorry.
Page 17 of the report…
“The top 10% of income earners now pay 44% of all personal income tax (if the impact of WfF, New Zealand Superannuation and other benefits including the unemployment benefit are included, the top 10% of taxpayers now pay 76% of net tax).”
Tell me, does Labour feel this is fair…?
Self employed, if a FAMILY earns $80k, I wouldn’t class them as rich, they’re middle class and they’re the ones who will be hit hard by increases in GST. Also if you’re finding it hard to pay your mortgage you should have bought a smaller house.
@nOexit. I like the way you think, that’s individual accountibility. But let’s also take your attitude it to its logical conclusion – don’t like being on the DBP? Shouldn’t have had kids! Find it hard to pay the bills like being on the dole? Get a job!
Right..? Or do I see you about to start talking about fairness and compassion?
Maybe selfemployed had to take a cut in income to start his family, maybe his wife lost her job, maybe he got sick for a time, or maybe the Reserve bank did it with the interest rate rises. Or perhaps you shouldn’t sneer at working people.
a couple of points:
1. scenario analysis will be undertaken given a set of variables that we currently know exist. Until we really know what recommendations the Nats will adopt, if any, it is difficult to comment directly. However, as outlined in my original post, we have some preliminary social equity concerns that many of you have highlighted.
2. agree with the posts re what constitutes ‘rich’ – or where that line starts. A $1m salary earner is wealthy, we all know that. Earning $80k living in Woodville with no mortgage and no kids would mean a pretty good lifestyle, however, earning $80k living in Akld with a young family and a big mortgage would mean sacrifices. However, what I am sure about is that tax is paid as a proportion of money earned. That is progressive and fair, is it not…
3. A guiding principle of the Labour philosophy is social equity. All tax changes need to be judged against a social equity test: ie is what we are doing good for the people of New Zealand? If it is, and will benefit all hard working New Zealanders, then Labour will generally support it; if however, a policy will only benefit a relatively small section of the population to the detriment of the larger general base, then there would have to be a very compelling argument for Labour to even consider such a move.
4. catcus kate and others – probably right – Key and English will revert to form and do little except tinker. Remember though, they did cancel labour’s more equitable tax cuts and replace then with cuts only for those earning over $40k. 70% of kiwis missed out. Friedman economics at the expense of the Keynesian philosophy to economic stimulus as practised by most in the OECD, so anything is possible with these two. So, for example, if tax rates were to be aligned at 30:30:30, some of our top business leaders on a $1m + salaries would get a TAX CUT of over $1,300 PER WEEK, or over $75k per year whereas someone earning $40k would get nothing except increasing costs associated with potentially increases in GST etc. Is that fair? Hardly.
6. Paul – absolutely go after those that hide their wealth in order to avoid paying tax.! No 1 priority is to chase these rats that then claim hand-ups like WFF. We agree with this 100% and it was the essence of my last post on WFF.
5. Waterboy – unsure on that. Will get back to you.
Well, I get the feeling that the general tenor of the debate since this report was released have been highly negative from people who earn in that $40-70,000 zone.
Looking at the make up of the TWG, it seems a well paid and out of touch group of beltway rightwingers have dreamed up a tax system suitable for well paid beltway right wingers. Not surprising really.
Out there in real New Zealand the response is a massive thumbs down.
Sanctuary, On what basis do you think the people on the TWG are out of touch – The fact they as probably intelligent and well paid. I would suggest that the TWG are intelligent and learned people who understand their particular area very well. They recognise problems with the current structures and what caused the problems (a decade of Labour plus the laws surrounding LAQCs) and I would also suggest that without exception they want much better for NZ. I think you and all on the lefts in the beltway may be very surprised at the support these proposals may in fact have. True, GST will rise and that may hurt some a little, but overall the long terms gains for NZ may be very significant. These benefits will accrue to all throughout the country. The tax base is currently very narrow and reports are that the current system is simply not sustainable.
Change is therefore necessary. I just prey that the government does have the courage to make the necessary changes (and at the same time look closely at the middle class welfare known as WFF. A restructure of the tax system may present this opportunity.
n0exit says: “Also if you’re finding it hard to pay your mortgage you should have bought a smaller house.”
And by the same logic if you’re finding it difficult to feed the kids presumably you should have used a condom?
Per-lease!
At noexit: we live a middle class area that is well out of the city and still had to pay $300k for a decent 3 bedroom house that was functional & would not cost us thousands to get up to standard. We borrowed $275k and still had to pay just under $1000k per fortnight because of the interest rates at a time. Unfortunately for us, we chose to get educated, work hard & save on graduate incomes for a house deposit – all the while paying exorbitant rents to the baby boomers who bought up all our first homes and forced the prices up. We then saved a bit more and decided to have a child. My income had increased to the point that my wife could stay at home. We have done everything right when it comes to the financial text book yet as each year passes we are being penalised by the rising cost of living, the rampant consumerism that is out there where people are buying things & property that they can not afford (which has had a detrimental effect on the economy) and by poor (Labour) government financial policy. You really need to think about things before you spit out assumptions.
At Stuart Nash: lumping the $80k families in with the ‘actual’ rich is NOT progressive and it is NOT fair. Whatever tax changes you managed to bring in, if you continue to leave the top tax bracket at the rate it is the rich will continue to find ways to avoid it and we, the supposed ‘rich’ families, are left as usual, picking up the tab. They are rich for a reason – they have top lawyers and top accountants all of which could beat the government’s hands down. Further, this is also the same group that could easily take their business elsewhere to I don’t know, perhaps Australia or the UK!!!! and then what do we have, an ever increasing brain drain. You have to think about the big picture – we are not just talking about the CEO of big corporations, we are talking about small business, accountants, lawyers, doctors, veterinarians, other people with Arts, Finance, Economic degrees that are working their way up the corporate or public service ladder. We need these people and we need people like me. National seems to get this: they want to keep us. After Labour’s ACC levy increases that hit us massively in the pocket 2 years ago and their refusal to lower the top rate of tax or at least increase the income thresholds, I am really not so sure they or you do. As for closing loop holes, well as I said on my WFF post I would love to see you try as it is a massively complex issue.
At Paul 2.0 – thank you. Re GST – if they remove it from basic food items then I would be all for it going up. The cost of fruit, veges, fish, meat & dairy is beyond exorbitant. These are all foods that the lower incomes also really struggle to afford which no doubt contributes massively to our growing rates of obesity. Removing GST from food items & increasing it for things like a big flat screen TV is something that will protect our economy in the longer term – especially the where the cost on the health sector is concerned.
Actually, writing that on a left blog is where it will be noticed and taken account of. As I keep telling everyone: nothing can be supplied at less than cost price. Unfortunately, our business leaders and present government seem to think that people can be which is why NACT are more than likely not to raise the minimum wage beyond inflation. If poverty level is set at 66% of average wage then the minimum wage is presently set at less than cost price as anyone on it is, by definition, living in poverty.
The tax rates don’t make any difference to beneficiaries getting into work. The abatement rates on the benefits do. There’s no point in going out and getting a part time job if you’re going to end up with less money than full time unemployed. This is one reason why the UI is a much better option than the present benefit system.
The rich aren’t defined by tax brackets.
This really is what needs to be done and not the tax cuts that will reward the rich pricks who been rorting the system.
Raising GST will hurt some? Try 70% to 80% of the population. And the long term gains will be like the ones we had from 1984 till 2000 – real wages will go down for the majority and the top 1% will get richer.
No, our tax base is actually very wide but some people manage to abuse it. We need to stop that abuse.
I am in total agreement with selfemployed. We are a family supported by a single salary of $78,000. It is a struggle getting by and we get no handouts like WFF from the government.
I have become very angry about our situation as I have come to realise it is people like us paying most of the tax in this country. We are not rich enough to evade tax and not poor enough to get government help.
In truth we would be better off earning less. The university degree my partner earned and the responsible and difficult job he does are totally undervalued. If we earned $20,000 less our highly gifted child could get free tuition at a private school, but as it stands now only the rich and poor have choices about the education off their offspring. Likewise our child at university gets no handouts so we are supporting her as well. This doesn’t seem quite fair.
It seems like no political party cares about people like us and yet we are the backbone of NZ society. And in the long run the disencentives that exist now not to “get ahead” will not be good for this country. People who get no reward for their efforts will leave NZ. I am a long term Labour voter but I doubt I will vote Labour again.
I have always voted for the left because I believe leftwing policies are best for society as a whole, but I have come to realise that as a family we need to start thinking about our own interests. If National lowers the top tax rate that will be a good thing for us and others like us. If National are prepared to hit property speculators that would be another excellent move- the cost of housing in NZ is ridiculously high for such a low wage economy.
@Jennifer , what free tuition at a private school. Nationals scheme is a ballot , so it only rewards very few , like Lotto.
The best education a child gets is from its parents, so ease off the instant prodigy
@DTB – why should poverty be defined as 66% of the average wage?
Genuine poverty is an absolute. Compared to the average wage in Abu Dhabi most people in New Zealand, under your definition, are in poverty. Compared to the average wage in North Korea we’re all rich.
What we need is a reasonable definition of what is essential for people to keep themselves and their families housed, clothed and fed. Without including luxuries. And that should be the level at which benefit is set. Then, in order to encourage people to work whenever this is possible, the minumum wage should be set so anyone working is 25% better off than this. Thereafter the market should prevail.
Of course this would result in some being worse off, especially if they smoke, or like a drink or so on. But the whole thrust of policy should be to get people to strive – to strive to get off benefit, and to strive to gain training or improve their performance to get a better job. This used to be the clear aim of the labour movement. Today it seems that many on the left have a vested interest in keeping as many as possible in their dependant client groups.
At the moment it seems that we’re bending over too much to ensure that those on benefit or lower incomes don’t feel too uncomfortable. But government policy should do whatever it can to make sure there are no comfort zones in a lifestyle which does not contribute to society. (And for every example of someone on benefit doing valuable voluntary work I’m sure there are many more doing nothing other than watch daytime TV).
The old labour stawarts of the first half of the twentieth century worked hard to establish a belief in a welfare system which protected against the worst of the economic cycle and provided assistance to those who genuinely needed it. This has been perverted over the last three or four decades and in the eyes of many has fallen into disrepute.
I don’t believe that people begrudge providing welfare where it is needed and deserved. The big disconnect is that I think a majority now think that there are large areas where it is neither. The challenge of Labour is either to persuade us that this isn’t so, or change the system appropriately.
@Self Employed – I agree with most of what you say, but would take issue when you say that fresh foods are exhobitant. It depends what you buy and where you get it from. In Christchurch at least there are many outlets where you can get in-season fruit and veg at very reasonable prices. If you must have x or y, and it isn’t plentiful at the time, you may have to pay the cost. But if you’re happy to take what’s available, and buy whatever’s on special at the supermarkets that week, you can do very well. The problem is that too many people don’t know how to cook properly any more. Cheap ingredients can often provide a very tasty and nutritious meal, but people can’t be bothered to put in the effort.
No, no, no! Quiet contemplation is not what we need here. We need loud and open condemnation. We are failing as an opposition party and you are leaving it up to the rest of us, your supporters on the ground, to convince people one by one, that this is WRONG! Raising GST is terrible, for people who can barely make ends meet, or are already living beyond their means, this is the equivalent of the market rents on state houses in the 90s, raising GST means EVERYTHING is more expensive. Groceries are already a lot more expensive than 3 years ago, especially basics like bread and milk. Come out now, Labour and say NO NO NO!
I currently earn around $200 a week as I finish my university studies, I studied at university, and received scholarships for my good grades, my parents didn’t support me (and why would they) and I got no student allowance. This is life, deal with it, I am not wanting for anything because I am responsible with my money and do not waste it on luxuries.
You are incredibly naive if you think a university education is not worth it. Go and do a job on minimum wage and see the kind of people you are working with before you judge whether they deserve welfare. Example : a woman I worked with had 6 children, was married etc, her husband had an affair with her MOTHER, what did she do wrong? She choose to work 20 hours a week for $9.20 an hour rather than collect the dole…
Another case, a woman who married, again had six children, and ended up living in a 3 bedroom state house on the DPB, because her husband left her and ultimately had a gender change and became a woman! Again, what did this woman and her children do wrong? Surely this is luck of the draw? And has nothing to do with working hard etc etc.
If these people had a university education and access to an $80k salary it would be all their Christmases at once. What we have is never enough and we whinge and whinge and whinge. People who are living in poverty are very rarely “lazy” – they have histories of abuse, addiction, alcoholic parents, sexual abuse, domestic violence and it is not so easy to “pull yourself together”. What would you have done if you were kicked out of home at 14 as one of the women above was?
Our own PM grew up with aid from welfare and a free uni education and now wants to deprive others of it!!!!
A lot of people seem particularly upset because raising GST will put up the cost of food.
Would these people be more ready to accept an increased proportion of the tax take coming from GST if there were several rates – for example a zero rate on uncooked food (which would actually bring down the cost of food), a standard rate of, say 15%, and a luxuries rate of, say 25%?
A similar system for VAT was introduced by the Labour government in the UK in the 1970s, and although the luxury rate has since disappeared there is still zero rating on a number of items including food, children’s clothing and books. The standard rate is, I believe, 17.5%.
One positive side effect of a high luxury rate would be that people would be discouraged from wasting the cash on things they don’t need but which cause pollution and environmental damage during their production, transportation, use and disposal. And where they can’t do without these luxuries they provide a significant contribution to the treasury. Far better than taking the same amount of cash off someone who’s only ‘crime’ is to have done a couple of hours overtime, surely?
Lisa by your own admission you are clearly very young. When you have grown up a little, worked your backside off with no assistance from anyone to get a degree (with a student loan), worked your way up to a higher level of income and made good financial decisions to buy a house and have children only to see your hard work negated by high taxes and a high cost of living then perhaps come into this debate as at least then it would have more substance. Everything comes down to choices. NOTHING is in the way of one choosing to finish their high school education, get out a student loan, go to uni & get a degree to get ahead in life. John Key and Paula Bennett have proven that as have I – I am the product of drug addicted parents and multiple foster care. I made a choice at a young age to go down a different path.
Being idealist does not solve this country’s widespread issues. Ensuring that our systems are fair and equitable across all demographics does. As for introducing child abuse into this thread, well let’s face it, neither Labour or National have ever really made that a priority – bottom line if we prevented child abuse we would be preventing the massive social costs we face now & what we will face in the future which means we wouldn’t need high taxes in the first place.
As Jennifer has said, people in the higher income bracket are the backbone of this country. We pay for everything ourselves, we pay the most taxes and we probably also donate the most to organisations that work to assist lower incomes & prevent things like child abuse. Keeping our taxes high makes us poorer and all for what, so we can join the queue at the food bank too?
One more thing to note is that Stuart I see by your profile you are extremely well educated and have held high profile jobs. This would indicate that your financial position is such that you don’t have the same worries as people like me.
Charles quotes from the report “The top 10% of income earners now pay 44% of all personal income tax (if the impact of WfF, New Zealand Superannuation and other benefits including the unemployment benefit are included, the top 10% of taxpayers now pay 76% of net tax).”
and asks if this is fair.
Actually, I would suggest (from personal experience that had me in a job whereby I knew peoples personal circumstances and also had me analysing their personal and business finances) that there are many people who are doing very well by arranging things in such a way as to pay very little tax. On the books they would make losses and offset these against incomes. So, in short, there are many people in NZ who are getting substantially wealthier but are paying little, if any, tax. They should be in the ‘top 10%’ but are not because of how their lawyers and accountants structure things for them.
http://dimpost.wordpress.com/2010/01/20/corrections/
has some interesting discussion on this too.
see this quote from the TWG report
“. . . out of an Inland Revenue sample of 100 of the highest wealth individuals in New Zealand, data indicate that only about half are paying the highest marginal tax rate on their income.”
Tax Working Group Report, Page 27
Self-Employed and Jennifer: You both comment that you earn around $80,000 – if the top tax rate is lowered to 33% you stand to make an extra $10 dollars a week. The average household spends about $400 a week on goods and services that incur GST – if GST rises to 15% you will be paying another $10 a week. You will make NOTHING off these so called ‘tax cuts’.
This does nothing for you, nor for the 80% of the country that earn less than you. What this does is reward people that are earning over a $100K by huge amounts and the Prime Minister by some $300 odd dollars a week.
And all this talk of Oz being so much better in terms of tax is ludicrous. Their top tax rate is 45%. I would quite happily agree with putting in place a top tax rate of 45% here for those earning over 150K. After all if we want what Australia has so badly why don’t we take some of their policies. We could raise the minimum wage to $14.32, pay no taxes on the first several thousand of income and have a higher top tax rate. Surely if we continue to look with wonderment and awe at our trans-tasman neighbours we should adopt some of their ’successful’ policies.
We won’t. Instead we will try and be like Mexico and the Slovak Republic and have personal income tax, trusts, and company tax rates all the same. These are obviously countries that we wish to follow – huge amounts of poverty, low efficiency, high crime rates…sounds great!
I think the points raised by Jennifer and Selfemployed are important, and it is vital that Lab listens to this – its not a one or two or three off voice! As a group that brings in a fair proportion of the tax income, we do not have issues as such with ensuring we do our ‘bit’ for those less well off – but the message that must be addressed by Lab in order to win our group back, is that we also need equity. Otherwise our group keeps on feeling like we do all the giving, the rich do all the avoidance and ripping off by not paying their bit, and we are left carrying the can for most of the social policy with little to no benefit – in fact, plenty of examples of being hard hit – over and over again. IT does nothing to engender support for a party that needs to look at all aspects of social justice and equity. And the sad thing is, we believe in the social policy – but are tired of being the ones to constantly carry this can.
I worry that this message is not being heard loud enough, nor that there is anything being done to address it. Otherwise more and more families will go with the Nats or go offshore. Its that simple. As a lifetime Lab supporter, it frustrated me no end to see that under the Nats our family was slightly better off – given my distaste for what they have done and what they stand for, it is disheartening.
So Labour – just what do you have up your sleeve to make this group feel ok about you?
@Lisa – I don’t think anyone is saying a uni degree is not worth it – but the point is – well – see above.
@Paul – actually I would say (and did in a comment on an earlier post) that a university degree isn’t worth it *per se*.
Perhaps it was a couple of decades ago when comparatively few had them, but today such a high proportion of youngsters come onto the job market with a ‘university education’ and a ‘degree’ that it’s hardly the differentiator that it used to be.
Some of these graduates (whom I’ve interviewed for jobs) appear functionally illiterate and innumerate, and even at the age of 23 or 24 have great difficulties with verbal communication. I feel sorry if they’ve delayed going into the job market for so long and acquired a huge debt merely because they believe the piece of paper they’ve framed is some sort of magic key to a better world.
Someone without a degree, but who has enthusiasm, committment, personality and the ‘right’ attitude is far more likely to get on than one who has scraped a pass in sociology.
@george – its worth it if you need it for the career you decide to go in – education, vet, accountant, dr, etc… perhaps not so if its a ‘filler’ until someone decides what to do with their lives…
@Paul – agreed. In fact if you want to go into the fields you mention you can’t not avoid the Uni experience. I was just musing in more general terms.
It seems that we’ve encouraged too many people into university under quasi false pretences. Some will go for the benefit of the education in itself. I have no problem with that – it’s a very valid thing. But others will go because they believe (and are often encouraged to believe) that a degree, in itself, regardless of discipline, will put them on the fast track to success. I think that in the modern world there are now far too many degrees chasing far too few jobs that match this ideal.
And furthermore I think that in the general as opposed to specialised graduate sector there is a significant minority who just aren’t up to standard. When faced with a choice between this sort of graduate and someone without a degree but with the personal qualities I’ve listed I think many employers would choose the latter over the former.
Ghostwhowalks- yes it is a ballot- but a number of low income families will get their children into a private school but we don’t even get a chance. The threshold should have been $80,000 not $60,000. Income is as much a barrier for us as it is for those at $60,000.
It does matter now where you are educated and I see class becoming a major issue in NZ in the future. NZ was once a fairly egalitarian place and the public school system was reasonably reflective of society. Public schools used to have the children of rich professionals (as well as the children of the poor), but these people don’t send their children through the state system anymore even though they might have been educated in the state system themselves.
It is not cool to be smart in the public school my children attend/ed and each day is an uphill battle. I can only imagine what being in an environment that embraced achievement would do/have done for them.
Tim: re your comments about the Australian tax policies, I agree – I wish we would adopt the same kind of system. But we won’t and well, we are actually already heading down the road towards a third world economy (as well, let’s face, this country hasn’t been first world for a long time – literacy rates speak volumes) for the reasons that I and others in a similar position are pointing out. We are this country’s long term bread & butter – our children are the ones that will be the bulk of the next generation’s of teachers, lawyers, doctors and, I hate to admit, politicians. But we are the most overlooked group out of everyone.
With regards to the proposed tax cuts – TWG have suggested dropping the top rate from 39c to 30c in every dollar earned over the current threshold ($70k). This would equate to approx $1500 per annum for me as I sit around the $85-90k mark. This is substantial as being self-employed I pay my tax provisionally and I definitely notice lump sums like that coming out of my bank account. Further, who cares if it is only $10 per week – $10 is $10. That buys some stationary for my kids or a train day pass.
As for GST – there is no way the government will increase the rate without support for the lower incomes. MPs want longevity in power, the times of Rogernomics are over and there is only so much they get away with given that we now have MMP. The only way this government can offset the extra cost in GST for lower incomes would be to either remove it from raw items or perhaps decrease the rate of tax for say the first $20k earned or whatever the minimum family income is. This means we would all benefit.
Basically Paul is right. We are group that are continually ignored and we are becoming an increasingly bigger voting base so our voice should matter. I too used to always be a very strong Labour supporter mainly because I believed that it balanced social conscience with good fiscal policy. However, as I have matured in my working life I have come to realise that the very policies I thought I supported, actually worked against me and do nothing to validate the hard work I have put in to earn a good living.
Further, knowing we are helping out our fellow man and/or neighbour is sometimes just not enough – especially if that neighbour was able to buy a cheaper house, do it up at cost because they are a builder/know people in the trade and then have 2 children which they couldn’t afford (although they are able to afford Sky, flat screen TV & a new lounge suite) and then get Working for Families. This really does not seem fair.
So yes Labour, listen to us for a change eh.
An attempt to get things back on topic…
“Labour’s bottom line is that any tax changes have to address structural issues in the context of broader economic and social goals.”
Stuart, sounds very admirable… but I’m not sure whether I can recall what Labour’s “broader economic and social goals” are anymore.
Maybe I’m slow, but take pity on me and remind me what these benchmarks are, and how you take into account when thinking up a “fair” taxation system?
Read this : http://tinyurl.com/y9dq9hj
Very good interactive graph on comparative tax rates with Australia.
Hat Tip : The Standard.