Will Labour really take action on child poverty?

Annette King’s speech to the Labour Party conference over the weekend was all about how Labour’s policy will focus on children and “put our children first”.

It all sounds quite familiar, but, all cynicism aside, it is really good to hear Labour talking like this. The more political parties put children at the heart of their policy development, the better off we’ll all be.

The proof though is in the degree to which Labour will risk votes in the centre to truly work for the poor.

So, I’d invite the Labour Party to take a look at our Mind the Gap package for reducing inequality in New Zealand, especially if they really are committed to breaking the cycle of poverty.

If they are serious, then here’s something they can adopt right now –we’ve already done all the work for them – extend the In-Work Tax Credit (IWTC) to the children of beneficiaries.

A bit of background: under Working for Families, Labour introduced the IWTC as an additional way to support low-income families with dependent children. It’s a tax credit available to parents on low incomes, to ensure that their kids get the basics: food, clothing, a warm, dry home. For families with 1-3 kids its worth an extra $60 per week.

But there’s a catch. The IWTC is only available to parents who are in employment, and not to families in which the parent/s are on a benefit, even though they are the poorest families. For the children of these families, who need the basics just as much, this is just discrimination. Why should some kids from some low-income families get extra support, but not others? The Human Rights Review Tribunal agrees that the IWTC amounts to real and substantive discrimination, and yet it persists.

140,000 of our poorest kids are missing out on vital support because their families are denied access to the IWTC. With the level of child poverty we have in New Zealand, this is just not ok.

Extending the IWTC to the children of beneficiaries is part of our Mind the Gap package, and we also have a members’ bill drafted and ready to go.

I’d be delighted if Labour showed their commitment to “breaking the cycle of socio-economic deprivation” by adopting our policy especially since it was Labour’s decision to exclude beneficiary children in the first place.

138 thoughts on “Will Labour really take action on child poverty?

  1. Labour seem to enjoy reinventing the wheel, or are they just cutting and pasting from our website then adding a softener.

    Like or Dislike: Thumb up 6 Thumb down 0 (+6)

  2. Metiria,

    Its all very well to argue for increased financial assistance for those at the bottom of the heap (though personally I reckon the money would be better spent on building more state houses, funding “free” primary health care, state education and so on).

    Whatever measures you propose to help children living in poverty, you’ll need to raise the revenue from somewhere. I see on the Green’s web site proposals for capital gains taxes, eco taxes and so on. However, the big revenue raiser will still have to be income tax (or perhaps GST).

    Why isn’t the Green party brave enough to advocate much higher income tax rates for those who can afford to pay them? I reckon it would gain more support than it would lose … not everyone thinks with their hip pocket. For example, compared to many European countries, New Zealand’s tax rates are quite low (see http://en.wikipedia.org/wiki/Tax_rates_around_the_world ). If you want good services or assistance for those in need, they’ll need to be paid for. I for one (being on a moderately high income) have no objection to paying more tax if it is used to build up state services and infrastructure (I do have a big objection to tax being spent to bail out banks and speculators though).

    Like or Dislike: Thumb up 5 Thumb down 1 (+4)

  3. Samiuela, what’s stopping you paying more now? You could easily pay more tax, as IRD accepts voluntary contributions over and above what you are required to pay by law. You could also write to your favourite department and say you’re now willing to pay $x for “y” to happen. It would save the deadweight cost of IRD and Treasury redistributing your money.

    Better yet you could be donating the difference between what you pay in tax and what you want to pay to charities.

    The notion that you need to wait for a change of government to help people in need is rather ludicrous. Surely you’d be far more effective if you actually did something about it now, with your own money. It could be as simple as sponsoring a scholarship for one child from a disadvantaged background to go to university or to pay for books

    It’s astonishing that the Greens don’t advocate this now.

    Like or Dislike: Thumb up 5 Thumb down 2 (+3)

  4. So our taxes are low by world standards, really!
    Hmm, when you include the various hidden taxes, aka stealth taxes like very high electricity costs where the consumer is ripped off, high food costs, expensive housing for our crappy tin sheds, exorbitant local body rates where GST is payed on a tax, very high retail prices on goods ie margins, compared to other more populated countries, low wages…. the list goes on.

    Then things dont look so good do they, and the reason our skilled people are leaving NZ and we cannot attract anyone to work here like medical staff.

    Damm high taxes and cost of living.

    Like or Dislike: Thumb up 5 Thumb down 2 (+3)

  5. LibertyScott,

    How do you know that I do not already spend a much bigger portion of my money on charities and “worthy causes” than I would pay in increased taxes?

    If you must know, almost all my disposable income (after paying rent and food etc for my family) goes to (1) various causes helping people in the third world and (2) student loan repayments to IRD. This amounts to approximately 20% of my income. I literally spend almost nothing on unnecessary luxuries, and have never done so – ever. So don’t imply I might be a hypocrite who advocates one thing and then does something else. And I’m not into spending paltry sums on child sponsorship or whatever (which often gets eaten up in charities administration costs) to “look good”, I put my money where my mouth is. OK?

    Mike, the price of food, housing etc in New Zealand is separate from taxation. Last time I looked, the government didn’t regulate food and electricity prices, so its not their fault if they are higher than they should be (well maybe it is … I reckon the prices should be regulated). On the issue of housing costs, you’ll note I advocate building more state houses as a way of addressing these sorts of costs.

    Like or Dislike: Thumb up 1 Thumb down 0 (+1)

  6. Cash money or direct tax subsidies should not be provided based on the number of children a person has. The assistance provided should be channeled through the community and where possible, directly given to the children. This includes provisions of food, clothing, computer access, library access and anything else we can imagine a way to provide. That applies not just to people on limited incomes but also to people like me on something more than 70k per year… and I am not saying how much more.

    Failure to do so encourages a sector of the population to regard children as cash machines… with predictable results in terms of child abuse and child poverty.

    That most parents do not need this limitation is clear, but that minority that do is overrepresented in just about every negative statistic imaginable, and uncorrectable, and deadly obvious when held up as examples of who we are giving money to. Calling to simply give more money without fixing the problem inherent in handing it out to people who abuse the privilege as well as the children they use to abuse the privilege, is going to be met with a reaction from middle-New-Zealand.

    Note that I am not saying to put less money into supporting children… we could advocate more easily… if we avoid this perception of subsidizing poverty. Which is I think, more perceived than real, but UNAVOIDABLY perceived because the negative examples are so in-your-face obvious to the average working Kiwi.

    respectfully
    BJ

    Like or Dislike: Thumb up 3 Thumb down 0 (+3)

  7. “The Human Rights Review Tribunal agrees that the IWTC amounts to real and substantive discrimination, and yet it persists.”

    The Tribunal also found the discrimination is justified. That is because the IWTC is designed to make work pay better than benefits and to attract people into the workforce. Of two children, both living in poverty, the one with a working parent(s) has a higher standard of living ie better access to health, adequate food and clothing etc. No doubt this has a lot to do with ability to budget and prioritise.

    It is also a reality that in most English-speaking countries where poverty is eased by cash transfers more workless households result.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  8. bj – when some regions have over HALF of new births to the poorest 20% of people – it is a FACT that poverty is being subsidised – not just a perception.

    I would have loved to have more children but couldn’t afford them. Now I’m forced to pay for extra children anyway – to someone else who couldn’t afford them but went and had a whole pile of them anyway.

    If Greens truely want to cut down on child poverty, the last thing they should be doing is advocating for policies that encourage the people with least money to have the most children.

    It’s obvious that that will lead to GREATER number of children living in poverty – not fewer.

    And a greater number of children failing education.

    And a greater number of children in youth services, CYFS houses etc.

    And a cycle that includes low skilled, out of work, turn to crime, in jail etc.

    And at some point the cycle starts again.

    There is a massive cost to society of encouraging people who can least afford to have children and look after them properly to breed several times faster than any other sector of society.

    Like or Dislike: Thumb up 6 Thumb down 4 (+2)

  9. Photo. I think you are attacking a problem from the wrong direction.

    What about research that shows that a higher level of benefits actually makes for a more efficient economy as labour is not used for low paid Mcjobs. There is an incentive to use it efficiently if it is higher priced. I will ad the references when I find them.

    Those kids are the ones who will be looking after you in your dotage. Provided you have not p—ed them off to much with assumptions of superiority.
    You are assuming that poorer people are automatically less intelligent. In fact some of the stupidest people I have met have very wealthy parents. Maybe they should be prevented from breeding.

    We also know that the easiest way to get people to have less kids is to raise their standard of living and their expectations.

    Like or Dislike: Thumb up 2 Thumb down 2 (0)

  10. @Lindsay “Of two children, both living in poverty, the one with a working parent(s) has a higher standard of living ie better access to health, adequate food and clothing etc”

    Even if we accept this (and I would argue that it’s not true in all cases: we could debate the relative merits of having a parent who has to work two jobs to scrape by and never sees their kids vs one who is available to care and interact with them at home) the child is hardly in the position to determine whether their parents works or not. Why do we help some children and not others?

    In the end, it’s about breaking the cycle of poverty for our most vulnerable kids, and punishing them for their parents’ life choices is hardly going to help with that.

    Like or Dislike: Thumb up 2 Thumb down 1 (+1)

  11. Sam. The power prices are a direct result of the Governments decision to make the power sector “competitive”. The profit take from the SOE power companies is simply a disguised tax.
    The fact we are mostly a low wage high price economy is also a direct result of Government decisions.

    Like or Dislike: Thumb up 2 Thumb down 0 (+2)

  12. Mike. Income taxes are a lot higher in OZ. It is low wages that are the problem.
    In the late 70’s half my income was going in tax, but my disposable income was much higher than now.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  13. @Lindsay Mitchell 9:24 AM

    Just to complete that picture, the decision of the Human Rights Review Tribunal that the discrimination is justified is under appeal to the High Court.

    Also, that the HRRT found that it was not satisfied the 2005 changes to the abatement rate and threshold for IWTC were rationally connected to the purposes of the WFF package or in due proportion to the importance of the objectives of the package.

    Like or Dislike: Thumb up 1 Thumb down 0 (+1)

  14. BTW, when National introduced the IWTC’s predecessor, the Child Tax Credit, that similarly discriminated against children of beneficiaries, Annette King said:

    …it isolates beneficiaries from other families – treats them like lepers and worst of all it treats their children differently – what is different about a beneficiary child? Does that child look different when she or he goes to school? Yes, that child probably does look different because of the circumstances of the family—but also the government wants everyone to know that he or she is different.”

    So what did Labour do when it got into power? It retained the discriminatory Child Tax Credit, and then, with its own In Work Tax Credit as part of the WFF package, extended the discrimination.

    Total hypocrisy.

    Like or Dislike: Thumb up 2 Thumb down 0 (+2)

  15. Higher tax cuts & tax credits for the highest paid workers & then theres, higher GST for beneficieries.. “gee thats fair”. Its creating a second class in Aotearoa.. the ‘haves’ & the ‘have nots’ then theres the ‘not likely to ever gets'(3rd class ?) !!
    In regard to, Labour adopting Green iniatives : maybe instead of the Greens being seen as the ‘left/green wing’ of Labour.. we could invite Labour to become the centerist/red wing of the Green Party ?? (just a thought) Kia-ora

    Like or Dislike: Thumb up 1 Thumb down 1 (0)

  16. Taxes here are not really higher than taxes in the USA. I have never felt overtaxed except when I compared myself with someone else living here on 10 times my income…. who pays a lower effective rate of tax than I do. That is something Australia does better than we do… along with having a Capital Gains tax.

    The notion that income derived from capital gains is somehow better than working for a living is a bit rich… as only the rich can afford it.

    You want people to want to stay here, sort out the housing mess and make the taxation FAIRER, not lighter, and in particular not lighter on the most wealthy of all… who aren’t all leaving in droves. It is the skilled middle class, not the wealthy, who seek to escape.

    Someone really ought to pay attention to that little detail.

    BJ

    Like or Dislike: Thumb up 5 Thumb down 1 (+4)

  17. I am going to repeat myself, as the argument about how much money is provided to THE PARENTS of the children who are in poverty rages while the fact that the target for the aid must be the children themselves remains unacknowledged.

    Greens must be seen as supporting social justice in a fiscally responsible manner.

    …or we won’t break over 12% of the vote.

    BJ

    Like or Dislike: Thumb up 3 Thumb down 0 (+3)

  18. BJ. It is puzzling that, as someone else said. “we are going to catch up with Oz by doing the opposite of what they are doing”.

    It is mostly higher paid skilled workers that pay the bulk of the tax.
    Not the rich. If they are paying taxes then their accountant is no good.

    One reason why we have deficits is that these incomes have dropped.

    However every time a NZ Government has reduced taxes i have been left with less disposable income as fees, prices and charges for everything always go up more than the tax reductions and the drop in skilled wages.

    I really object to my taxes going to the people who caused the problems in the first place instead of to those in need and constructive development of a sustainable economy.

    It should be skewed more towards capital gains taxes. Eventually income tax proportion of the take may even be able to drop.

    Like or Dislike: Thumb up 1 Thumb down 1 (0)

  19. Kerry – you keep saying your income is going down, but according to statistics NZ, (after being adjusted for inflation) the average real gross national disposable income per person went up 35% between 88 and 08.

    Kerry says “What about research that shows that a higher level of benefits actually makes for a more efficient economy as labour is not used for low paid Mcjobs.”

    Can you please show me the research that says paying higher benefits makes the economy more efficient.

    Like or Dislike: Thumb up 2 Thumb down 1 (+1)

  20. As long as the wealthy keep getting wealthier even a little faster than the po’folk get poorer, and the cost of living keeps going up, that average can keep right on being a meaningless indicator of the economic health of the rich folks… and they aren’t spending money making capital investments to improve productivity… they are (have been) buying fncking houses.

    We are about equality, not making the gini coefficient even higher.

    BJ

    Like or Dislike: Thumb up 3 Thumb down 0 (+3)

  21. Photo. I am back in the same job as I was doing in 1982.
    If I adjust the amount by the CPI change since then pay is down 50%.
    As we know, CPI change has been fiddled to understate inflation.
    I am one of the highly skilled and trained people that NZ has a shortage of. I wonder why??

    I will give you the references for the research as soon as I find the journal article again.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  22. Photo. Have you got the numbers for median family income.
    Or even median income against prices of things that most people buy. Not new cars.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  23. libert scott..i think we are all waiting for you to apologise to samiuela…

    ..(yknow..!..sticking that sized boot into yr mouth is ungainly…

    ..at best…eh..?..)

    and then to list how you ‘help’…?

    ..y’know..!..as a kinda compare and contrast..?

    or are you just going to run..run like the wind…?

    doing either is a win…really…eh….?

    phil(whoar.co.nz)

    Like or Dislike: Thumb up 0 Thumb down 2 (-2)

  24. photonz said:..

    “..Can you please show me the research that says paying higher benefits makes the economy more efficient…”

    you don’t need ‘research’…half a brain’ll do..eh..?

    y’see..!..every cent that people on the bottom earn…

    ..is spent keeping body and soul together..

    ..hence..any increase in their income serves a dual purpose..

    ..it helps to ease their miseries…

    …and those monies flow straight back into the economy..

    ..in goods and services..

    ..(hence stimulating/helping the economy ‘stimulate’/grow..eh..?

    ..are you following/still with me..?)

    .. the inverse of that is proven by the major retail downturn/recession that followed richardson/shipleys’ ‘mother of all budgets’…

    ..cos’..y’see..that benificiary-cut-money…was money sucked directly out of circulation…

    and out of retailers tills etc..

    and..whereas..tax cuts for the rich..(financed by borrowing..(!)..)

    ..they aren’t spent/recycled…

    …most of those cuts are squirreled away/used to buy gold…

    ..so..qed..one of the most efficient ways to revive an economy..

    …is to increase that buying power/turnover at the bottom..

    (..that’s all just common-sense/basic-reasoning…eh..?..)

    ..it’s as simple as a.b.c..

    ..but that john key…?

    he just don’t … wanna see..

    (ah well..!..one-term-john..eh..?..)

    (..and if you have any further questions..just ask…)

    phil(whoar.co.nz

    Like or Dislike: Thumb up 0 Thumb down 3 (-3)

  25. Still cannot find the references, but just looking at Kaitaia’s shops during the mother of all budgets, showed the effect of benefit cuts on the economy.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  26. The one thing Bill Clinton did right was reverse Reagan’s trickle down tax cuts for the rich and retarget them to the lower end of the population. The rationale was exactly the same, that every dollar this group receives, it spends, as it has little other choice. This was the foundation of the job-rich economic boom of the 90’s. Then Bush came in and changed it all back again.

    Like or Dislike: Thumb up 3 Thumb down 0 (+3)

  27. At first the Human Rights Commission ignored my complaints against the National Government 1990-1999 and the Labour Government 2000-2008 concerning their policies causing child poverty in New Zealand. After getting the Ombudsman involved, they finally acknowledge receipt of my formal complaint. I recall the governments getting off the complaint because they argued that childhood poverty did not exist in NZ. The commission ate it up like a good little dog. What a crock!

    Like or Dislike: Thumb up 1 Thumb down 0 (+1)

  28. http://www.unite.org.nz/?q=node/704

    “Average wages” don’t capture the real position of the majority of wage and salary earners because the average has been dragged up by the inflated incomes of the very wealthy in society. Real ordinary time average hourly earnings have risen from $21.08 in September 1996 to $25.06 in June 2009 (measured in June 09 dollars). Even using LCI figures there has been a average of 1.3% difference between the median and mean changes every quarter between June 2000 and June 2009. The only quarter where the median exceeded the mean was the most recent one.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  29. Kerry and BJ regularly complain about the very wealthy, and these people need to pay more tax so there’s more money for everyone else.

    However 90% of people earn less than $70,000. (which puts an experienced teacher in the top 10% of earners).

    97% earn less than %100,000, and 99% earn less than $150,000.

    So even if you whacked up the tax rate for the very wealthy, there’s not actually many of them so it won’t make a great deal of difference to overall tax take.

    High tax on the rich is a repeated mantra as a cure to our problems, when in reality there are so few people in this bracket it wouldn’t raise a great deal of extra money – certainly only a very small part of what’s needed for all the spending that been touted for benefits, health, teachers pay rises, infrastructure etc.

    Personally, I’m for lower tax, but increasing tax at a very high level .i.e $100g or $150g isn’t something I’m strongly against. It’s just that it wouldn’t make much difference in the overall tax take.

    Like or Dislike: Thumb up 0 Thumb down 2 (-2)

  30. “not actually many of them so it won’t make a great deal of difference to overall tax take”.

    Yes,but they have 60% of earnings which does add to the tax take.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  31. had that tax readjustment been targeted at the lower to middle income people..

    (y’know..!..to ‘close the gap’…?..that wasn’t just rhetoric/bullshit..?…

    ..was it…?)..

    had key done that…the economy would have been stimulated..

    …as it is..his tax cuts for the rich…and making the poor pay for it thru higher gst…and borrowing the rest…

    …this is all a guaranteed drag on the economy…

    ..i thought this guy key was meant to have financial ‘smarts’..?

    ..if so..he’s keeping them well hidden…

    oh well..!..we can toss him out in twelve months..

    ..(not long to go now..)

    another thread to all this is that half of the wealthiest people in nz…

    ..don’t pay that top rate…

    ..(they have their affairs ‘arranged’..)

    i really think the extended key-honeymoon has just about had its’ day…

    ..too many people are hurting too much..

    ..to vote them back in again…

    phil(whoar.co.nz)

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  32. The top 3% earn 60% of earnings? I don’t think so.

    Treasury says that each 1% increase in the top tax rate brings in just $100m.

    This low amount is because a/ only 10% of people are on the top rate, and only 3% over $100,000 and b/ if you increase the top rate by 1%, someone on say $80,000 pays 1% extra but only on the part of their income in the top bracket over $70,000 (i.e. 1% extra on $10,000 so only $100 more per year)

    So even if you whacked the top rate up by a massive 10%, you’d only bring in an extra one billion, and increase total govt income by only a little over 1% – little difference to NZ for a massive tax increase.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  33. phil says “had that tax readjustment been targeted at the lower to middle income people..”

    WFF means 40% of people at the lower end effectively pay NO tax.

    How would a reduction be beneficial if they already pay zero?

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  34. photonz – I see you believe what Tolley and the PM say – yet no experienced teacher earns $70,000 – only people heading departments and acting as deputy principals do.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  35. There are lots of things that only cost 1 billion dollars we do not have.

    1. the Kiwi Saver subsidy.

    2. having a top rate at 33 cents while Australia’s is 45 cents.

    Make Kiwi Saver compulsory and end the subsidy and having a rate of 39 cents at 6 figures and 45 cents at $150,000.

    That’s 2 billion dollars off the deficit.

    Some of that money can be used to offer all doctors and nurses and teachers full tertiary debt write-off (10% pa) – so they repay none of their debt in return for working here 10 years. That and a wage increase targeted to them is a better way to retain skilled workers
    than across the board tax cuts to anyone on a high income. That would cost less than $250M pa.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  36. SPC – the majoity of teachers earn units at $4000 each on top of their salary, and there’s many other extra payments on top of base salary – head of departments etc.

    Also most are at to top of their scale for their qualification.

    From memory the govts figures were are average of around $71,000 but that included deputy principals, so I agree that it will be a little high.

    But all they did was take total payments to teachers and divide by the number of teachers.

    When the union was asked about the figure they said it was completely wrong, but they had no idea whatsoever what the real figure was – none at all. So if they don’t even have their own figure (or refuse to tell) then how can they say it’s wrong.

    But when
    – most teachers are on more than the average NZ invcome from their very first day at work, and
    – when they’ve had a 50% increase in a decade – TWICE the rest of the public sector and TWICE the private sector average, and
    – when the majority of people are getting pay decreases, or no increases at all, and only a small number getting inflation increases, it looks greedy to again go on strike to get a much bigger increase than everyone else has got.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  37. Catch the half of top income earners who do not pay tax now another 1 billion. Get rid of other loopholes. 1/2 Billion. Starting to add up.
    May be able to afford a GMI instead of benefits. 200mil saving in administration.

    Photo. Management salaries have increased much more in that time period.

    Also some of that was catch up from Ruth’s and Rogers time as well.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  38. Kerry – So massive tax hikes, close all loopholes, and all added up you’re now up to around 2-3% increase in tax take. It’s still billions short of the tax take last year when we were in the depths of the recesion.

    So even if you had massive tax hikes at the top end, close all the loopholes etc, we would still need to make spending CUTS – not the increases some here are calling for in nearly every department from early childhood, benefits, conservation, teachers salaries, rail, child poverty etc etc etc.

    It’s a totally unsustainable position for some to call for increases across the board when the govt has LESS money to spend than previously.

    (However I agree that some salaries are rediculously high).

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  39. SPC – I think the govt is on the right track by reducing taxation on earnings and putting it on spending.

    There are many advantages.
    1/ It encourages people to earn more, and save more.
    2/ It will get an additional $250m tax from tourists.
    3/ It will tax those who avoid tax through loopholes.
    4/ It will tax those who avoid tax through black market work.
    5/ It will even get more tax from the likes of drug dealers.

    On the income side, lower tax encourages wealthy people to bring their money to NZ (whereas high tax encourages avoidance and people to leave)

    Just like Swedens high tax means they lose many of their top people and companies – like their two biggest companies – two giant companies (Swedens biggest)Ikea and tetra pac both shifted out of Sweden because of high taxes.

    Sweden has recently had the biggest tax cuts in it’s history – business tax is now down to 26% – designed to permanently increase employment. They also left tax high for those on benefits, and reduced it on wages.

    The result – a booming economy straight out of the recession and 100,000 new jobs were created when the opposite was happening in the rest of Europe.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  40. So even if you whacked up the tax rate for the very wealthy, there’s not actually many of them so it won’t make a great deal of difference to overall tax take

    Photonz – I already pointed that out, and it is wonderful that you take note of it, but I do not give a flying fnck whether they can pay for everything the parliament cares to spend.

    I am p!ssed as hell that they pay significantly LESS as a percentage of income than I do. I try very hard to pay my fair share of tax, and it is likely that on a percentage basis I pay more on my income, particularly considering the people I must support on it, than just about anyone else in this benighted land… but I don’t regard the absolute burden on me as too high… not really, though I am annoyed to see it wasted. The thing that gets the fireworks going is seeing some jacka55 with 4-10 times my income paying a lot less effective tax on his next dollar than I do… because he plays with houses and companies and accountants and makes capital gains, because my effective rate still includes reductions in WFF…

    I don’t demand that the wealthy pick up the whole fncking burden, I just want them to pick up their share of it. Something they are bleedingly obviously not willing to do. Killing off the middle class here and in the USA, is the endgame of the wealth transfer process. The next step after that is bloody revolution.

    If you want to avoid THAT you take the gini index DOWN… not push it upwards with the policies that National and ACT prescribe for our economy.

    Australia has a lower GINI coefficient than we do, and it is the perception of growing unfairness to the middle class working class battler here that drives people to want to leave. There is no incentive to do otherwise when the rich aren’t even willing to pay as MUCH as their PAYE slaves, and instead lie about how put-upon they are…

    See there’s the argument that if we tax them too much they’ll take their money and leave. Since by your accounting they don’t have enough money to make a difference, good riddance to them. However, that isn’t the case. They have a really good deal here… mindless sheep willing to believe that complaining about their behaviour is “class-warfare” and vote in the banker’s friends.

    No Photonz, I don’t expect that the wealthy could shift more than a percent or so of the burden off me and mine by paying something resembling a fair tax rate and a CGT… but that shift would move things towards fairer and that would make me a hell of a lot happier about the taxes I pay. Me and just about every other Kiwi.

    BJ

    Like or Dislike: Thumb up 6 Thumb down 1 (+5)

  41. Photo. No problem with consumption taxes so long as there is a means of reducing the burden on low income earners and beneficiaries.

    French Polynesia gets on fine with consumption taxes only, but they have more tourists than their population.

    I’ve talked before about a GMI (Guaranteed individual income administered as a reverse tax by IRD) replacing benefits. Big savings in admin costs.

    As BJ says it is not the rich who are leaving. It is middle class skilled people. Apart from some of Rogers mates who went before we woke up and put them in jail like the Australians have.

    More important in the medium term, I am sure BJ will agree, is shifting our economy towards sustainability in resources and energy or there will be no cake for anyone. The model we have of constant growth has been broken for some time and has only been sustained by the west by grabbing from the worlds poor.

    Like or Dislike: Thumb up 2 Thumb down 0 (+2)

  42. bj – says “because my effective rate still includes reductions in WFF… ”

    I have zero sympathy for this situation. Of course you will have a high effective rate if earn reasonable money AND get working for families.

    Just like someone on the dole has a high effective rate if they work several days a week.

    If you didn’t have that high effective rate then you could have your salary, and WFF (or dole), and earn more than someone on a higher salary.

    bj says “Since by your accounting they don’t have enough money to make a difference, good riddance to them. ”

    Sorry bj, but this is really head in the sand stuff. The cases I talked about took tens of thousands of jobs as they took their businesses with them.

    “Good riddance” to thousands of jobs?

    You must be very pleased with the govts new tax initiatives because they address a lot of your concerns. Taking depreciation of rental properties, looking at stopping shifting tax loses through LAQCs, will mean millions previously deducted from tax payments can no longer be desucted.

    And shifting tax from earnings (which you say they don’t pay) to spending, which they obviously do.

    Do you not think these are positive moves?

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  43. Kerry – unfortunately, if you want more pay for teachers, you need growth.
    If you want higher benefits, you need growth.
    If you want more for child poverty, you need growth.
    If you want more for rail infrastructre, you need growth.

    Otherwise, if you want increased spending on a myriad of areas you need to make cuts in other areas of the same amount.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  44. Yeah yeah, there’s never enough money for teachers, but always enough for motorways. Funny that.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  45. Enough to pay Brash to repeat the same mantra he has been saying for 30 years, but never enough for teachers.

    Photo. What useful people left taking jobs with them?
    The only ones I see are businesses shifting jobs to Asia to make more profit from slave labour. Or buyers of business who asset strip and run them down.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  46. Business do not invest in productive enterprises in NZ for the simple reason that NZ’rs no longer have the incomes to spend on anything but necessities.

    Exporting is too difficult due to an overvalued dollar and higher interest rates than oversea competitors. I can tell you this from personal experience, and that of every one else in the same industry.

    In any case very few companies anywhere in the world turn into exporters without a solid local market base. With the exception of commodities.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  47. rimu says “Yeah yeah, there’s never enough money for teachers, but always enough for motorways. Funny that.”

    There seems to be plenty for teachers. 50% pay increase for teachers over the last ten years, while the rest of the public sector gets less than 25%, and private sector gets less than 25%.

    And we still wait on transmission gully. Nowhere in the whole country are two cities even conected by a motorway. Dunedin finally got a short section of motorway about 2=3 km long, a couple of years back, whenit was supposed to be finished in the 70s.

    The motorway south from Christchurch was only completed in…wait a minute…. there isn’t even a motorway south out of Christchurch. At least there’s one north. It’s has been lengthened significantly in recent years to a whopping 7km.

    Whereas our education spend as a percentage of GDP is right near the top of the OECD list. We are seventh out of around 30, virtually equal with Sweden and within just 0.25% of second place.

    The only country that spneds more than a quarter on one percent of gdp more than us is Iceland – at least they used to.

    We are ahead of USA, Canada, Switzerland, Australia, France, Germany, Netherlands, Austria, Italy, Spain, Japan, Ireland, Fnland etc.

    So the percentage of GDP we spend on education is one of the highest in the world.

    But our roading infrastructure is decades behind most first world countries.

    Like or Dislike: Thumb up 0 Thumb down 1 (-1)

  48. Photo. Not necessarily. A redistribution will work. Their are enough resources in NZ right now to feed and house everyone at a good standard.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  49. “Whereas our education spend as a percentage of GDP is right near the top of the OECD list”.

    That is because our GDP is near the bottom of the OECD list due to 40 years of Government by idiots.

    Starting with Muldoon taxing sunrise industries out of existence to pay welfare to farmers and ending with NACT cutting everything during a recession.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  50. Kerry asks “Photo. What useful people left taking jobs with them?”

    As I said earlier, Swedens two biggest companies were driven out of the country by high taxes.

    Funny that you say that businesses don’t want to invest in NZ to set up export buinesses, while complaining that overseas investors want to invest in NZ farms and export dairy.

    Kerry says “Business do not invest in productive enterprises in NZ for the simple reason that NZ’rs no longer have the incomes to spend on anything but necessities. ”

    But we have far more disposible income (adjusted for inflation) than we had 20 years ago. The fact that we are the most isolated country in the world and have a small population is a bit of a drawbak.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  51. Some people have more disposable income. Most people have less.

    Swedens two biggest companies left for many reasons. Taxes being just one. Does not necessarily apply to NZ companies as our taxes are much lower than Swedens.

    Overseas investors are not investing in making export farms more efficient. They are investing for speculation crowding out those who would farm for income.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  52. Kerry says – “Not necessarily. A redistribution will work.”

    There are very few people to redistribute from. Less than 10% of people earn over $70,000 (the rate at which many teachers are crying poverty).

    As bj says – taxing the rich won’t make more than a percent or two difference. Treasury says each 1% increase in the top tax rate brings in just $100m. So you could put it up by 20% and have some of the highest taxes in the world and you’d only bring in an extra $2b or 3% – hardly a significant difference (take take between 09 and 10 dropped over twice that).

    SO even if we raised the top tax rate to one of the highest in the world, we STILL need govt spending to be cut by a few billion from 08/09.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  53. Kerry says “Overseas investors are not investing in making export farms more efficient. They are investing for speculation crowding out those who would farm for income.”

    Actually a number of overseas investors have (and have wanted to) pour significant extra funds into farms.

    The problem with the farm issue is most people sit on one side of the fence or the other and trot out all the reasons it is either soley a good idea or solely a bad idea. The reality is that there are both pros and cons.

    If a farm is bought by an investor for say $10m, and even if they operate it in exactly the same way, the vast majority of benefits still remain in NZ (wages, tax, and costs of equipment, fertilizer, fencing etc, for running the farm). Perhaps a small profit goes offshore IF it is not reinvested in the business.

    But what is always overlooked is what happens to the $10m the farmer received? Where is that spent or invested? It is likely that it will reduce debt (good for NZ), or be invested in NZ (good for NZ), or be spent in NZ (good for NZ)
    or be invested overseas, with income and profits coming back to NZ (good for NZ).

    So foreign investment, even in farms, is not a black and white situation.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  54. Photo. I am more interested in redistributing the part of our economy which is donated to financial services. Which has expanded many times since 1970.
    It was supposed to be returned in productive investment, but this has declined to a third since 1982.

    Taking over banking and borrowing from ourselves instead of allowing offshore banks to do it would go a long way towards re-balancing the economy.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  55. I once heard that globally, 90% of the economy is ‘controlled’ by 10% of the people.. I guess if the ‘filthy’ rich were not ‘so filthy’ the rest of us might be a little better off.. “MIND THE GAP !”. Viva the Revolution !! Kia-ora

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  56. Kerry says “Swedens two biggest companies left for many reasons. Taxes being just one.”

    No – Tax was the reason they both left.
    http://www.thelocal.se/25286/20100301/

    Now Sweden has significantly reduced tax on business to promote economic growth. Business tax in Sweden is now lower than NZ.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  57. Yeah. Sweden has been taken over by those who lean towards the same delusions as NACT. It will be a good study to see if life actually gets better for the majority of Swedes.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  58. Kerry – Sweden just dropped it’s tax rates, and has added 100,000 jobs, while those around them have higher and higher unemployment.

    It’s simply not sustainable to encourage more and more people onto high benefits, and encouraging fewer and fewer people to work by taxing a large part of their income.

    Over the last few decades Sweden’s tax take has had to double from 27% to half to pay for welfare.

    They PAY the most per person for welfare in the OECD, but by the time it gets through the massive bureaucracy, the amount the RECEIVE in welfare is average for OECD.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  59. Hmmph… looks like I made a comment that got moderated. Not too surprising as I am VERY angry.

    [frog: Not that I can find, bj]

    Photonz… .I pointed out long ago that the LAQC was in need of change. I pointed it out to English and Cullen alike…. Cullen wrote back and eventually floated the idea… English didn’t write back but had the opportunity to implement it.

    Neither of them touched any other effort to reach greater fairness to the middle-class. However, the lack of CGT, the lack of the higher top rates of tax and additional tax bracket to allow it to happen… those things are the additional nails in the economic coffin that surrounds the NZ economy. Built by and for the wealthy and the bankers to contain the aspirations of ordinary people.

    One hopes this was not intentional, merely the effect. The fact is that English is less likely than Cullen to do any of those things and that based on the tax changes already in place, the notion of achieving a lower GINI coefficient might as well be inside a black hole for all the chance we’ll have to see it as a goal from this government.

    The point you failed to understand is:

    I AM NOT TAXED TOO MUCH!!!

    My complaint about the rate at which the wealthy pay taxes has to do with their ability to avoid tax and the powerful tools that this and previous governments persist in providing for them to do so. I was quite pleased with the LAQC change. I was incensed with the changes in tax rates that accompanied it.

    Moreover, the notion that if someone on 500k of income who is paying an effective 100K of tax would find it necessary to leave if that tax became an effective 150K … or in other words someone who has 400K of spending money every year suddenly has to make do on 350K… that is simply not in evidence. Not at all.
    .

    However, for someone on 80K, a couple of percent reduction is significant…. because there is no slack to speak of in the middle.

    …and houses are still overpriced.

    BJ

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  60. Photonz… Sweden may have too low a GINI coefficient, certainly it is as low there as anyplace on earth. Comparing us to Sweden is foolish. We aren’t even in close to the same positions, either in terms of manufacturing or in terms of market. The things they’ve got right however, include a GST that does NOT apply to everything… though the top rate of GST is higher than ours.

    We are in no danger of becoming anything like Sweden was… for one thing, I understand that they’ve organized taxes and benefits so that the top marginal rate of “tax” climbs monotonically as one makes more money. Not like here where that rate looks like a monument sitting on top the middle class. Something granite with some suitable engraving on it… sort of like you find in a cemetery.

    People do leave once they perceive it and it is impossible to be under it and still ignore it.

    To date the misdirection has succeeded and many still blame the lowest classes in NZ for inequality here. Which is why Key is PM.

    I want solutions. THIS government isn’t aware (or able to admit) there are problems. It is focused on “growth by any means necessary”.

    So no, not happy at all except about the LAQC changes.

    As I said, my taxes aren’t too high.

    BJ

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  61. …and to drag this back into play for the third time (AREN’T I INCONVENIENT?)
    .

    I am going to repeat myself, as the argument about how much money is provided to THE PARENTS of the children who are in poverty rages while the fact that the target for the aid must be the children themselves remains unacknowledged.

    Greens must be seen as supporting social justice in a fiscally responsible manner.

    …or we won’t break over 12% of the vote.

    BJ

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  62. bj says “So no, not happy at all except about the LAQC changes”

    What about stopping the ability to claim depreciation on rental housing?

    Making gst highly complicated by putting it on some things but not others is a really bad idea.

    All you do is make it an administrative nightmare, make companies LESS efficient, make IRD LESS efficient, and have to either cut govt services or collect tax from people in some other way to make up the losses.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  63. No Photonz.. the rich don’t spend the extra money they get from these tax changes, they squirrel it away because they don’t need it.

    This is why it is so “inflation safe” to provide more money to the wealthy… they don’t do anything productive with it, don’t spend it and as a general rule, sequester it from both the economy and the tax man… which explains the current state of affairs on the plant fairly neatly.

    Poorer folks and the middle class… all have to spend every dime they lay their hands on. Savings and investments are relatively expensive for them.

    Wealthy folks can find investments, or more precisely their accountants can, that protect income, shelter money from the higher taxes and attract rewards that aren’t taxed. The claim that a consumption tax is more fair falls on incredulous ears here. Not believable.

    BJ

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  64. Photonz…

    I don’t know of too many places that don’t differentiate when they apply GST. Certainly not the case in the USA. That’s what computers are for. It isn’t that hard.

    Hell, in the USA you get State, County and City sales taxes (gst equivalent) with different applicability to any given product.

    BJ

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  65. bj says “To date the misdirection has succeeded and many still blame the lowest classes in NZ for inequality here. Which is why Key is PM.”

    No – Key is PM because people had had a gutsful of the Labour govt taking more and more money from them, trying to control their lives more and more, growing the civil service and govt spending at unsustainable rates, and because they had become very arrogant and had lost touch with people.

    Like or Dislike: Thumb up 0 Thumb down 3 (-3)

  66. bj – other countries have variable gst and look to our system as being much better. Why would we want to go to a system that’s worse?

    If a restaurant has a supermarket buy with hundred of items some will be non-food, and some food.

    So instead on inputing receipts into your system and applying gst, every recept would have a different effective rate of gst depending on the mix of food and nonfood items.

    Computers only work things out AFTER you have manually put in the data. If you have a single rate, things can be done automatically in some cases. With a variable rate you would have to go back to manual input.

    And you’d have food outlets paying gst on all their non food items, other companies collecting it all, IRD processing it, the food company claiming it all back, the IRD checking their claim,, then paying it all back again – a massive money go round, hugely inefficient – all for a gain of ….nothing.

    No gain whatsoever – just massive inefficiencies and costs and work for nothing. It’s stupid – really stupid.

    Phil Goff says removing GST on fresh produce will only cost $150m. Divide that by 4.3m people and 52 weeks, and you get a saving of $0.67 per week per person.

    So you INCREASE the work needed to collect GST, despite collecting LESS gst.

    Like or Dislike: Thumb up 0 Thumb down 1 (-1)

  67. photonz – you say other countries regard a universal flat rate GST, including necessities as food, as better than their own.

    Can you identify who speaks for these other countries? Is it the governments – which have no plans to make any change to our system. Is it public opinion polls?

    Is there even one in the OECD which has GST on food at a universal rate?

    Is there even one other with no CGT? In some ways we have been unique since the 1984-1990 reforms and we have performed worse than all other nations in GDP per head since then and we have suffered an increase in income/wealth disparity (that is causing child poverty and according to recent reseach indicates that future economic growth prospects are limited) since then unmatched by the other nations.

    I guess on some things we must have been wrong.

    Like or Dislike: Thumb up 1 Thumb down 0 (+1)

  68. spc – why would you go to the huge hassle and massive inefficiency, (for example, taking gst of fresh fruit and vegatables) – when the country could save millions in aditional administration and shifting money all over the place and finally giving it all back, simply by changing tax and benefits so people get an extra $67c a week each – and get an IDENTICAL outcome?

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  69. Computers only work things out AFTER you have manually put in the data. If you have a single rate, things can be done automatically in some cases. With a variable rate you would have to go back to manual input.

    No… all you have to do is tag the UPC with the categories it is in and the municipality tax rates for the categories… the tax rates apply automatically with the UPC swipe.

    There being a separate tax applied by each of the governing bodies means that there are several taxes applied to each UPC, as many as there are governing bodies. The application is complicated if you think about doing it by hand but with the machine it is too easy to cause any engineer to break a sweat.

    …and since that well-tested software already exists there is no real reason that we should suffer any difficulties at all.

    BJ

    Like or Dislike: Thumb up 1 Thumb down 0 (+1)

  70. bj says “No… all you have to do is tag the UPC with the categories it is in and the municipality tax rates for the categories… the tax rates apply automatically with the UPC swipe.”

    Which of course doesn’t work with what we are talking about – receipts with numerous items with various rates of gst.

    When you get back to your business to do your accounts, you have a receipt – there is no electronic record for you of what items have what gst. And the bank record will only have a total.

    So it all has to be put in manually, whereas previously the same rate could have been applied across virtually all expenses.

    Making it far MORE complex and expensive, to collect LESS tax is a huge backward step.

    When the identical result could be acheived for no cost by simply adjusting benefits and tax so everyone gets 67c more per week.

    It’s a terrible idea, probably from someone who has never even done a gst return.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  71. Yup… $2.68 per week for a family of 4. Assume further that that family is just squeaking along at 0.6 of the median income here, about $36000, and pay no effective tax EXCEPT the 15% GST. Say they spend 60% of their income on housing and heating and other “stuff”. So there’s between 30 and 40% available for food. Now take the higher of those two numbers and you get 15K for food for the year.

    Divide by 4 and 52. They have available $72 per person per week on food. Flat GST means that this is effectively reduced by 15% to $61 per week per person, and they pay the same no matter whether they eat healthy or not… and there is no chance in hell that they are going to set aside anything.

    Basic problem is that they’re POOR… and GST in its current form taxes 100% of their income.

    The Rich guy puts money into the bank, no GST, buys and sells property (gets tax breaks and Capital Gains, no GST). Puts money into a foreign bank or investment. No GST. The spending he/she does is not anything like 100% of what he/she gets.

    BJ

    Like or Dislike: Thumb up 1 Thumb down 0 (+1)

  72. Key is PM because most people do not like either Labour or National. Neither lot listen and continually make us poorer. The only way to signal your disapproval of the present lot is to vote in the lot we did not like before.
    The other part is blatant lying as we see from English at present.

    Like or Dislike: Thumb up 1 Thumb down 0 (+1)

  73. Which of course doesn’t work with what we are talking about – receipts with numerous items with various rates of gst.

    When you get back to your business to do your accounts, you have a receipt – there is no electronic record for you of what items have what gst. And the bank record will only have a total

    Sorry, I look at my supermarket receipt and the machine knows what was purchased, and each item in the cart was swiped, separately. What businessman doesn’t keep electronic receipts now?

    I purely do not understand your difficulty in understanding that the tax can be applied at the UPC rather than the business level.

    I know this all works because I’ve seen it work.

    BJ

    Like or Dislike: Thumb up 1 Thumb down 0 (+1)

  74. Personally I think GST should be universal and then compensated for by GMI as it is much simpler.

    However my accounting software deals with different tax rates with no extra effort. Any new transaction or customer is input with the tax rate anyway. GST, No GST, zero rated and then any further similar transactions with the same rate are automatically applied.

    Should try some good accounting software sometime.

    Like or Dislike: Thumb up 1 Thumb down 0 (+1)

  75. Photo. Sorry to rain on your parade, but just been talking to someone in Sweden. The company tax drop was also combined with an increase in spending on job subsidies and employment. A stimulus package.

    Like or Dislike: Thumb up 1 Thumb down 0 (+1)

  76. bj says “What businessman doesn’t keep electronic receipts now?”

    And your supermarket gives YOU the electronic receipt?

    I would love electronic receipts, but very few businsess I buy from give me one. They will have their own copies – but you’re looking at the wrong side of the problem. You’re talking about sellers – not buyers.

    If I post 50 items at the post office to various destinations in NZ and overseas (i.e. with 15% gst and 0% gst respectively), and pay electronically, I get a single total – that’s all. I don’t get told electronically which of those items have gst and which ones don’t.

    That has to be sorted our by going through the paper receipt and entering inforrmation manually.

    Have you ever done a gst return bj?

    We’ve spent the last week doing ours and have another week to go. And you think making it much more complicated and time consuming, to collect LESS money, is a good idea.

    If you want to make poor people better off, then giving them $0.67c a week (the figure for zero gst on fresh produce) or $10 / week (your inflated price for food – we spend 1/3 less than your figure including several bottles of wine a week) – then you’d be better off giving it to them in the hand instead of making gst more complex, more time consuming, ( taking people away from how they actually make money), taking gst off people then handing it back again, all to collect LESS than you previously did.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  77. Kerry – so if your software is so smart can it take a paper receipt, read it, and tell me which of hundreds of items on a receipt have one gst rate, and which have another?

    What you are talking about is ALL supplies from a single regular source having the same gst every time.

    But that wouldn’t be the case with variable gst. You may get a whole pile of items from the supplier that have different rates, all on the one receipt.

    That means instead of automatically having bpayments from bank statements entered into accounting software, the all variable receipts have to be done manually.

    Each receipt has to be looked at, divided up into various gst amounts, and entered manually.

    It’s EXACTLY what we have to do now with some receipts – slow tedious manual data entry when everything else is becoming automatic.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  78. Photo can I recommend cashbook complete. Kiwi software. Also did not charge for an upgrade to 15% GST. GST used to take hours not weeks. No commercial interest etc, etc.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  79. Crossed posts.
    Have to enter manual receipts anyway. If they are regular buys the software picks up the tax in the allocated category after the first time.
    Does not take any more time than we spend now as each bought item is on the purchase order anyway and transfers over to the cashbook when you enter it as paid..

    I do agree though that a simple tax setup is better. Harder to dodge.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  80. Kerry – I agree with you on simple tax. If your aim is to save poor people the equivalent on the value of gst on food, then there are ways to do that, that are many MANY times more efficient than having variable gst rates.

    Having variable gst means –
    -The country LOSES tax on overall gst.
    -The country has to pay MORE tax elsewhere to make up for it.
    -We LOSE tax on a major proportion of tourist spending, meaning Kiwis have to make up the difference of their GST savings PLUS they also have to make up the tax on tourist spending.
    -We LOSE efficiency from the complicated handling of data entry for variable gst on the same receipt.
    -Companies / small businesses lose time because they spend more time on gst returns and less on their business.
    -Companies / small businesses lose MONEY because of above.
    -NZ loses a small proportion of business and income tax because people are spending MORE time on returns and LESS earning money.
    -There are additional efficiency loses in time and money because businesses are paying gst, other businesses are collecting it, it all goes to IRD, then is all claimed back again. It costs everybody time and money, for ZERO return to anyone.

    If you want people to save $10 on food, much cheaper just to give them $10 more.

    Or you could make busineses account for gst at variable levels, wasting a huge amount of time and money, get them to pay for, get other companies to collect and pass on, then let them claim back gst on zero rated items, get IRD to set up large new departments to adnminister it, and make Kiwis pay more elsewhere to make up for BOTH their gst savings AND tourist gst savings ……. all to get an IDENTICAL result that you would get from a simple paper entry adjustment to tax and benefits.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  81. photonz – please mention the more efficient ways to help the poor afford necessities that have an extra GST cost component.

    Remember there are economic costs (and impacts) associated with all forms of revenue collection …

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  82. SPC says “photonz – please mention the more efficient ways to help the poor afford necessities that have an extra GST cost component.”

    Simple. Give them the cash to the same amount.

    Put it on benefits or take it off tax.

    Very efficient – there’s virtually no administrative cost as it’s using systems already in place – it’s just the numbers are different.

    The benefit is identical. The amount lost in less tax take is identical. (which will need to be made up elsewhere whichever way it’s done).

    But you don’t turn gst into a messy system with different percentages for different items, cause businesses EXTRA work (for LESS tax).

    Not that I’m in favour of doing this – just saying if you want the benefit of taking gst of fresh produce or all food, there are far more efficient ways of creating EXACTLY the same benefit, without complicating the gst system.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  83. photonz, I was referring to the means used to deliver the “cash” – there is a distorting economic cost to delivering it via benefits or tax credits … as it impacts on the integrity on the wider income tax system or wage benefit relativity etc etc.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  84. Samiuela: Good for you, would you do less if taxed more? Do you increase your contributions when you get tax cuts? That’s what this is about after all.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  85. If I post 50 items at the post office to various destinations in NZ and overseas (i.e. with 15% gst and 0% gst respectively), and pay electronically, I get a single total – that’s all. I don’t get told electronically which of those items have gst and which ones don’t.

    That has to be sorted our by going through the paper receipt and entering inforrmation manually.
    .

    I am still at a loss to understand why this isn’t in your records.

    Do you ship to customers without knowing where you are shipping until you get to the Post Office?

    Do you ship to customers without knowing what you have shipped?

    Do you not know what the postage is for the things you ship (This is possible but after a few trips to the post office it seems unlikely)?

    Do you know what you charge your customers for shipping?

    When you mail things you put the overseas and local mailings in the same bin?

    In other words, Customer A in Tussockville orders 10 widgets, and Customre B in Singapore orders 10 widgets and you don’t know if they attract GST based on where you are shipping ?

    I am gradually working out that this complaint of yours has to do with the way GST payments are recovered but I have not worked out that it has to do with any necessary incapacity to keep track of things. It sounds like you just don’t like change.

    To be sure I never regarded GST (a VAT) as a simple or appropriate form of taxation. It is inherently regressive and because of the multi-level aspects of it, complex of administration. The fact that it can mask by its multi-level nature, a higher rate of tax to make it appear more palatable, only enhances its regressive nature.

    However, if it must be applied then it has already created a massive complexity of record keeping and there is no reason and small likelihood that those records do not capture all the information necessary to tax ice-cream at a different rate to iceberg lettuce.

    Moreover, the subsidy approach you apply has to be specific, the poor have to keep receipts and claim money based on their purchases of fruit and veggies, otherwise it is simply an increase in benefits that has no effect on their perceived price of fruit and vegetables.

    In other words, you have lost the “healthy food” portion of the proposal and simply increased the money available.

    Canada doesn’t have a GST on food, Sweden has a different rate for books…. the rest of the OECD does it differently from us *and* is faring better than us economically.

    Time for a change.

    BJ

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  86. bj – clearly you’ve never had anything to do with putting in a gst return as your questions have no relevance to the actual problem.

    Right now if I pay a regular supplier for goods or services, I put the amount into my accounting software and it automatically calculates how much is gst. Simple.

    Even simpler – With new software we’re about to use, our bank statement will know that a payment to ABC supplier will be under a specific accounting code, and it will automatically know to input the correct gst without us having to do any data input at all. We don’t even have to key in the amount as it automatically collects the data from our bank statements.

    With variable gst on multiple items on a single receipt, nothing is automatic. I have to get out the paper receipt, and go through every item and sort them into what level of gst they are charged at.

    Because if buy 70 items from XYZ suppliers, and I input the figure of $500, the accounting software does not know what the gst rate is. Right now, the gst is 15% on everything.

    With variable gst, 20 items might be at one rate (i.e. 0%), and 50 items at the other rate (15%), or maybe they are all at one rate, or all at the other rate, or a 60/10 split.

    So instead of inputing a single figure of $500 and gst being calculated automatically, instead I have to work out how many items are at one rate and how many are at the other, work out the totals for these 50 items and those 20 items, and finally come up with a figure for each.

    So every receipt for variable rates, instead on inputing a single number, will have to itemised and be sorted into it’s various gst rates, all these will have to all be added up, to finally come up with figures for each rate.

    You have chosen the most complex and inefficient method to solve the simplest of problems.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  87. SPC says “I was referring to the means used to deliver the “cash” – there is a distorting economic cost to delivering it via benefits or tax credits … as it impacts on the integrity on the wider income tax system or wage benefit relativity etc etc.”

    The amounts are so small thet there would be little distortion. Goff reckons the cost of removing gst from fresh produce is $150m per year – that’s only 67 CENTS per person per week.

    Even if it was from all food, it’s only $5-$10 per person per week. And if it’s done on benefits and wages then there’s no issue with distorting relativity.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  88. bjchip says “No Photonz.. the rich don’t spend the extra money they get from these tax changes, they squirrel it away because they don’t need it.

    This is why it is so “inflation safe” to provide more money to the wealthy… they don’t do anything productive with it, don’t spend it and as a general rule, sequester it from both the economy and the tax man… which explains the current state of affairs on the plant fairly neatly. ”

    So where do all these “wealthy” people put aquirrel away their money?

    – Bonds? (providing money for companies and the government, with interst TAXED at their highest rate)
    – Shares? (providing money for business growth, with dividends TAXED at their highest rate)
    – Fixed interest? (providing money for companies and the government, with interst TAXED at their highest rate)
    – Finance Companies? (providing money for companies, with interst TAXED at their highest rate)

    All these common investments both help grow the economy – something that’s desperately needed (but you say it does nothing produictive)

    All these common investments are taxed on top of someones income i.e. at their highest rate of personal tax (but you say it is not taxed)

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  89. Photonz…
    .
    …ask their accountants where they put it and how they get it there. I note that you omitted property, New Zealand’s favorite investment… and overseas investments, the second favorite.
    .
    Structuring finances, companies and expenses so that tax obligations are minimized is an art form practiced more elaborately in the USA than here, but absolutely, it is practiced here.

    .
    Nor are taxes on the interest (the free money they get just for having money) relevant to income being tax free (as CGT) or income over say 100K+ being taxed at the same rate as income below some threshold of 6 figures.
    .

    Giving the wealthy more money doesn’t increase NZ productivity. They don’t as a rule, invest 1in anything that produces, they like the property and overseas markets. Property of course IS inflationary, but that only hurts the rest of us who can’t afford our own houses.

    We’re doing so WELL here, why on earth would we want to change things to make the playing field more level?

    …a question that only makes sense if you are part of the “We are the financial owners of the National Party of NZ “we” “.

    BJ

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  90. With variable gst, 20 items might be at one rate (i.e. 0%), and 50 items at the other rate (15%), or maybe they are all at one rate, or all at the other rate, or a 60/10 split.

    The people you buy from know which have GST applied. Their bill to you should itemize which have GST applied and how much GST is on each, and if they aren’t invoicing electronically there would indeed be a problem.

    …but this isn’t anything like the unresolvable issue you are trying to make it out to be. Overall it is simpler than the move to use GST in the first place. Your ordering software might take a good shot at it, but then you’d have to audit the agreement between its opinion of GST applied against the actual invoices from your supplier (paper or electronic).

    In other words, what you are charged is what your supplier charged you, not what you think you should have been charged. So you’d have to check.

    I don’t like GST. I don’t like the rise in GST. I don’t like the accounting problem GST causes in the first place…. but it has caused the accounting SW to be put in place and the changes needed to make variable rates happen are minor. This is not THAT hard a problem.

    respectfully
    BJ

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  91. bj says “Nor are taxes on the interest (the free money they get just for having money) ”

    Tax on interest is a secondary tax on earnings from money that has ALREADY been taxed.

    You say interst is “free money” – now you’re sounding extreme – somewhere left of communist.

    How can the govt “give money to the wealthy” when it’s not the govts money in the first place.

    As for overseas investments. My dividends on overseas investments are taxed in NZ at a fixed rate as if I get a 5% dividend – EVEN IF they don’t earn any dividends.

    Some aspects of property are a bit of a tax free haven, which is why for the first time in years someone is finally doing something about that by stopping claims on depreciation, LAQCs etc.

    bj says “Giving the wealthy more money doesn’t increase NZ productivity. They don’t as a rule, invest 1in anything that produces,”

    This is patently utter nonsense. While we do need to do more to shift money from housing to more productive areas, there is a lot of money in all sorts of investments that help NZ businesses (shares, bonds, fixed term deposits etc).

    And as for foreign investments. Your arguement is contradictory. You say foreign investment into NZ is bad for NZ because profits get sucked out. But when NZ invests overseas, then you say this is bad for us as well. You can’t have it both ways.

    Your arguements make no sense.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  92. bjchip

    When each variable gst receipt might take 30 times longer to process, it is a significant problem.

    You’ve completely lost sight of what you are trying to do.

    If you want poor people to have more money in their pocket after they’ve done their food shopping, there is a simple way of doing that – give them more money.

    And there is a complex way that will cost businesses money and time, make the tax system more complicated, be more expensive to administer, require money to be paid to IRD then refunded back again. With the same result to the shopper.

    And the reason to go for the costly difficult time consumming inefficient method?

    There’s none.

    You haven’t provided a single good reason why making gst far more complicated is better than simply handing out cash.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  93. When each variable gst receipt might take 30 times longer to process, it is a significant problem.

    If the system is computerized the difference is probably on the order of 30 microseconds, and I don’t think that it matters that this is 30 times longer than the 1 microsecond the computation normally takes. I defy you to make the case that this is significant. Moreover, the initial time reading the record in would be measured in milliseconds, not microseconds. Really.

    BJ

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  94. If you want poor people to have more money in their pocket after they’ve done their food shopping, there is a simple way of doing that – give them more money.

    That wasn’t the point Photonz. The point is that the tax was arranged to SELECTIVELY encourage people to eat healthier foods. This is not the same as just giving everyone more money.

    BJ

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  95. Tax on interest is a secondary tax on earnings from money that has ALREADY been taxed.

    Beg pardon?

    1. The interest has NOT been previously taxed. I can understand the point when someone complains about taxes on rates payments. That’s double taxation and no bones at all about it. This however, isn’t money that has already been taxed, it is income. Which you still apparently want to play favorites about some being privileged and some not.

    2. I think about money as representing work. That means that you can’t store it without suffering losses. IF you invest it you might break even…. and even make some gains, but no way you can break even just storing it for future use. Free money for having money means just that. Put a black box around it Photonz. There was no work done but the amount of money just increased. In thermodynamic terms the system just broke the law… except there’s this catch… like catch 22. The system CANNOT break the laws of thermodynamics, and that means that the money that is accumulating on top of that pile of dough had to come from someone somewhere else. This gets more complicated than I should try to explain in an enumeration.

    3. How can the govt “give money to the wealthy” when it’s not the govts money in the first place. Yeah.. that’s fair enough I should have said give money BACK to the wealthy… except that we’re in a state of continual deficit and when they get money back it then has to come out of my pocket either through future additional debt laid on my kids or out of reduced government services, like closing the library on Sunday, or making us pay for entry to a national park…

    BJ

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  96. bjchip “If the system is computerized the difference is probably on the order of 30 microseconds,”

    This is complete nonsense.

    When you have to identify, sort out, and add up dozens of items on a receipt, just so you can input the data, it takes many many times longer than puting in a single figure with an automatic gst calculation.

    Obviously you know nothing about doing gst returns. We do them regularly, have been doing one for several days now, and will be into next week.

    When was the last time you actually did one?

    I would guess never.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  97. bjchip says “That wasn’t the point Photonz. The point is that the tax was arranged to SELECTIVELY encourage people to eat healthier foods. This is not the same as just giving everyone more money.”

    Reality check bj – a 67 cent saving isn’t going to change anyones eating habits. (67 cents per week is the average saving someone will make by taking gst off fresh produce).

    Besides, you argued for tax of all food – not just fresh produce.

    And if you want to make add this extra complexity, time and cost to save just 67cents, then that is even more insane.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  98. Photonz

    I already stipulated that the invoice you are paying should be electronic and if it isn’t there IS a problem. You are telling me that if it isn’t there is a problem… again. There is no reason that the invoice should not be electronic.

    I don’t need to DO one to know that what has to be done involves information management. The fact that you do not have an electronic receipt/invoice is the problem… the complexity of any VAT/GST system already demands that you and your suppliers keep electronic records.

    BJ

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  99. Photonz

    I never argued either way for a tax off of all food. I’m quite used to the Ice Cream attracting a tax and the eggs, milk, rice and veggies not being subject to one. Lived with that for most of my life. Not much effect when I have money. When I was a student at university however, it did. How much money you have determines how important the pennies are.

    BJ

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  100. bj says “and when they get money back it then has to come out of my pocket ”

    So you think someone the money someone else works for is actually YOUR money and comes from YOUR pocket.

    And that if someone works hard, has been taxed, and puts a little of what’s left over aside (which is then lent to businesses and individuals), gets paid a small amount of interest, is then taxed on that, you think the small amount they finally get back is “free money”

    Bj – normally you talk quite a bit of sense, even when I don’t agree with you.

    But I’m finding this kind of thinking extremist, so it’s pointless debating further.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  101. bj says “and when they get money back it then has to come out of my pocket ”

    So you think someone the money someone else works for is actually YOUR money and comes from YOUR pocket.

    No Photonz, of course you WOULD fail to account for the fact that between the two of us, me and the wealthy guy, we have to pay for government. That cost is more than we’re paying now… so we’re borrowing… and that makes it a zero-sum game. If the rich guy gets to keep more, then I have to pay more… and vice-versa.

    You are the extremist here… your failing to keep track of all the players is frighteningly naive.

    BJ

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  102. bj says “I never argued either way for a tax off of all food.”

    20 Oct, 3.38pm, you argued the savings if gst was removed from all food.

    If it’s only on fresh produce, then putting in a whole new system of variable tax, including time , cost, administration etc, just to save $0.67c is totally pointless.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  103. I gave an example Photonz… we were considering at the miniscule amount of money that this represents, and I was trying to form some estimate of how much per person our poorer people have to spend on food. I didn’t say that that is how it should be…

    It does however, speak to the example of a family that spends all its money on staples and healthy food and nothing on luxuries.

    Which is something that poor people are more likely to consider doing than rich people.

    If there’s a difference like this to exploit.

    BJ

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  104. bj says “There is no reason that the invoice should not be electronic.”

    Not a single reason? How about NO suppliers we use do this. If we ask, some might supply a pdf or email, but that’s no better than a paper invoice anyway.

    It still requires mannual input.

    And very few of our suppliers are regular anyway.

    It would be a really dumb idea if every patrol station, shop, or hotel where I spend money has to (in addition to selling me their product or service) spend every night sending out electronic invoices for every sale they’ve made that day.

    You really should get some knowledge on doing gst returns – these ideas are total non-starters. the are administration nightmares – all to save 67 cents.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  105. bj says “If the rich guy gets to keep more, then I have to pay more… and vice-versa.”

    So if you pay say $15,000 tax and the other guy pays $50,000 tax, and you both use identical services, you say HE is the one not paying his fair share.

    Yet he not contributes many times what you do to the country, but also pays a considerably higher percentage of his earnings.

    And you think he’s ripping you off. That’s really skewed.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  106. Photo. The one who pays 50k benefits a lot more (That s if he pays axes. At least 50% of NZ’s wealthiest people do not pay taxes.) from the tax payers. Police to protect his property, roads for his Mercedes, Educated workers, etc etc etc.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  107. bj says “It does however, speak to the example of a family that spends all its money on staples and healthy food and nothing on luxuries.

    Which is something that poor people are more likely to consider doing than rich people. ”

    Actually, according to the supermarkets, wealthy people spend far more on fruit and vegatables, and poor areas don’t spend much on fresh produce.

    It’s well known that takeaways and pubs do well in poor areas – probably pokies as well.

    A 25c difference in a piece of brocoli or a 5c difference in an avocado isn’t going to make people suddenly change unhealthy eating habits.

    And making the whole gst system more complex to andminister for such a negligable change is a very silly idea, when there are much much simpler ways of getting the same result.

    Surprising you are advocating removing gst on fresh produce when wealthy people will benefit much more than poor people.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  108. Kerry
    I often hear these bland generalisations. No doubt many people do pay little tax (a good reason to shift some tax from income to gst).

    But where is your evidence that “At least 50% of NZ’s wealthiest people do not pay taxes”

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  109. That was from Rogers little junket. (The working group report) I hardly think he would have made that one up as it goes against his philosophy..

    If they can identify 50% then you can be sure there are more under the radar.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  110. Photonz… Kerry just made the point… and we can see that you dislike the income tax being graduated. The notion of a graduated income tax is not unique to me. Adam Smith liked it too. The thing is, it extends to all the other taxes. Shifting taxation to the regressive taxes from the progressive taxes has always been one of the tactics of the wealthy in the class war. Denying there is one of those is another one of their tactics.

    Making more means that you benefit more from the society as a whole and have an obligation to pay more to keep it running smoothly. Truth is, we aren’t going to use identical services anyway.

    As for what he contributes to the country, that might depend on how you measure it no? After all, he may simply be ripping us all off for that money… or selling it off in chunks… or destroying its value through pollution… and that is often enough the case, as the commons here is NOT in general protected by having a cost placed on its destruction. We find other ways to do that, mostly involving regulation and government agencies which the wealthy work hard to de-fund.

    No Photonz, I don’t reckon that the wealthy do any more FOR this country than I do as a rule. As a rule I suspect they actually do a lot more DAMAGE.

    BJ

    Like or Dislike: Thumb up 1 Thumb down 0 (+1)

  111. Kerry says “The one who pays 50k benefits a lot more ”

    Often the opposite is true.

    Wealthy people I know are more likely to use private health care rather than using the public system.

    Ditto with education. The pay more tax, but their children go to private schools, and the govt payment for private pupils is a fraction of what it is for a pupil in a public school.

    And if they lose their job they are not entitles to a benefit.

    So despite contributing many times the average person, they have minimal use of govt provided health, education and welfare, which covers 3/4 of govt spending.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  112. Private health care whose doctors were trained in the public system. Employees who are educated in the public system.
    A pleasant outlook paid for from taxes instead of slums.
    Among many other things.

    If they lose their job they do get a benefit if they have no other source of income.

    If they need an operation beyond their ability to pay they still get helped.

    Wealthy people use more of the common resources. We should pay more.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  113. bj says “As for what he contributes to the country, that might depend on how you measure it no? After all, he may simply be ripping us all off for that money”

    Or it might be you who is ripping the country of and he whose profession is much more valuable to NZ.

    You seem to have an automatic hate of wealthy people regardless of whether they are good people or not.

    And your last comment confirms your prejudices.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  114. Kerry – even if doctors and teachers were originally trained in the public system (just like everyone else) the ongoing cost on taxation when they are in the private system is obviously substantially less than the public system.

    Effectively wealthy who use private health and education pay at least twice.

    They pay privately, and they pay MORE than everyone else for health and education systems, despite rarely using them.

    You are clearly both (Kerry and BJ) predudiced against wealthy people not for who they are but bacause of their pay packet.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  115. How about NO suppliers we use do this. If we ask, some might supply a pdf or email, but that’s no better than a paper invoice anyway.

    That’s not a reason why they don’t, just a fact that they don’t.

    Now lets get to the next little detail.

    It would be a really dumb idea if every patrol station, shop, or hotel where I spend money has to (in addition to selling me their product or service) spend every night sending out electronic invoices for every sale they’ve made that day.

    You buy business supplies from retail outlets.

    The problem Photonz is that this works everywhere else, and the reason it works is that it is designed to work. If you buy supplies for your business the whole shebang is gst deductible. Whatever the total GST was.

    I think that part of the problem is that you want it to work the same way that it works now, and that isn’t what everyone else does.

    If you are deducting your purchases from a hotel shop or petrol station (apart from petrol), I must confess to having no idea what business you could possibly be in to resell such goods and make a profit.

    If you are in the restaurant business the restaurant meal itself is fully subject to tax, no matter what goes into it. This simplifies the accounting for you somewhat, and the principle applies to other aspects of the system. It IS complex if it is done correctly, and the legislature has to do a lot more than wave a suggestion at the tax office and expect it to work as it is intended. I never said it wasn’t. What I said was that it can be automated, and that is something that is definitely possible… and that it can work, and that is demonstrable out there in the rest of the world where they do the impossible all the time.

    Not too hard. Not harder than GST is in the first place to be sure.

    BJ

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  116. BJ says “and we can see that you dislike the income tax being graduated. ”

    Yes, I dislike it, but can see that it’s probably neccessary. However there are situations where it is very unfair.

    I know someone saving for a house and currently working two jobs with near full time hours for each.

    In his second job, his effective tax rate is almost double his fellow workers doing exactly the same job.

    Why should he be taxed twice as much for doing exactly the same job as the person he is working beside?

    At least the small shift in tax this month from income to consumption will help a little for people who work really hard to try to get ahead.

    BJ – I thought that was one of the things you wanted was making housing cheaper.

    Effectively houses just became 2.5% cheaper for anyone paying off a mortgage or about to buy a house.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  117. photonz – wealthy people still use public hospitals for the most expensive health care (paying extra for health care choices rather than necessities) and are more likely to send their children onto university (subsidised education) – many wealthy people live in the neighbourhoods of the best public schools.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  118. Photonz

    Not prejudiced against wealthy people. I recognize how the system is biased in their favor. Many of them, recognize this as well. Some of those, to their credit, even try to compensate for it instead of taking advantage of it. That doesn’t change the fact that THE SYSTEM is biased.

    I don’t think that many of the wealthy get anything so mundane as a “pay packet”, at least not for their principle source of income.

    BJ

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  119. SPC – some do – but they’ve paid more than everybody else for the the same services.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  120. bj says “I recognize how the system is biased in their favor”

    So someone who contributes three times the tax you do, which is a higher percentage of their wages than you, has the system in favour of them – yeah right.

    If it’s so biased towards them, perhaps you should shift your wages onto the highest tax rate, just like them.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  121. In his second job, his effective tax rate is almost double his fellow workers doing exactly the same job.

    Yup…. I know all about that. That’s why I’ve made myself so obnoxious to English and before him, Cullen. The hump in the effective tax rate is one of the most intensely stupid things in the system, and the fact that it is a HUMP makes it worse. If he made 10 times what he makes, he would pay a far lower effective rate of tax.

    That is one of the reasons there needs to be another tax rate kicking in for people who are on higher incomes.

    That won’t fix the problem entirely but the goal SHOULD be to get at least a monotonically increasing effective tax through the income brackets.

    The other thing is that some benefits, like child benefits, should not be means tested at all, but should simply be provided as the things that the child needs, not as monetary supplements or as tax rebates (like WFF). The “clawback” that Cullen was so adamant about, doesn’t hurt the income side.

    BJ

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  122. The reality is that most on the top income tax rate have made a lot of money in ownership of assets that has not been subject to a CGT.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  123. SPC. No, most of us in the top bracket work for a living.

    Those who have income from assets can escape taxes. You are right though it is partly because their are no CGT or taxes on finance. Not to mention many other tax loopholes which could be closed, but are not,like LAQC’s trusts etc.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  124. Kerry, I would have presumed that earning an income at the top rate enables the ownership of assets and (or the ability to borrow against those assets) to finance speculation for profit because they are untaxed.

    Farmers work full-time while earning most of their money from CG. Many professionals own rental property or coastal land, many own shares in companies and own gold etc.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  125. bj says “Photonz, my wages are on the highest bracket already. Just like them”

    If they are paying three times your tax, then MOST of their income is in the highest bracket, and MOST of yours is not.

    Because you have a larger percentage of your income in lower tax brackets, you cannot be paying 10% more – that’s rubbish.

    SPC says “The reality is that most on the top income tax rate have made a lot of money in ownership of assets that has not been subject to a CGT.”

    And you evidence that “MOST” own assets they get CG on is what? Or did you just say thay cause it sounds good and fits your ideology but you don’t really have any evidence at all?

    Kerry – the govt has jsut stopped depreciation on property, and is looking at stopping people using LAQCs to swap losses afgainst tax.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  126. If they are paying three times your tax, then MOST of their income is in the highest bracket, and MOST of yours is not.

    Right, and it is exactly the same rate if they were paying personal income tax. So on each additional dollar they might pay 38%… if they were getting PAYE and were not arranging a corporate structure and paying a corporate rate or buying and selling properties, making losses on rentals and capital gains and basically using tools that have been handed to them freely to structure things so that they pay even less than that.

    The corporate tax rate was 8% less than my personal PAYE rate, and even with the adjustments being done it will be 5% less. The point is that the wealthy have the ability to use this, and the tax code as it is written and the absence of the CGT, to structure their affairs to minimize their tax liabilities and they have the accountants to advise them how to do so.

    I went to see an accountant and he told me to buy a house and rent it out. That was a while ago.

    Which means that at the end of the day, when I make dollar 80001, I pay 38 cents and when they make their dollar 500001 they pay 30 cents, if that much. Not all of course. Just enough to make the average performance of the wealthy look pretty sad. Most of their NZ investments have been in property. This has both driven up the prices of houses and allowed them to hide substantial income from the fury of the IRD.

    There is a graph that shows how the structuring affects the taxes paid. I’ll have to hunt for it but it rather conclusively demonstrates that a large fraction of folks who have money are structuring their income so as to pay taxes at a lower rate than I do… on ALL of their money.

    The rubbish Photonz, is the notion that the wealthy are somehow, by having money, more deserving than the rest of us…. and they don’t pay the sort of tax percentages that the middle class pays. Not as a group.

    This government did what the last government suggested should be done, and stopped the LAQC. It didn’t put in the CGT, it didn’t put in another tax bracket for the wealthiest among us, it didn’t raise the top rate of tax. It lowered the rate and added to the regressive GST. That makes this government something much less than perfect. The LAQC thing keeps them from being perfectly bad but the fact is that they knew that they had to do SOMETHING, the distortion in the economy had become so blatantly obvious that everyone knew about it (that accountant had a pre-printed brochure showing how to structure the LAQC !)… and it was the least possible thing they could do.

    No Photonz, the most you’ll get from me about this government is that it did what it had no choice but to do with respect to housing, and as little of that as possible.

    BJ

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  127. bj – company tax is largely irrelevant. We should make it much lower. Even high taxation countries like Sweden have a lower company tax than us.

    Because even if it’s zero, you still pay personal tax when you transfer the income from the company to somewhere where you can use it for personal use.

    The vast majority of people on high incomes are not property dealers. And if they are property dealers, they DO get charged tax.

    If you buy properties (not to live in)and sell them for capital gain (any time under ten years) you can be charged tax on the capital gains though I beleive it’s not called that – just treated as income in the same way that someone buys and sells cars.

    The govt receives about $100 million per year from taxing capital gains on property. Word I’ve heard is that if you sell a rental within ten years you will most likely get away with it but if you sell a second time you most likely there’s a good chance you have to pay.

    There was a clamp down on this about three years ago.

    Just like if I regularly buy and sell shares for capital gain I will be considered a trader and taxed on my profits.

    Like or Dislike: Thumb up 1 Thumb down 0 (+1)

  128. If you want to clamp down on wealthy, how about stopping their welfare?

    The insanity of Working For Families is that you can be be on a $110,000 salary and still be getting a WFF benefit.

    Like or Dislike: Thumb up 1 Thumb down 0 (+1)

  129. Lindsay Mitchell summarised in part the HRRT decision with regards CPAG’s IWTC case stating the discrimination was justified because of the other policy incentives IWTC supposedly offered government as a policy tool. These related mainly to labour market intervention mechanisms.
    I would argue though that the govt has far better labour market tools than an employer subisidy directed to parents.
    These include (A) reducing the abatement rates for those on benefits so as to encourage increased labour market activity; (B) more direct employer subsidies such as community max which is currently only available for a very small number of at risk youth; (C) greater availability of te Enterprise Allowance for people on benefits to start mentored small business enterpises, to name just three areas.
    The IWTC could then be universalised so as to reduce the poverty of all low income households with children.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  130. In amongst the comments above was one where the removal of the ability of landlords to claim depreciation on rents was raised. It would seem this in itself may only lead to increases in rentals as rhe landlords attempt to maintain a level of financial gain (irrespective of capital gains). Residental property reform needs to be far more radical than just removiung the ability to claim depreciation (or a CGT) as these mechanisms merely address one aspect of how people with savings “invest” their largesse.
    Changes to residental property “ownership” need to ensure both security of tenure for people residing whereever and methods to encourage investment in ways that promote joib growth are inter-twined. In efect the current crop of landlords need to be encouraged to change their form of investment.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  131. Photonz

    The insanity of WFF is that it is attempting to correct the problem that a not very progressive income tax structure creates… without altering the tax structure. At 110k you’d have to have quite a few kids to collect WFF. Moreover, it wouldn’t be all that much.

    DO try to understand that WFF was aimed primarily at the effective tax hump in the income tax/benefit claw-backs that ranged between 60K and 100K income before WFF was brought in. That effective tax of 90 cents on each additional dollar earned was part of the reason people with degrees and working brains were leaving for just about anywhere else. Hitting that hump was an astonishing disincentive here. Yet that effective rate went back down to 33% as the more wealthy managed their incomes and investments and LAQC’s to keep their income and tax under even the 38% top rate.

    So the ludicrous arrangement where someone on 70K could earn 10K more and get 1K more, while someone on 700K could earn 10k more and get 7k more.

    The wrongness of that picture makes WFF a good idea…. if you don’t actually want to fix things right.

    Matter of comparative wrongness I guess.

    :-)

    BJ

    Like or Dislike: Thumb up 1 Thumb down 0 (+1)

  132. bj – it does pose the question – why are we giving welfare benefits to someone in the top 3% of income?

    (and $110,000 is still about $10,000 below the upper limit for WWF benefits).

    There’s one way to correct your hated “tax hump” – stop giving welfare benefits to people on high incomes.

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  133. Photonz

    There’s one way to correct your hated “tax hump” – stop giving welfare benefits to people on high incomes.

    No, that makes it worse. You actually have to raise taxes on the people with the higher incomes. Different brackets and adding in a CGT… so that income is not privileged as a result of its source.

    … as well as not giving MONEY to people on the basis of the number of kids they have.

    That is what neither Labour nor National have had the spine to do.

    BJ

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>