Yesterday David Farrar put up an interesting post at Kiwiblog titled ‘all theory no reality’ ‘(http://www.kiwiblog.co.nz/2010/02/all_theory_no_reality.html). He critiqued a post by No Right Turn on income distribution on the basis that it “gives us a great example of the difference between an academic theoretical analysis, and understanding the real word.”
David wrote: “You see in New Zealand, we have these things called families and households. What No Right Turn sees as a mass of poor people who will be unaffected by tax cuts, are spouses, older children, many students and even parents of those who do earn more than $23,000 a year, or even $48,000 a year.”
“If a family has one parent earning $60,000 a year, and one on $15,000 part-time, they both benefit from a change to the 33% tax rate. Because they are a family!! …. So ignore the stupid stats and graphs about individual incomes. They are relevant to academic theory, rather than the real world. Household Family income is what affects most people. Now as of June 2009, the median household income was around $64,000. 30% of households have income over $93,000.”
The medium household income is actually closer to $60k David. This means that over 800,000 kiwi families are living on a combined household income of $60k or less; out of which has to come food, rent/mortgage, clothing, school uniform and books, telephone, petrol, rates, repairs, doctors etc etc (which will all increase due to GST rising).
The tax cuts floated by the National govt with give PM Key an extra $500/wk in-the-hand and the CEO of Telecom an extra $2,500/wk in the hand.!!! I suspect those families surviving on $60k household income will see the inequity and unfairness of the proposed tax cuts, even if Mr Farrar can’t.
| Household income deciles | Number of households | Percentage on or below this income |
| 1 – 10K | 20,300 |
1.26% |
| 10 – 20K | 149,200 |
10.53% |
| 20 – 30K | 188,400 |
22.24% |
| 30 – 40K | 163,500 |
32.40% |
| 40 – 50K | 146,500 |
41.51% |
| 50 – 60K | 138,900 |
50.14% |
| 60 – 70K | 111,300 |
57.06% |
| 70 – 80K | 104,200 |
63.53% |
| 80 – 90K | 93,900 |
69.37% |
| 90 – 100K | 72,100 |
73.85% |
| 100 – 110K | 61,300 |
77.66% |
| 110 – 120K | 60,900 |
81.44% |
| Total Number of Households | 1,609,100 |
I also love this line from David in the same blog: ”..But if you are retired and earning just $25,000 a year, that doesn’t mean you are against tax cuts, because you are happy that your adult children will benefit from them.” Of course, that’s right David – mum and dad can shiver through winter (powerbills have GST, and we know how high they go), but if the kids are lucky enough to be one of the 9% in the top tax bracket, then all will be fine because they can now afford that winter holiday in Fiji…! What about the parents whose children are one of the 800,000+ kiwi families struggling on $60k household income.? Suspect they also will see the gross inequity and unfairness in the govt’s proposed tax changes…
So perhaps Mr Farrar should take his own advice. Stop worrying about the theory, and focus on the real world.
“If a family has one parent earning $60,000 a year, and one on $15,000 part-time, they both benefit from a change to the 33% tax rate. Because they are a family!! …. So ignore the stupid stats and graphs about individual incomes. They are relevant to academic theory, rather than the real world. Household Family income is what affects most people.
He is correct on this point. My Partner is in the higher bracket, we have 1 child, I work 3 part time jobs and study. We dont get working for families, we pay more tax than a couple both on the average income with the same total household income as us. And yes household income is considered first.
But, we had 9 years of Labour when all anyone was worried about was being told what you could or couldnt do on minor issues.
Now we have a goverment that isnt telling us what to do, but is stopping us doing what we want and punishing us for being average kiwis. GST increases are scary and will hurt house holds and single income earners.
Stuart, do you have any numbers that throw some light on the claim that the top 10 percent pay 76 percent of the tax?
Jennifer – I will blog on this soon, but it is a number that comes from the Tax Working Group when all WFF tax credits etc are taken into account.
The medium household income is actually closer to $60k
Pedantry: The mean household income is actually closer to $60k. Medium is a term used solely by the mathematically ignorant.
The tax cuts floated by the National govt with give PM Key an extra $500/wk in-the-hand and the CEO of Telecom an extra $2,500/wk in the hand.!!!
Or, to put another way; For the last decade or so, the CEO of Telecom has been paying an extra $2,500/wk in taxes.
If you were a household on $60k p.a. you might have got a little bit of that through WFF, just recently. But, you probably got nothing ‘from him’ for most of those 10 years.
Jennifer
Top 10% get 32% of all income and pay 42% of all income tax.
Never heard the 76% figure before
http://www.publicaddress.net/6414#post6414
Phil: The CEO of Telecom was paying $2,500/wk more because of our regressive tax system (Boohoo! poor guy, imagine that tax on his million dollar salary). See Keigh’s article at public address (posted by Jill) if you need that explained. You are arguing against a regressive tax system, bit I bet most in NZ would support it.
I think “medium” was a typo, it should have been median. Which really is a better measure of central tendency to use that the mean in this case, as the latter is affect by large outliers (e.g. the CEO of Telecom). Looking at that table, the median is definitely $60,000. I haven’t looked up the mean household income, but I’m sure the mean is higher than the median of $60,000 because of some disproportionately large incomes. It’s you that seems to be mathematically ignorant.
@wtl: And the mode (greatest number) is $20-30K. I agree with you that the median is more telling than the mean in this instance, since it gives a clearer picture of how these tax cuts would actually pan out.
The tax cuts floated by the National govt with give PM Key an extra $500/wk in-the-hand and the CEO of Telecom an extra $2,500/wk in the hand.!!!
Don’t you need to wait for the May budget to start putting up numbers?
And i’m not sure the existence of millionaires is an argument for reducing taxes on those earning $70,000+, or whatever it’s going to be. School principals earn $70,000 too, i’d imagine.
And just out of curiosity, surely there are households out there that go above 110 – 120K, why aren’t they included in the chart?
Agreed.
Never happen. Reality doesn’t suit the right so they make up stories that “prove” that reality is wrong. They even believe the stories that they make up. This doesn’t make them true of course and when this is pointed out to them they usually revert to “well, that’s your opinion and this is mine” in an effort to try to discredit the facts that prove them wrong.