No surprises – tax burden to shift on to poor
No one should be surprised. The latest report of the government's Tax Working Group - due out today - proposes to maintain the same overall level of government income but to transfer the tax burden from the rich to the poor.
All the weasel words are there to sell this Sheriff of Nottingham proposal. Previously released excerpts quote the report as saying the current tax system is "not sustainable" and there are "major growth, fairness and integrity issues". So under the guise of making the system "fairer" the rich will be boosted with the hard-earned money of the low-paid.
The TWG propose lowering the top tax rate from 38c to 30c. The argument is that the rich use creative ways to avoid paying their fair share of tax and therefore, so the reasoning goes, we should simply stop collecting the top tax rate. A more self-serving piece of logic from the well-paid TWG members would be difficult to find.
At the other end the panel proposes punishing the poor with an increase on GST. Each week low-income earners spend 100% of their income on essentials such as food, transport and electricity so that any percentage increase in GST is pretty much a straight percentage reduction in their income.
The TWG is also toying with ideas to transfer investment from property to the productive sector but again those on the lowest incomes will bear the brunt of the proposed changes.
Any increases in household rates will hit all home owners but property speculators and landlords will simply pass these increases straight on to the low paid through increased rents. And whereas rate increases in the past would have been greater impact on higher value properties, much of this effect has been eroded through the introduction of user-pays for many council services.
It's important to see these proposals in the wider context of the transfer of wealth from the poor to the rich over the past generation. This has been startlingly revealed in data compiled by Unite Union's national director Mike Treen from Statistics Department figures.
His analysis demonstrates how the share of GDP (the entire wealth of the country) of wage and salary earners has decreased from 56% to just 46% over the past 25 years while the share of GDP taken by the corporate sector has increased from 36% to 48%.
So there isn't likely to be much ideological opposition to the TWG proposals within National or Labour. It's simply continuing a trend Labour began in 1984 with its radical free-market agenda.
Lest anyone ask me what the alternatives might be, let me give just one example. It would have been a sensible break from tradition if the TWG had proposed a financial transactions tax where currency traders, stockmarket speculators and all sorts of unproductive financial activity could have been taxed and curbed for the benefit of everyone.
Unfortunately the unproductive financial leeches still hold more sway on economic policy than decent hard-working families. No surprises here.
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Please explain how "the rich will be boosted with the hard-earned money of the low-paid" ?????? As I understand it, the rich dont qualify for welfare.
"the rich will be boosted with the hard-earned money of the low-paid"
That's weird. When WFF was introduced I was sure I saw my taxes being diverted away from growth and wealth producing government spending directly into the pockets of those hand-picked by Labour.
If WFF were scrapped or at least the extension removed and that money used more productively, I'd hardly call that "boosting the rich".
unfortunately john you missed the bit where the report says the lower income 50% of NZ do not pay any net taxes - ie WFF and tax rebates net out against GST/income tax. Surely the concept of a free ride (even for low income earners) must rile you somewhat.
"Each week low-income earners spend 100% of their income on essentials such as food, transport and electricity".
And here I thought they spent their money on cigarettes, booze and pokies! How mistaken I am.
I think that part of the argument for a flat tax structure is the perception that successful individuals are disadvantaged at present, by their success. If you achieve a certain level of income, quite possibly through hard work, you are punished by having to pay more tax. Your individual or family's burden on the state has not changed one iota, but you are now required to pay more, simply because you pulled your finger out.....
I can see both sides of the story, but as one of those disadvantaged by the Labour imposed tax regime, I would obviously like to see that money in my pocket, and not being spent on pokies by someone who benefited from my taxes.....
It would have been a sensible break from tradition if the TWG had proposed a financial transactions tax where currency traders, stockmarket speculators and all sorts of unproductive financial activity could have been taxed and curbed for the benefit of everyone
I actually agree with this part of your Blog John
But what i would ask is the following:
You say that you want a fair tax system. I agree. But could you explain how the following is fair?
In all cases i have assumed a family of 2 adults & 2 children with one income earner.
100k per year, 29.5k in tax no Working for families. Effective tax rate 29.54%
50K per year, 10.9k in tax $155 per week in WFF. Effective tax rate 5.76%
25k per year 4.4k in tax $206 per week in WFF. Effective tax rate ZERO. In fact this family recieves $6342 of other peoples money.
The family earning 100k effectively pays a marginal tax rate on their last 50k of earnings of 53%!!!! ( i can provide the calculations if people cant work this out themselves)
In a truely fair system, the family +2 kids earning 100k would pay 2x the tax of 50K and 4x the tax of the 25k.
But based on figures taken from the IRD website they pay 10.25x the tax of the 50k family, whereas the 25k family pays no income tax at all.
Whos the real greedy ones here?
Last week you said that Pokies was a blight on the poor. Now this week you are saying that the poor spend 100% of their income on essentials.
Anyone that is stupid enough to borrow money to play pokies deserves to be poor.
Instead of taxing the rich, how about having a "You are too stupid to be allowed to keep your money if you are going to waste it on pokies, cigarettes and booze. Give it to us and we will hold your hand like the imbecile you are" tax.
Naturally this will be a tax only upon those that shouldn't really be forming part of the greater gene pool. Which is another interesting point. Wages are based on supply and demand. Doctors / accountants, etc get paid more because the demand is greater than the supply. Low paid jobs are low paid because the supply is greater than the demand. So how about the low paid workers stop breeding. This will reduce the supply, and hence increase demand, and increase wages.
John As Kris # 4 correctly points out, lower income earners pay very limited net tax, and in a number of cases get net wealth transfers through credits such as WFF. The hard working peasants being robbed by the Sherrif are those in the $70k to $120k who receive no welfare credits but must pay the mnaximum tax rates. This is especially true if they are a single income family. John - if you are up to doing some real work, I suggest you sign-up for voluntary work in a developing country. This will allow you to get your hands dirty, make a real contribution to this world and to see what real poverty is. I think you will be really surprised and you never know, you may actually learn something relevant so you can come back and make some meaningful and enlightened comments.
John.
Your understanding of economic issues is shocking to say the least.
It is people like you who promote a culture where getting ahead, becoming rich and succesful should be frowned upon.
Not quite sure where you're going on this one John. I absolutely agree there are a proportion of people who are overpaid. I don't think that's what you are saying though. You appear to be saying that people who earn more are not entitled to earn more. I'm confused.
One thing is clear to me though, high tax rates on higher incomes says one thing clearly: "Piss off mate, you're kind aren't wanted here".
Surely, John, not even you can think that makes sense, can you? Er, can you??
"So there isn't likely to be much ideological opposition to the TWG proposals within National or Labour."
It must be depressing for John to be proven sooooo wrong (yet again), so quickly!