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.
