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 3.1.3.1

          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 3.1.3.1.1

            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

  • Tokelau Language Week reminds us to stay united and strong
    Staying strong in the face of challenges and being true to our heritage and languages are key to preserving our cultural identity and wellbeing, is the focus of the 2020 Tokelau Language Week. Minister for Pacific Peoples, Aupito William Sio, says this year’s theme, ‘Apoapo tau foe, i nā tāfea ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • NZ announces a third P-3 deployment in support of UN sanctions
    The Government has deployed a Royal New Zealand Air Force P-3K2 Orion (P-3) maritime patrol aircraft to support the implementation of United Nations Security Council (UNSC) resolutions imposing sanctions against North Korea, announced Minister of Foreign Affairs Winston Peters and Minister of Defence Ron Mark. “New Zealand has long supported ...
    BeehiveBy beehive.govt.nz
    7 days ago
  • Pacific trade and development agreement a reality
    Pacific regional trade and development agreement PACER Plus will enter into force in 60 days now that the required eight countries have ratified it. Trade and Export Growth Minister David Parker welcomed the announcement that the Cook Islands is the eighth nation to ratify this landmark agreement. “The agreement represents ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Securing a pipeline of teachers
    The Government is changing its approach to teacher recruitment as COVID-19 travel restrictions continue, by boosting a range of initiatives to get more Kiwis into teaching. “When we came into Government, we were faced with a teacher supply crisis,” Education Minister Chris Hipkins said. “Over the past three years, we ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Border exceptions for a small number of international students with visas
    The Government has established a new category that will allow 250 international PhD and postgraduate students to enter New Zealand and continue their studies, in the latest set of border exceptions. “The health, safety and wellbeing of people in New Zealand remains the Government’s top priority. Tight border restrictions remain ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • First COVID-19 vaccine purchase agreement signed
    The Government has signed an agreement to purchase 1.5 million COVID-19 vaccines – enough for 750,000 people – from Pfizer and BioNTech, subject to the vaccine successfully completing all clinical trials and passing regulatory approvals in New Zealand, say Research, Science and Innovation Minister Megan Woods and Health Minister Chris Hipkins. ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • International statement – End-to-end encryption and public safety
    We, the undersigned, support strong encryption, which plays a crucial role in protecting personal data, privacy, intellectual property, trade secrets and cyber security.  It also serves a vital purpose in repressive states to protect journalists, human rights defenders and other vulnerable people, as stated in the 2017 resolution of the ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Ministry of Defence Biodefence Assessment released
    The Ministry of Defence has today released a Defence Assessment examining Defence’s role across the spectrum of biological hazards and threats facing New Zealand. Biodefence: Preparing for a New Era of Biological Hazards and Threats looks at how the NZDF supports other agencies’ biodefence activities, and considers the context of ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • New Approaches to Economic Challenges: Confronting Planetary Emergencies: OECD 9 October 2020
    New Approaches to Economic Challenges: Confronting Planetary Emergencies: OECD 9 October 2020 Hon David Parker’s response following Thomas Piketty and Esther Duflo. Good morning, good afternoon, and good evening, wherever in the world you might be. I first acknowledge the excellent thought provoking speeches of Thomas Piketty and Esther ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Kaipara Moana restoration takes next step
    A Memorandum of Understanding has been signed today at Waihāua Marae between the Crown, local iwi and councils to protect, restore and enhance the mauri of Kaipara Moana in Northland. Environment Minister David Parker signed the document on behalf of the Crown along with representatives from Ngā Maunga Whakahī, Ngāti ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • New Zealand and Uruguay unite on reducing livestock production emissions
    Agriculture Minister Damien O’Connor and Uruguayan Minister of Livestock, Agriculture and Fisheries Carlos María Uriarte have welcomed the launch of a three-year project that will underpin sustainable livestock production in Uruguay, Argentina, and Costa Rica.  The project called ‘Innovation for pasture management’ is led by Uruguay’s National Institute of Agricultural ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • 3100 jobs created through marae upgrades
    Hundreds of marae throughout the country will be upgraded through investments from the Provincial Growth Fund’s refocused post COVID-19 funding to create jobs and put money into the pockets of local tradespeople and businesses, Regional Economic Development Minister Shane Jones and Māori Development Minister Nanaia Mahuta have announced. “A total ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Health volunteers recognised in annual awards
    Health Minister Chris Hipkins has announced 9 teams and 14 individuals are the recipients of this year’s Minister of Health Volunteer Awards.  “The health volunteer awards celebrate and recognise the thousands of dedicated health sector volunteers who give many hours of their time to help other New Zealanders,” Mr Hipkins ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Community COVID-19 Fund supports Pacific recovery
    The Minister for Pacific Peoples, Aupito William Sio says a total of 264 groups and individuals have successfully applied for the Pacific Aotearoa Community COVID-19 Recovery Fund, that will support Pacific communities drive their own COVID-19 recovery strategies, initiatives, and actions. “I am keen to see this Fund support Pacific ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Community benefits from Māori apprenticeships
    Up to 50 Māori apprentices in Wellington will receive paid training to build houses for their local communities, thanks to a $2.75 million investment from the Māori Trades and Training Fund, announced Employment Minister Willie Jackson today. “This funding will enable Ngāti Toa Rangatira Incorporated to provide its Ngā Kaimahi ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • Training fund supports Māori jobseekers
    Rapidly growing sectors will benefit from a $990,000 Māori Trades and Training Fund investment which will see Wellington jobseekers supported into work, announced Employment Minister Willie Jackson today. “This funding will enable Sapphire Consultants Ltd. to help up to 45 Māori jobseekers into paid training initiatives over two years through ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • Ruakura Inland Port development vital infrastructure for Waikato
    The Government is investing $40 million to develop an inland port at Ruakura which will become a freight super-hub and a future business, research and residential development for the Waikato, Urban Development and Transport Minister Phil Twyford, and Māori Development Minister Nanaia Mahuta announced today. The funding has been has ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • Appointments made to Defence Expert Review Group
    Defence Minister Ron Mark announced today the establishment of an Expert Review Group to review a number of aspects of the New Zealand Defence Force’s (NZDF) structure, information management and record-keeping processes.  The Expert Review Group’s work arises out of the first recommendation from the Report of the Government’s Inquiry ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • No active community cases of COVID-19
    There are no active community cases of COVID-19 remaining in the country after the last people from the recent outbreak have recovered from the virus, Health Minister Chris Hipkins said today. “This is a big milestone. New Zealanders have once again through their collective actions squashed the virus. The systems ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • Clean energy upgrade for more public buildings
    More public buildings will be supported by the Government to upgrade to run on clean energy, the Minister for Climate Change James Shaw announced today. Minister Shaw announced that Lincoln and Auckland universities will receive support through the Clean-Powered Public Service Fund to replace fossil fuel boilers. Southern, Taranaki, and ...
    BeehiveBy beehive.govt.nz
    3 weeks ago