Back in the real world

40 comments on “Back in the real world ”

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1. alex 1

   27 May 2008 at 8:18 am

   This looks like the same graph as from a few posts back.

   Obviously if you bundle:
   – beneficiaries
   – elderly
   – part time workers
   – non-workers who don’t claim a benefit
   – everyone above the age of 15

   Onto the graph, then its hardly surprising that the average most people earn is low.
2. higherstandard 2

   27 May 2008 at 8:29 am

   Clinton

   Alex makes a fair point any analysis for only those in full time work ?
3. ak 3

   27 May 2008 at 8:42 am

   yeah, just the real people Steve, forget those losers in alex’s list, who needs em?
4. Scribe 4

   27 May 2008 at 8:51 am

   Genuinely curious: Have you done a graph — which would look about the opposite of this one — showing the proportion of the total tax take people pay at different incomes?

   No prizes for guessing which circle editors and opinion writers fall into, eh?

   The same circle (roughly) where politicians fall. But, of course, Labour politicians are benevolent wealthy people and editors and opinion writers are “rich pricks”.
5. Rocket Boy 5

   27 May 2008 at 8:52 am

   I agree with Alex & Higherstandard, you really need to look at people in full time employment when looking at tax & incomes.

   Part time income earners are going to distort your figures downward and even though this suits your argument it is hardly a fair picture of incomes.

   I understand that the average full time income in New Zealand is around $45K.

   And ‘ak’ part time income earners are hardly loser’s, my wife works part time as we balance this with bringing up our baby.
6. burt 6

   27 May 2008 at 8:52 am

   Steve P.

   The issue with fiscal drag is that it’s not just the top threshold effected. A person earning $38K in 1999 was paying $7,709.25 (20.2%) of their income. Using the reserve bank CPI calculator $38K in 1999 equates to $47,496.02 today. The tax paid today for that amount of money ($38K in 1999 CPI adjusted to first quarter 2008) is $10,543.68 (22.2%).

   Labour’s core voters, the ones promised that nobody earning under $60K would pay a cent more income tax are being robbed an extra 2% in tax. 2% of $47,496.02 is $949.92 – thats $18.26/week (today) taken off them via fiscal drag. What has Cullen given them back? According to the tax cut calculator on their web site – $17/week from October. Tut tut.

   Labour – growing their share of your CPI adjustments since 1999. It’s a disgrace that Labour didn’t at least sort out the fiscal drag for their key supporter base and it’s a disgrace that the workers rights advocates here at the standard support this. I expect Labour to slap the rich pricks and scoff at fiscal drag in that context, they are socialists and proud of it, but slapping their own the same way is appalling and I guess starting to be reflected in the polls.

   Update: Last time I posted this you added your 5c worth to the end including this. A person on 38K in 2000 was paying 19.5% of their income in tax, after Oct, the person, now on 47K will be paying 19.62%, in 2011, the nominal salary equa to 38K in 2000 will be about 51K and paying 19.6% of their income in tax.

   So you agree that Cullen’s tax cuts don’t even address fiscal drag for middle income earners. Well you kind of agree, you tell me my analysis is crap then do your own to prove the same point I set out to prove. So can we call these tax custs a Claytons tax cut – The tax cut you have when you are not having a tax cut!

   One thing is interesting though Steve P. I’ve been bagged on this site before for suggesting that thresholds should be indexed on an annual basis to control fiscal drag. Some people said it was unworkable to adjust them each year, luckily that’s not the case – just a pity socialism is so addicted to other peoples money and these tax cuts don’t actually reduce the tax burden the state places on productive middle earners.
7. burt 7

   27 May 2008 at 9:01 am

   From public address.

   the latest tax cuts are designed to nearly exactly cover the bracket creep for everyone who earns over $47,000.

   And for people earning under $47K, I guess they don’t matter as much to Cullen because they are already likely to be Labour voters and they don’t need to be convinced that Labour are looking after them.
8. alex 8

   27 May 2008 at 9:16 am

   Burt,

   According to public address, for people earning less than 47K:

   “This means that the rejigging makes no difference to everyone who earns over $47,000, but it does make a different to everyone who makes less than that. For them, this is a genuine cut, above and beyond bracket creep.”

   In other words, people earning less than 47K matter “more” to Cullen, and he is indeed looking after them.

   People above 47K get covered for bracket creep, people below get genuine cuts.
9. burt 9

   27 May 2008 at 9:26 am

   alex

   I understand tax way more than I wish I needed to, I do know that somebody earning say $25K in 1999 would not have experienced any fiscal drag at all, but as public address has pointed out in his analysis;

   * Fiscal drag is not a right-wing conspiracy. It is real. It is significant. It’s a part of the Government’s fiscal strategy.

   * Fiscal drag means people pay a greater proportion of their income in tax. That does not mean that people are worse off, since income is rising, too.

   It’s a part of the Government’s fiscal strategy – that tells it all really. For the govt – growing their share of your CPI increments is part of their revenue gathering plan – stealth tax increases are part of their fiscal plan.

   But how about this little gem – “That does not mean that people are worse off” following the comment “Fiscal drag means people pay a greater proportion of their income in tax”…

   This shows the bias of public address’s analysis – Hey it’s real and it means you pay a greater proportion of your income as tax – but that’s not making you worse off …. yeah right!

   If paying a greater proportion of your income as tax is not making you worse off then reducing the proportion of your income paid as tax will not make you better off… So perhaps public address could explain why Cullen reduced taxes then?
10. Pascal's bookie 10

    27 May 2008 at 9:30 am

    Did you even read the post burt?

    Your 9.01 comment is right there, including the bit you hillariously left out, which disproves your smear and reveals a little something about your honesty.
11. burt 11

    27 May 2008 at 9:34 am

    Pascal’s bookie

    No I didn’t read it, I just made up quotes – were they correct?

    Muppet!
12. burt 12

    27 May 2008 at 9:38 am

    Pascal’s bookie

    I can’t be blamed for the facts revealed by using the RB inflation calculator and the IRD web site for income tax calculations. It’s not my fault that some people have been burdened with bracket creep and it’s not my fault that the govt revenue gathering strategy relies on this aspect of progressive taxation with static threshold for 9 years.

    Lets not forget – fiscal drag has been occurring for up to 8 years for some people, real people, tax payers contributing more than their share before fiscal drag stated eating into their earnings.

    Fiscal drag in the lower thresholds (which we now have a new one to collect on) make a mockery of the PM’s 1999 promise that “nobody earning under $60K wuill pay a cent more income tax under Labour”. – Because they do and even public address has confirmed it’s been occurring for years.

    He now claims it’s sorted – I claim it’s not. Either way the 1999 promise has been proven to be nothing more than spin.
13. Tamaki Resident 13

    27 May 2008 at 9:41 am

    What the graph doesn’t show is how many of the people on the left hand end are in a household with someone from the right hand end. Two reasonable common (I think) examples are:
    1) High earner + spouse at home (or doing part-time work)
    2) Both parents earning + students (who work part-time, therefore taxpayers)

    The point I’m trying to make is that not all the left hand end are in households that are struggling to live with incomes under the average wage.
14. Pascal's bookie 14

    27 May 2008 at 9:42 am

    Burt, I was talking about the post that you are commenting on, here, on The Standard. The one in which Steve writes:

    In fact, Keith Ng at Public Address has done a brilliant analysis showing that the tax cuts undo fiscal drag for all incomes above $47K and the 70% of people whose incomes are lower than that will be getting a tax cut that goes well beyond making up for fiscal drag.

    This would be a reference to the Public address post that you quoting . No?

    So instead of shifting the goalposts, how do you defend this smear, from your 9.01 comment?

    And for people earning under $47K, I guess they don’t matter as much to Cullen because they are already likely to be Labour voters and they don’t need to be convinced that Labour are looking after them.

    …given that that the public address quote you cite, (but don’t link to), says that the under 47K people get a greater tax cut than the over 47k’s.

    I’m guessing you can’t, but I’d loved to be shown otherwise.
15. mike 15

    27 May 2008 at 9:49 am

    agreed Burt, but on the bright side that thieving little socialist will be dog tucker come October and just imagine the pain he will take with him as a result of having to begrudgingly give it all back.
16. burt 16

    27 May 2008 at 9:53 am

    Pascal’s bookie

    We all seem to agree however that we have had 8-9 years of fiscal drag and now (at best) it’s being set close to neutral, which when I was talking about a difference of $1.26 week was always obvious.

    However close to neutral is not neutral and it ignores the last 8 years of gouging. No such concept of ‘unders and overs’ for the govt eh, take it on the growth cycles and dare not give it back on the downswing. It’s incredibly dishonest to claim they have addressed it when they haven’t and it’s also myopic “Labour good” to not acknowledge the over taxation that has occurred along the way.

    The real shame is that Cullen left his tinkering so late, had he made the same changes in 2005 they would have pushed us into a slight negative fiscal drag situation – which is sometimes called a tax cut, not an a minor bracket adjustment.
17. Felix 17

    27 May 2008 at 11:21 am

    Alex, the people you mention (part-time workers, the elderly, beneficiaries etc)

    1. All have an income
    2. All have to live on this income.

    By what reasoning would you exclude them from the graph?

    edit: I just read Tamaki Res’s very good point above – perhaps a “by-household” graph would be more meaningful?
18. Dave 18

    27 May 2008 at 11:30 am

    You state Tax cuts are more than making up for fiscal drag for those under 47k. Lets drop about 10k. How many earners 37k or less even have fiscal drag? None, so it is not making up for fiscal drag, because they were paying the right amount of tax – if they had kids they were payingtoo much tax, or they wouldnt be getting WFF. The government is wasting money,thats the problem. Spending.far.too.much.on. irrelevant.things.

    Actually it could be said that many over 47k are getting fiscal drag relief by having kids…. and now they are getting more because single people dont have kids and need to have some relief from the government forced interst free “loan” stolen from them over thee past 8 years.
19. Steve Pierson 19

    27 May 2008 at 11:39 am

    Dave. You read it wrong. According to Keith’s analysis – eveyone below 47K is getting a cut that more than makes up for fiscal drag and everyone above that is getting a cut to match fiscal drag.

    And, like you say, 370,000 families are already getting WFF on top of that, so, they’re paying far less net tax than they were in inflation-adjusted terms.

    Identify some actual waste and then your waste arguments will be more respectable.
20. alex 20

    27 May 2008 at 11:47 am

    Felix, it would seem you answered your own question.
21. Keith Ng 21

    27 May 2008 at 1:43 pm

    Part-time workers are included is because this is a tax graph. Nothing more, nothing less. Taxes are based on individual income, regardless of hours worked. The benefit from tax cuts is based on individual income, regardless of hours worked.

    If you want to get finicky about this, we can say that everyone with a taxable income below $47000/year, will pay a smaller proportion of their income in tax than they would under a CPI-adjusted version of the 2000 tax regime, and that there are 2-2.3 million taxpayers who fit into this category. Regardless of their work status, they are still people who would pay a smaller proportion of their income in tax, etc..

    Burt – at $47,000/year, the difference between Labour’s tax cuts and CPI adjustments is less than $100. The difference does not get bigger as income increases. It is not a significant number, especially when you consider the nature of the CPI as a composite index, that the 2.8% average future CPI growth is entirely speculative, and even the amount that you lose to rounding errors.

    Also, let me ask you a question. If you earned (assume these numbers are inflation adjusted) $100 and paid 25% in taxes in 2000, and earned $140 but paid 30% in taxes in 2008, under which scenario are you “better off”? The reason I made that point on PA is that people use the term “worse off than they are in 2000” and talk solely about tax, without considering the rise in real income. As you can see, these are different things. Real after-tax income has increased – it’s not a statistical construct, it’s actual money you can buy cheese with.
22. milo 22

    27 May 2008 at 9:39 pm

    I think the critical conclusion is that those on the right of the graph are appalling bloodsuckers, and we would be better off without them.

    Right?

    Or do they contribute something? And if so, should they be encouraged to contribute more?
23. AncientGeek 23

    27 May 2008 at 10:03 pm

    Keith: Excellent post at HardTalk.
    Steve: Great series looking at the effects of the budget.

    Effectively this set of tax adjustments when complete gets rid of the fiscal drag accumulated since 1999. That is good, and hopefully future governments will continue to follow that regime.

    What burt (above) is ignoring is that there is a separate tax rebate running as well, Working for Families. Probably because it doesn’t apply to him.

    WFF runs across the majority of families in the country. It makes it feasible to have children without (as a relative put it) “bankrupting us to do it”. That ultimately helps with paying for the costs of the aging population and the costs associated with it. As does the Cullen fund and Kiwisaver.

    We’ve also gotten rid of the excessive government debt from the 70’s and 80’s that was chewing up so much of the tax take. That gives the country more choices into the future. From my understanding, Michael Cullen has managed to put in a massive tax adjustment downwards with very little requirement to cut services (about $500M per year for the next 3 years), and only raising minor debt to pay for capital projects. He has also not dropped a sinking lid on the government services.

    Anyway, now that I’ve peeked through some of the detail, this looks like an astonishingly fair budget with an eye to the long-term. It really shows that Michael Cullen seems to have more pragmatic imagination than anyone amongst the Nat’s.

    So what are the ‘right’ whinging about? That they are going to be paying no more than they used to do? Poppycock! The amount of tax take at my rather high income level isn’t excessive. The lower effective taxes will help other members of my family and their kids.
24. burt 24

    27 May 2008 at 10:03 pm

    Keith Ng

    Also, let me ask you a question. If you earned (assume these numbers are inflation adjusted) $100 and paid 25% in taxes in 2000, and earned $140 but paid 30% in taxes in 2008

    If a “thing” that you regularly purchased cost $75 in 2000 and increased by the same proportion (40%) then it would increase to $105 and the earnings now taxed at 30% would leave you $98, insufficient to purchase the same item you could before ‘fiscal drag’.

    Sure in a zero inflation situation you are better off paying 30% on $140 8 years after you were paying 25% on $100, but that’s not what fiscal drag is about is it, it’s CPI increases pushing people over thresholds. It’s particularly ugly when thresholds stay in place for so long as they have under Labour.

    IrishBill says: Burt, would you care to explain how CPI (the measure of the increase in goods and services) has any bearing on bracket creep (the process by which people’s pay increases enough to put them in a higher tax bracket)? You are effectively arguing that if the price of oranges (for example) is increased you pay more income tax. I can’t really see how that works. underpants gnomes maybe?
25. AncientGeek 25

    27 May 2008 at 10:04 pm

    Damn, I shouldn’t have used hs’s favorite expletive – I got moderated!

    I like being able to fix my comments though.
26. AncientGeek 26

    27 May 2008 at 10:24 pm

    milo: Think of it as catchup from the 1990’s. I had a fairly major tax cut then. But the costs to me, my family and friends was immense. Because to pay for it, services were cut.

    Just as a minor example, I have a leaky building that I’m fixing now because f*ckwit in the national government in the early 90’s thought it’d be a great idea to deregulate the building industry inspections. Tell me how much that ‘saved’ the country through private sector ‘efficiencies’, against what it cost.

    That alone has cost me a great deal more than the tax cuts I got in the 90’s.

    A similar dickhead plan on the student debt has been costing a lot as we get new generations heading off for training.

    I’m not going to even bother to talk about the rises in insurance premiums. More theft – largely due to really stupid benefit cuts in the 90’s. That was an example of really stupid social engineering. How to invent an underclass that we have to wind up paying for in our lives.

    Face it as a society, we sink or swim together. Trying to grab unfair pieces of the pie is a game for idiots (or Act members perhaps?)
27. milo 27

    27 May 2008 at 10:39 pm

    Ancient Greek: I agree with you. But the devil is in the detail. Who is to define what is fair?

    My own view is that the critical thing in fairness is to be heard, and to have your views taken seriously. The current government is a long way from such an approach. In fact, I think they have been at the exact opposite. Their views are “if you’re not for us you’re a National party supporter, and why don’t you just f*** off.”

    I’m not very keen on a definition of fairness that writes me off as an annoying irrelevance. It’s an election year, so they are improving, but nine years of history are hard to overcome.

    So from my point of view, it is the current government that has been trying to grab unfair pieces of the pie. And they won’t even do me the courtesy of treating my concerns about that seriously.
28. r0b 28

    28 May 2008 at 12:10 am

    My own view is that the critical thing in fairness is to be heard, and to have your views taken seriously. The current government is a long way from such an approach. In fact, I think they have been at the exact opposite. Their views are “if you’re not for us you’re a National party supporter, and why don’t you just f*** off.’

    That’s a fairly standard partisan impression Milo. What facts is it based on?

    I put it to you that Labour will listen to anyone who wants to talk to them. Labour and Helen Clark have shown real skill at MMP politics, a process of continual negotiation and compromise. They have led minority governments in NZ for 9 years now – you can’t do that unless you listen to people (as National discovered once before, and may yet discover again).

    You might be interested to read this Herald piece on how hard Helen works to stay in touch: http://www.nzherald.co.nz/section/story.cfm?c_id=280&objectid=10510655&pnum=0

    Clark has made it her routine as Prime Minister to visit a town or city outside Wellington on the Thursday of weeks when Parliament is sitting, and she tries to get around as many regions as she can during recess periods. It is all part of keeping in touch, keeping up a presence, and keeping an ear to the ground to sense the public mood.

    And as for other MPs – what do you think they do when parliament is not sitting Milo? They talk to people. Often the most vulnerable or angry people in their electorates. They hear views from everywhere.

    So, make an appointment with your friendly local Labour MP Milo. Or contact the Labour Party direct:
    http://www.labour.org.nz/contact_us.html
    or this page describes many ways to make your opinions known to government:
    http://www.parliament.nz/en-NZ/HvYrSay/
29. AncientGeek 29

    28 May 2008 at 1:13 am

    milo: rOb pretty much described the way I feel about it as well.

    In case you haven’t figured it from my previous comments, I’m pretty much of a right-wing leftie. I’m conservative on economic matters, and liberal on social. Probably because of a rather large and long-lived family, I hear things from almost every available angle, and with a very long-term perspective. The pre-1920’s generation is passing away now. I still have to deal with the young idealists who think that anarchism is a good idea (yeah right!), and the materialists (yeah right!).

    It isn’t hard to ‘talk’ to people in the NZLP. I’ve been doing it for years. The trick is to be concerned about things over the whole country and into the future. That is what politics is about, not whatever the current issue of the day is. Politics is a long-term process, not short-term sensationalism. Unfortunately, there are relatively few of the vocal right that I’ve found who are genuinely concerned about others over the long-term in the wider community.

    In general I’d say that people who say that the labour and left leaning politicians do not listen to them tend to have one trait in common. They don’t talk, they SHOUT. For some strange reason having spittle splattered into your face doesn’t help in listening to other peoples points.

    It is much the same reason I don’t bother to comment in places like kiwiblog. Seems rather pointless. Everyone shouting and few listening.
30. alex 30

    28 May 2008 at 8:08 am

    AncientGreek

    Just listen to Allan Peachy shouting away in parliament last night. Reminded me of Murray Deaker on steroids.
31. milo 31

    28 May 2008 at 9:55 am

    r0b –

    In 2005 Labour was elected with 41% of the vote. National got 39%. Many of those voting Labour did so “through gritted teeth”. Labour’s response was to slash and burn its political opponents, and treat any critic as a lifelong supporter of Don Brash.

    I think it is quite disingenuous to claim that our democratic institutions mean Labour is listening. Rather “we won, you lost, eat that” seems to have been the philosophy from day one.

    As far as I can see, Labour only listens to swinging voters. Everybody else can get stuffed, whether they are beneficiaries or entrepreneurs.

    This works in parliament too – they listen to NZ First and United Future, but ignore Act (unsurprisingly) and shaft the ‘Greens’.
32. r0b 32

    28 May 2008 at 10:19 am

    In 2005 Labour was elected with 41% of the vote. National got 39%. Many of those voting Labour did so “through gritted teeth’.

    Did they indeed. I’d be fascinated to know how you happen to know this particular “fact” Milo. What’s your methodology there me old cuppa?

    and shaft the ‘Greens’

    Nice wedge politics there Milo. The Greens were “shafted” by UF and NZF. But being rather more mature than most politicians (heh!) their goals are not baubles but results. So they have a perfectly workable co-operation agreement with the government that gives them input into the budget, and the two Green co-leaders were appointed as the official spokespeople on Energy Efficiency and Buy Kiwi Made. Since then the Greens have been quietly achieving:
    http://www.greens.org.nz/about/achievements.htm
    and specific examples:
    http://www.greens.org.nz/searchdocs/PR11838.html
    http://www.greens.org.nz/searchdocs/PR11830.html
    http://www.greens.org.nz/searchdocs/PR11825.html
    http://www.greens.org.nz/searchdocs/PR11839.html
    Go you Green things!
33. milo 33

    28 May 2008 at 10:24 am

    r0b – you can find the election results at:

    http://2005.electionresults.govt.nz/
34. r0b 34

    28 May 2008 at 10:32 am

    I certainly can milo, thanks so much for that.

    Now, how did you determine that ‘Many of those voting Labour did so “through gritted teeth”? I couldn’t see that bit in the results milo.
35. alex 35

    28 May 2008 at 10:36 am

    Milo,

    Point is how do you know that:

    Many of those voting Labour did so “through gritted teeth”

    I assume you know this anectodally or is this just your feeling? Or do you actually have survey results to back your point?
36. milo 36

    28 May 2008 at 11:44 am

    I think it was Joanne Black that wrote that in a column. Maybe it was Lynley Boniface. It certainly resonated with me.

    You can disagree or agree as you see fit, but I don’t think asking for a survey to back it up has much weight. Our interpretation of society is not based purely on surveys, is it?
37. r0b 37

    28 May 2008 at 11:56 am

    Our interpretation of society is not based purely on surveys, is it?

    Indeed it isn’t milo. It is all to often based on blind partisan instincts that manifest themselves as statements of “fact”. As seems to be the case here for example.

    Bye!
38. milo 38

    28 May 2008 at 12:01 pm

    On what basis do you accuse me of blind partisan instincts? That seems rather rude.
39. National disgrace 39

    28 May 2008 at 12:06 pm

    could it be resonating with Joanne Black?
40. burt 40

    3 June 2008 at 1:08 pm

    IrishBill

    IrishBill says: Burt, would you care to explain how CPI (the measure of the increase in goods and services) has any bearing on bracket creep…

    Well I always thought fiscal drag was about incomes rising against static tax thresholds. You know the CPI increases that most people get… I say most people becasue big nasty CEO’s always get more than CPI and so do MP’s – but workers get about CPI every year and hey guess what…. prices go up by CPI as well. How hard can it be Irish????

    You could at least provide a valid argument why Keith (I love Labour) Ng can say that fiscal drag is not decreasing peoples real income… Oh that’s right – you can’t can you -so you denigrate me.

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