web analytics

33% nonsense

Written By: - Date published: 9:00 am, January 22nd, 2010 - 13 comments
Categories: dpf, tax - Tags:

David Farrar has one of his dodgy maths posts, where he argues that getting rid of the 33% rate is necessary because typical New Zealanders are paying it:

“You see [not] only should people not be paying a 38% rate, most FT workers shouldn’t even be paying the 33% rate.”

Quite why 33% is such a disastrous number, Farrar can’t explain, he just holds it to be self-evident, but that’s not important for now (I might do a piece on the Laffer curve and ‘optimal tax’ on the weekend). My point is that “most Full-Time workers” do not pay the 33% rate on any of their income. The 33% rate kicks in after your first $48,000. The median full-time wage is $45,000, so 50% of full-time workers earn less than that.
Even someone on $50,000, who earns more than 79% of Kiwis, isn’t paying 33% of their income in tax.  They pay 33% on just $2,000 of income, they pay 21% on $34,000, and just 12.5% (thanks to Labour’s tax cuts) on the first $14,000. Their total tax bill is $9,550 – just 19% of their gross income.

What would this person, who remember is on above the average wage, get from reducing the 33% rate to 30%? Well, $30 for every $1,000 they earn over $48,000. For our person on $50,000 that’s just over a buck a week. Hardly seems like the difference between manifest injustice and the perfect tax system to me.
Compare that to the $12 a week tax cut they got when Labour cut the bottom tax rate to 12.5%. 

It’s misleading to talk about the average full-time wage as if that is representative of Kiwis’ incomes. 25% of workers aren’t full time, so we shouldn’t just be looking at full-time workers’ wages but all workers’ wages. Really, we should be looking at all taxpayers’ incomes, including those that aren’t working for whatever reason (retired, lost job in recession, student, invalid etc). We shouldn’t be using the average, because it is pulled upwards by outliers (like the CEO of Telecom on $5 million). We should look at the median instead.

So, if we want a true picture of what the typical Kiwi’s income is we want the median income for a New Zealand taxpayer: $28,000. Nowhere near the 33% bracket (which is why Farrar went for a subset with higher incomes). In fact, the typical Kiwi pays less than 17% of their gross income in tax.
The Right needs to get a sense of perspective. 78%of New Zealanders have incomes below $48,000. Cutting the 38% and 33% rates is no tax cut for nearly 4 out of 5 Kiwis. They just end up paying more GST. If tax reform is really about making a better deal for everyone, not just the wealthy, then cutting those top tax rates isn’t the way to do it.

13 comments on “33% nonsense ”

  1. I do wonder what will happen to ‘average’ New Zealand wage statistics if/when it’s no longer possible to use losses from housing investments to articifially lower your taxable income.

    • Clarke 1.1

      This is a very very very interesting question, IMHO. I’m unable to put a finger on the stats, but IIRC there are hundreds of thousands of LAQCs, all of which would no longer be able to attribute losses back to their owners regular incomes … so such a change is likely to have a pretty significant impact on both the tax take and the median income.

  2. Excuse my tax law ignorance but I presume those tax bands apply to trusts and company tax too, so trusts and companies pay 12.5% tax on the first $14,000 of profit and only pay 38% over $75,000? If not, how does it work for them? And will that 30% alignment make any difference?

    • snoozer 2.1

      Corporates and trusts pay 30% and 33% respectively from the first dollar of profit.

    • Draco T Bastard 2.2

      Company tax rate is 30%
      Trusts tax rate is 33%

      The progressive scale only applies to personal income taxes.

      No, the alignment won’t make any difference as it’s sole purpose is to prevent the tax rorts that are going on now and which will still be going on after the alignment. Some of the rorts are a function of being able to right off business expenses – fishing trips with the boys in the company launch (doesn’t even have to pay GST on the fuel), McDs for the family etc, etc.

  3. Draco T Bastard 3

    The Right needs to get a sense of perspective.

    They won’t – reality doesn’t suit their spin so they’ll ignore it.

    • gitmo 3.1

      The Left needs to get a sense of perspective.

      They won’t reality doesn’t suit their spin so they’ll ignore it.

      gosh that’s an easy (and meaningless) naming game to play.

      • snoozer 3.1.1

        Yeah, name calling seems to be all you can manage, gitmo. No response to the substance of the post?

        captcha: commented – yes, yes I did

      • Draco T Bastard 3.1.2

        When the right start paying attention to reality I’ll point it out. Same as I point out when the left don’t. My expectations are that the left will listen and maybe change and that the right will continue to ignore reality because paying attention to reality doesn’t make them rich.

      • rob 3.1.3

        perspective is exactly what is sounds like…

        My perspective is my view of reality, the rights perspective is their reality (see Don Brash/Roger Douglas etc) .

        But there is only one true reality!!

        • fizzleplug

          Which is, of course, that we are all fucked because we have politicians (regardless of bent) making the rules up as they go along.

          • Draco T Bastard

            Only the NACT type politicians make the rules up as they go along. The ones on the left actually do research before putting the rules in place. Unfortunately, even the ones on the left are still using the neo-liberal theory to base their research upon which, inevitably, returns the wrong results.

  4. randal 4

    okay kiddies, you heard it here first.
    when woger finally realised that he would never be prime he went looking for the best way to get his revenge and falling into bed with the rabid right was just up his alley.
    and just for finishers is there anywhere esle in the world where their type of tax system is used.
    come on now..
    lets hear it.

Recent Comments

Recent Posts

  • Government Northland housing investment to spark transformational change
    Over $10 million infrastructure funding to unlock housing in Whangārei The purchase of a 3.279 hectare site in Kerikeri to enable 56 new homes Northland becomes eligible for $100 million scheme for affordable rentals Multiple Northland communities will benefit from multiple Government housing investments, delivering thousands of new homes for ...
    BeehiveBy beehive.govt.nz
    8 hours ago
  • Battle of Ohaeawai remembered
    A memorial event at a key battle site in the New Zealand land wars is an important event to mark the progress in relations between Māori and the Crown as we head towards Waitangi Day, Minister for Te Arawhiti Kelvin Davis said. The Battle of Ohaeawai in June 1845 saw ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • More Police deployed to the frontline
    More Police officers are being deployed to the frontline with the graduation of 54 new constables from the Royal New Zealand Police College today. The graduation ceremony for Recruit Wing 362 at Te Rauparaha Arena in Porirua was the first official event for Stuart Nash since his reappointment as Police ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • Further support for upper North Island regions hit by significant weather
    The Government is unlocking an additional $700,000 in support for regions that have been badly hit by the recent flooding and storm damage in the upper North Island. “We’re supporting the response and recovery of Auckland, Waikato, Coromandel, Northland, and Bay of Plenty regions, through activating Enhanced Taskforce Green to ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • The Princess Royal to visit New Zealand
    Prime Minister Chris Hipkins has welcomed the announcement that Her Royal Highness The Princess Royal, Princess Anne, will visit New Zealand this month. “Princess Anne is travelling to Aotearoa at the request of the NZ Army’s Royal New Zealand Corps of Signals, of which she is Colonel in Chief, to ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • Government and horticulture sector target $12b in exports by 2035
    A new Government and industry strategy launched today has its sights on growing the value of New Zealand’s horticultural production to $12 billion by 2035, Agriculture Minister Damien O’Connor said. “Our food and fibre exports are vital to New Zealand’s economic security. We’re focussed on long-term strategies that build on ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • Cost of living support extended for families and businesses
    25 cents per litre petrol excise duty cut extended to 30 June 2023 – reducing an average 60 litre tank of petrol by $17.25 Road User Charge discount will be re-introduced and continue through until 30 June Half price public transport fares extended to the end of June 2023 saving ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • More Kiwis in work as rising wages match inflation
    The strong economy has attracted more people into the workforce, with a record number of New Zealanders in paid work and wages rising to help with cost of living pressures. “The Government’s economic plan is delivering on more better-paid jobs, growing wages and creating more opportunities for more New Zealanders,” ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • Government boosts fund for Auckland flooding
    The Government is providing a further $1 million to the Mayoral Relief Fund to help communities in Auckland following flooding, Minister for Emergency Management Kieran McAnulty announced today. “Cabinet today agreed that, given the severity of the event, a further $1 million contribution be made. Cabinet wishes to be proactive ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • New Cabinet focused on bread and butter issues
    The new Cabinet will be focused on core bread and butter issues like the cost of living, education, health, housing and keeping communities and businesses safe, Prime Minister Chris Hipkins has announced. “We need a greater focus on what’s in front of New Zealanders right now. The new Cabinet line ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Prime Minister to meet with PM Albanese
    Prime Minister Chris Hipkins will travel to Canberra next week for an in person meeting with Australian Prime Minister, Anthony Albanese. “The trans-Tasman relationship is New Zealand’s closest and most important, and it was crucial to me that my first overseas trip as Prime Minister was to Australia,” Chris Hipkins ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Government makes first payment to Auckland Flooding fund
    The Government is providing establishment funding of $100,000 to the Mayoral Relief Fund to help communities in Auckland following flooding, Minister for Emergency Management Kieran McAnulty announced. “We moved quickly to make available this funding to support Aucklanders while the full extent of the damage is being assessed,” Kieran McAnulty ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • Government steps up to assist Auckland during flooding
    As the Mayor of Auckland has announced a state of emergency, the Government, through NEMA, is able to step up support for those affected by flooding in Auckland. “I’d urge people to follow the advice of authorities and check Auckland Emergency Management for the latest information. As always, the Government ...
    BeehiveBy beehive.govt.nz
    7 days ago
  • Poroporoaki: Titewhai Te Huia Hinewhare Harawira
    Ka papā te whatitiri, Hikohiko ana te uira, wāhi rua mai ana rā runga mai o Huruiki maunga Kua hinga te māreikura o te Nota, a Titewhai Harawira Nā reira, e te kahurangi, takoto, e moe Ka mōwai koa a Whakapara, kua uhia te Tai Tokerau e te kapua pōuri ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Enhanced Task Force Green Approved following Cyclone Hale
    Carmel Sepuloni, Minister for Social Development and Employment, has activated Enhanced Taskforce Green (ETFG) in response to flooding and damaged caused by Cyclone Hale in the Tairāwhiti region. Up to $500,000 will be made available to employ job seekers to support the clean-up. We are still investigating whether other parts ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • General Election to be held on 14 October 2023
    The 2023 General Election will be held on Saturday 14 October 2023, Prime Minister Jacinda Ardern announced today. “Announcing the election date early in the year provides New Zealanders with certainty and has become the practice of this Government and the previous one, and I believe is best practice,” Jacinda ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Prime Minister Jacinda Ardern announces resignation
    Jacinda Ardern has announced she will step down as Prime Minister and Leader of the Labour Party. Her resignation will take effect on the appointment of a new Prime Minister. A caucus vote to elect a new Party Leader will occur in 3 days’ time on Sunday the 22nd of ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Trade and Agriculture Minister to attend World Economic Forum and Global Forum for Food and Agricult...
    The Government is maintaining its strong trade focus in 2023 with Trade and Agriculture Minister Damien O’Connor visiting Europe this week to discuss the role of agricultural trade in climate change and food security, WTO reform and New Zealand agricultural innovation. Damien O’Connor will travel tomorrow to Switzerland to attend the ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • Government funding relief for flood-affected Wairarapa farmers and growers
    The Government has extended its medium-scale classification of Cyclone Hale to the Wairarapa after assessing storm damage to the eastern coastline of the region. “We’re making up to $80,000 available to the East Coast Rural Support Trust to help farmers and growers recover from the significant damage in the region,” ...
    BeehiveBy beehive.govt.nz
    3 weeks ago