On flat tax

Written By: - Date published: 4:51 pm, July 12th, 2008 - 61 comments
Categories: tax - Tags:

We have a progressive tax system, whereby the portion of income paid in tax increases with income. Many on the Right argue that moving to a flat tax system, where everyone pays the same portion of tax on income at all income levels, would be fairer. Let’s look at what such a change would entail.

The 3.25 million adult New Zealanders had an average income of $34,800 in 2007, equating to total income of $113 billion. $26 billion in income tax was raised in the last year. That’s 23% of income. So, if we were to introduce a flat income tax, it would have to be set at 23%.

So far, so good. Now, how many Kiwis currently pay more than 23% of their income in tax? If your income is below $50,000 a year, you pay less than 23% of your income in tax. Of 3.25 million taxpayers, 2.55 million earn less than $50,000 a year. That means 78% of people pay less than 23% of their incomes in tax.

S0, if we were to replace the current progressive tax system with a flat tax system, it would put up tax for 78% of Kiwis. And the poorest Kiwis would have the largest increase in tax. A person on an income of $10,000 a year would see their after tax income drop from $8,470 a year to $7,700, a 9% drop. A person on $100,000 would see their after tax income increase from $69,730 to $77,000 a 10% increase. The higher your income, the higher your tax cut would be.

What’s fair about putting up tax on 78% of Kiwis to give a massive tax cuts to the few most wealthy? What’s fair about taking from the poor to give to the rich?

Oh, we could just slash government spending to get income tax lower? You would have to cut revenue by $10 billion to get the flat tax to the 15% the lowest income earners currently pay. It would be the poor that suffer from $10 billion less government spending (which equates to nearly all health spending, or education spending and is more than is spent on superannuation and benefits).

Whatever way you cut it, introducing a flat tax would make most people poorer. Doesn’t sound fair to me.

61 comments on “On flat tax”

  1. Spam 1

    Of course, your analysis completely ignores the fact that a flat tax of 23% would almost immediately stop a lot of tax avoidance, and generate more investment and hence may even push-up total tax revenue. It also ignores the benefits of much lower marginal tax rates on providing incentives to improve productivity.

    I personally think that (say) the first 10k tax free, with a flat-tax of about 25% after that would be better.

  2. claims about productivity, lower tax avoidance, more investment…..how?

  3. Felix 3

    Good post, Steve – but can you please, please proof read it?
    (There are plenty of regular readers here who’ll have enough trouble comprehending this one as it is.)

  4. Felix. maybe it’s the hangover, maybe it’s watching the Simpsons but i could only see the one typo. always pleased to have mistakes pointed out.

  5. Felix 5

    “Now, how Kiwis currently pay more than 23% of their income in tax?”

    That was the other one I spotted. Not trying to hassle a hungover person, just trying to help 🙂

  6. Oliver 6

    Of all the proposals I have ever seen for a flat tax this is the first one that has suggested a flat tax rate of 23% The Baltic countries that have introducted flat taxs have typically gone for a rate between 12% and 15%.

  7. Lew 7

    Oliver: Ah yes, the Estonia Proposition. Leaving aside for a moment whether we want to be like Estonia, with unemployment running at about 10% for much of the time since implementing that flat tax, I wonder if you could provide some counter-data to the wikipedia entry, which states:

    “The Baltic countries of Estonia, Latvia and Lithuania have had flat taxes of 24%, 25% and 33% respectively with a tax exempt amount, since the mid-1990s.” (
    http://en.wikipedia.org/wiki/Flat_tax#Recent_and_current_proposals )

    I normally don’t cite wikipedia as an authoritative source, but even so, it’s more authoritative than Some Random Unsubstantiated Statement On A Blog.


  8. Draco TB 8

    Of course, your analysis completely ignores the fact that a flat tax of 23% would almost immediately stop a lot of tax avoidance, and generate more investment and hence may even push-up total tax revenue.

    Back in 2005, IIRC, ACT suggested a split tax @ 15/25%. They said that this would push productivity up and therefore increase the tax take. Being the inquisitive type I plugged their projected growth figures into the spreadsheet as well as appropriate figures from the 2004 budget and came to the conclusion that it would take 14 to 15 years before the tax take would equal what it had been before the cuts. Of course, over that time the government would be seriously down on the needed funding to maintain services. The economy may grow in the first year or two after such a cut while things were still in good repair but after awhile the lack of funds to maintain and improve infrastructure and support services will take their toll and the economy will start to go into decline.

    It also ignores the benefits of much lower marginal tax rates on providing incentives to improve productivity.

    You can’t improve productivity if the required government services are either under-funded or non-existent ie, you won’t be able to truck anything from Silverdale to Auckland City if the truck is going to get a broken axle every two kilometers.

    Government spending isn’t optional – It’s there to maintain our society and infrastructure so that the economy will work and it needs to be enough to do the job.

  9. Oliver. you’ve got the tax rates in these countries wrong. If you want to find out about the Estonian tax system, go to riik.ee (it has english) or here http://www.worldwide-tax.com/estonia/estonia_tax.asp .

    The income tax rate is 22%. Moreover, in Estonia, as most European countries, there’s a social security tax as well as income tax – it’s paid before gross income by the employer but that is a tax on workers (ie there incomes would be higher wihtout it). It’s 33%.

    When you add together social security and income taxes you get the ‘tax wedge’ – the difference between the money paid by the employer and the money recieved by the employee. NZ has one of the lowest tax wedges in the world.

  10. Tax wedge- http://en.wikipedia.org/wiki/Tax_wedge

    in fact, we have the third lowest tax wedge in the OECD http://www.oecd.org/dataoecd/50/41/36371703.pdf

    only Mexico and Korea are lower, and after the tax cuts in October, we might be lower than them

  11. Well I had a bit of a go at this topic. But my question is – why do you bring it up? Do you know something we don’t?

  12. no particular reason just a ‘big issue’ piece. But somethng brought it to mind a few weeks ago – talking to a woman over dinner, ACT-type, wanted a flat tax, she was earning $45K, I said ‘you know, you’re promoting a tax increase for yourself to give me a tax cut’

    ‘yeah, but in 5 years i’m going to be earning $200K’ she replied.

    so I thought I would sit down and work out the figures.

    I’ hoping Farrar and co might come to defend wanting a tax cut for themselves when it would put up tax for everyone else, or cut their social services.

    I know Farrar would get rid of WfF to fund tax cuts – ie. reduce the after-tax incomes of families to increase his own.

  13. Flat taxes give people an incentive Stevo. Proportionally, those that earn more pay more tax. It is an unfair system because of that. Income tax should lower as income rises. Incentive again Stevo.

    Taking money off those who earn it by force isn’t a clever thing Stevo. Best the income tax system is simplified, reduced for all and then we can cut IRD staff by at least half.

    Remember Stevo, the pie is not a finite thing that must be shared, people can be incentivised to bake a larger one.

    Of course if taxes were lowered and those that your ilk purport to support, people who earn smaller wages, earn’t more because they were incentivised to work harder because of lower taxes, then you wouldn’t have the money to interfere in their lives with crackpot nanny state meddling now would you?

  14. Anita 14


    Flat taxes give people an incentive Stevo

    Huh? How would the incentive be any different from the current one?

    I get a pay rise, I get more money in my pocket, I am pleased. The End.

  15. Ari 15

    I think if we cut out some of the more useless tax exemptions there might be room to flattern the tax curve a little afterwards. (that said, I think it’s middle-income earners and those on the minimum wage that need tax relief most) Generally speaking, I dislike tax systems with exceptions- which is why progressive tax systems are actually much simpler, as they reduce the need for lots of exceptions and tax cuts for lower-income earners.

    Darren- Taxing people’s income often results in better spending efficiency than leaving it to them. Even with high taxes there’s still plenty of reason to earn more- you still get a lot more money, it’s just a lot of it is spent on roads and public services instead of going directly to your pocket. If you use public transport, have health problems, drive between cities, etc… you’ve benefitted significantly from paying taxes.

  16. because if we were to remove the 39 cent tax rate (that will only apply over $70K form Oct 1) that would inspire the 500,000 workers who earn on the minimum wage or close to it to work harder. I mean, that 6 cent in the dollar reduction in a bracket that most people don’t earn anywhere near would inspire them to work harder – right now they’re content to live on $25K a year working full time, but remove the 39% bracket and they’ll soon be working the 120 odd hours a week they need to get their incomes over $70K.

    You provide no evidence that adjustments to tax rates alter how hard most people work, why not? because there is none, it’s just wishful thinking to justify taxcuts for the rich.

    In fact, as the Incomes Report shows http://www.thestandard.org.nz/?p=2419 cutting taxes for the rich and cutting benefits to pay for it just made the rich richer and the poor poorer in the 1990s.

  17. Lew 17

    Dazza: “Taking money off those who earn it by force”

    pweet – offside! For consistency’s sake you can’t argue tax is theft and simulataneously argue a flat tax system, unless that tax system is flat at a rate of 0%. If you want to argue that, be my guest.


  18. Anita,

    > I get a pay rise, I get more money in my pocket, I am pleased. The End.

    Actually, if I earn say $35k with 3 kids and get a pay rise, I pay a marginal tax rate of about 51%.

    So say I get a $1k pay rise, then I get only $490 of that. Certainly still some incentive to work, but high income people give up at 39%. 51% is getting a bit silly.

    Worse at $50k, where earning another $1k I face a tax rate of about 64%. That’s downright nasty.

    If I have accomodation supplement also then it is much worse. Best I don’t work it out.

    Of course such is the nature of these sorts of tax-based schemes, they are genuinely hard to get right, like maybe impossible.

    So I disagree – your argument is that getting a $1000 pay rise and seeing only $360 in the pocket is fine? It isn’t.

  19. > In fact, as the Incomes Report shows http://www.thestandard.org.nz/?p=2419 cutting taxes for the rich and cutting benefits to pay for it just made the rich richer and the poor poorer in the 1990s.

    Cutting taxes for the rich doesn’t make the poor poorer, does it? Or are you referring to envy?

  20. Anita 20

    So I disagree – your argument is that getting a $1000 pay rise and seeing only $360 in the pocket is fine? It isn’t.

    My argument was that if I get a pay rise I get more money in my pocket, and that is an incentive to try to earn more.

    (Incidentally a decade or so ago when I was on the sickness benefit and working part time when I was well enough, the clawback was so steep that sometimes if I worked more hours than the previous week I earned less money, it was very disheartening!)

  21. Lew 21

    The Optimist: Perhaps he should have said `in real terms’.


    Captcha: “on competing”. Scary.

  22. >> Cutting taxes for the rich doesn’t make the poor poorer, does it? Or are you referring to envy?

    > The Optimist: Perhaps he should have said `in real terms’.

    ‘in real terms’ normally refers to adjusting for inflation.

    Maybe he meant ‘in relative terms’. But even that is arguable, since $1 to a poor person is worth more than $1 to a rich person. You would have to have very high tax rates to take a 3% pay rise for someone on $100k down to the same as a 3% pay rise for someone on $20k.

    I could be wrong, but I think the claim that tax cuts for the rich make the poor poorer is simply false.

  23. T-rex 23

    I think you’re wrong.

    Rich people and poor people all live in a society. If you reduce the level of that societies output that is allocated to poor people (through services common to all – health, roads, police, education) then you make the poor people poorer.

    Some incredibly simple equations I just made up…

    Poor person available wealth = personal wealth + societal wealth share
    Rich person available wealth = personal wealth + societal wealth share

    Obviously, recuding the total tax take will reduce the societal wealth share for all members of society.

    Rich people will see their personal wealth go up, because you’ve reduced their tax burden, so the combined available wealth will be greater.

    Poor people will see their personal wealth remain unchanged, because they’re on the same tax rate. But because societal wealth has dropped, their combined available wealth has dropped. The poor have become poorer.

    Maybe it would be more valid to switch ‘wealth’ for ‘income’, but the idea is pretty obvious.

  24. The Optimist, read the report or the link, people on low incomes saw their incomes drop in real (not relative) terms, because the tax cuts for the rich were funded by cutting benefits.

    However you fund tax cuts for the rich whether reduced benefits, reduced social wage (that’s pubic services provided free or nearly free to the consumer, education, health, police etc), or higher tax on lower incomes – the rich get richer and the poor poorer..

  25. T-rex

    Feeling sleepy, but let’s ignore for the moment the idea that is it moral to take away someone’s income and call it ‘societal share’.

    So let’s agree that poor people don’t get poorer in terms of income, when rich people earn more. You’re saying that they get poorer in terms of their ability to live off other peoples’ income, I think. But really?

    I believe roads are funded by petrol taxes, and health is severely rationed already. I doubt removing the higher tax rates would affect the police. Education is a right based on age I think, so no affect there. You didn’t mention welfare, but again that doesn’t apply since these people are working.

    What exactly is in that societal share that the low income person will lose when the high income person pays less tax? Obviously you are assuming a reduction in government spending, but beyond that I am not sure.

    I’m thinking ‘envy’ is the real issue here. Come on, you can tell me, I can keep a secret am I right? 🙂

  26. Felix 26

    Very bloody optimistic.

    For the sake of clarity, can you please restate your reasons for ignoring the health, welfare and education budgets in your “calculations”?

    It’s just that in the real world, quite a lot of things hinge on these 3 areas so we can’t just pretend they don’t exist to make our numbers add up.

  27. gomango 27

    This has been wrongly attributed to the author shown, it really has no proven provenance. There’s something in this for all sides of the debate to think about.

    Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

    The first four men (the poorest) would pay nothing.

    The fifth would pay $1.

    The sixth would pay $3.

    The seventh would pay $7.

    The eighth would pay $12.

    The ninth would pay $18.

    The tenth man (the richest) would pay $59.

    So, that’s what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve.

    “Since you are all such good customers, he said, I’m going to reduce the cost of your daily beer by $20. Drinks for the ten now cost just $80.

    The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men – the paying customers?

    How could they divide the $20 windfall so that everyone would get his “fair share”? They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

    And so now:

    The fifth man, like the first four, now paid nothing (100% savings)

    The sixth now paid $2 instead of $3 (33%savings)

    The seventh now pay $5 instead of $7 (28%savings)

    The eighth now paid $9 instead of $12 (25% savings)

    The ninth now paid $14 instead of $18 (22% savings)

    The tenth now paid $49 instead of $59 (16% savings)

    Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.

    “I only got a dollar out of the $20,”declared the sixth man. He pointed to the tenth man,” but he got $10!”

    “Yeah, that?s right,” exclaimed the fifth man. “I only saved a dollar, too. It?s unfair that he got ten times more than I!”

    “That?s true!!” shouted the seventh man. “Why should he get $10 back when I got only two? The wealthy get all the breaks!”

    “Wait a minute,” yelled the first four men in unison. “We didn’t get anything at all. The system exploits the poor!”

    The nine men surrounded the tenth and beat him up.

    The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!

    And that, boys and girls, journalists, college professors, fellow workers is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction.

    Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

    David R. Kamerschen, Ph.D.

    Professor of Economics, University of Georgia

  28. Draco TB 28

    Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

    So, all the rich pricks leave the country because they don’t want to pay tax. Their businesses, farms etc all fall into disrepair because no ones working them as they were closed down so that the rich pricks didn’t have to pay tax. They, of course, still all have mortgages and loans that they can’t pay anymore so the banks foreclose. The banks, though, are in a bit of a bind as the only people who want to buy the businesses and farms are the poor. After some discussion between the poor and the banks the community buys the farms and businesses up for pennies on the dollar. After this small investment the communities all become massively rich, there’s no poverty, unemployment is unheard of and the most anybody works is 4 hours per day giving plenty of time to be with the family/whanau as well as to up skill down at the community funded university.

    Suits me fine.

    BTW, if that was POS written up by a professor he (and anyone who agrees with him) needs to go do a class in remedial logic. There are several other ways I can rip it to shreds.

    I’ll give you a hint: “The rich do not produce wealth.” Adam Smith in The Wealth of Nations

  29. gomango 29

    Here are a couple of interesting links:


    On this first one, the key question the hypothetical taxpayer asks themselves is “why is the second largest bite out of my pocket wff and benefits?” Wouldn’t it be more efficient for me to keep at least the wff part of it?


    And on this one, many interesting parts but the most intriguing the table showing percentage of total tax paid by income band. You see that the 2% of the population earning 150k+ (2% of population) pays 17% of the overall income tax take. They also pay a large share of GST. If the 51,000 people earning 150k+ all leave overseas try plugging a 4.5 billion hole in the PAYE take plus all the multiplier effects from GST, lower business investment, less entrepreneurial job, fewer employees working. What would it be – a $10 billion hit? More? These are the “rich pricks” our Finance Minister alludes to. They are actually indispensable to our society and to suggest otherwise is to play the politics of envy card, And in the same way National can’t ignore people at the bottom of the income scale, Labour can’t ignore those at the top.

    Personally I have made a choice – I am very squarely in the top bracket and think I pay way too much tax. However, I also regard it as the premium I have to pay in order to live in NZ, and have my kids grow up as kiwis rather than expats, and to live in a society where people don’t starve even if it is their own fault. It also means I demand good service from schools, hospitals, police etc. In rational economic terms the reward from my labour is far greater overseas but I ascribe value to many intangible things, hence I came back to NZ. I also don’t want to drive down the road and see abject poverty like I have done in places like Indonesia, the Philippines, Malaysia and Thailand.

    My reason why Labour is doing so poorly in the polls is that when working people on modest incomes get squeezed (for whatever reason) they don’t like seeing public money wasted, they don’t like paying taxes for the perception of poor service, they don’t like politicians (of either hue) throwing taxpayer money at non-critical expenditure. No one knows the value of a dollar like a small business owner who has pledged his house as security for the business, or the mother who works when she’d rather be at home caring for the kids but doesn’t have that choice.

  30. gomango 30

    ummmm….. have you actually read “The Wealth of Nations”? And I don’t mean just the Wikipedia version. There is actually a real book (with pages and everything) called that.

    If you have read adam smith you’d know the society you describe doesn’t work – Adam Smith proved that over 200 years ago, the soviets proved it last century – look around the world there istons of proof. The best model is probably what we have in NZ – broadly open markets and rewards for free enterprise, but an element of wealth re-distribution to keep a cohesive society.

    Was NZ really a better under our last Socialist government (Muldoon).

    Despite being one of those people you froth at them mouth about Draco, I don’t think NZ is too bad at the moment. Nor would it be for the next three years under either labour or national – there really isn’t a lot of difference between the two.

  31. Draco TB 31

    Yes I have read Adam Smith’s Wealth of Nations. I’ve read quite a bit of Das Kapital as well but I don’t really agree with Marx. I’ve also read Principals of Economics by R.H. Frank and Ben Bernanke. Presently reading Macroeconomics by A.B. Abel, Ben Bernanke and D. Croushore.

    What you fail to note is that I didn’t say that it would be a command economy. I would fully expect it to be a market economy – just one without the capitalists.

    I also don’t think NZ is bad ATM but that doesn’t mean that it couldn’t be better.

  32. gomango 32

    Again I’d call you on that – show me an example of a market economy that has ever functioned without capitalists?

  33. DS 33

    “If you have read adam smith you’d know the society you describe doesn’t work – Adam Smith proved that over 200 years ago,”

    The thing about Adam Smith, of course, is that he was an advocate of progressive taxation (his argument was that the rich had more property, so they should pay a greater proportion of their income to the state to protect property rights).

  34. Ari 34

    I could be wrong, but I think the claim that tax cuts for the rich make the poor poorer is simply false.

    That depends what’s funding the tax cuts and whether everyone gets a roughly equal share of the pie or not. Flat tax cuts generally widen income disparity- whether that’s because they only motivate the rich or because they tend to go hand-in-hand with degradation of the public service would be interesting to know, but not enough to experiment with it.

    I also don’t see how tax cuts would incentivise most of the poor to earn more. They’ve already got all the incentive they’re going to get from money- it’s a matter of whether they feel ABLE to move up the ladder or not.

  35. T-rex 35

    Gomango – My reasoning is actually pretty close to yours, except for the following:

    1) I don’t have kids, so I’ve got some freedom to explore the world for a few years before I come back here to bring them up in a nice place.

    2) I haven’t read ‘The Wealth of Nations’

    3) I’m probably not quite so far into the top bracket

    4) I don’t really think I pay too much tax… or if I do I don’t think it’s siginificantly too much. However, I don’t actually think that’s a difference… as you say you think you pay too much tax, but you think it’s the premium you pay for living in a place that gives all the benefits you describe.

    It think of it the same way – it’s a premium paid to keep a place worth having. On that basis, I don’t think I pay too much.

  36. T-rex 36

    Optimist – Your argument is completely retarded. Health, Police, Education etc etc etc don’t get funded by the ‘Money Fairy’ just because they’re rights. You still need to pay for them.

    Envy? You mean me being envious of rich people? Ahhh… no, I’m not really in a position to do that. I’m contemptuous of stupid rich people who don’t understand what it is that keeps their lives so good and don’t give a damn about people who have it a bit harder than them, but that’s different.

  37. vto 37

    Mr Pierson, your argument will apply to any tax relief anywhere anytime virtually. Those that pay the most now will almost certainly get the largest cut in dollar terms no matter what sort of tax cuts are put in place. Unless tax cuts are implemented which give larger dollar cuts to the lower income brackets, in which case the tax rate differential widens constantly – to some kind of end near oblivion.

    It will always be deemed “unfair” in the eyes of this type of ideology.

    Its a brainless point being made.

  38. gomango 38

    T-rex, just to expand on my comment, the reason I think I pay too much tax is because I think our government spends it inefficiently. I don’t disagree generally with what it is spent on, I just think we could do way, way better in the quality of how it is spent. Many, many little things – in no particular order…..

    – why do government departments need to rent offices in Tier 1 commercial space? Contrast the commercial property market in Wellington vs Auckland or any similar market overseas. The best investment in NZ for the last decade has been as an owner of a wellington office building with a lazy government department tenant who can’t negotiate to save themselves, but feels its important for their departmental culture to have a fancy office. Keep the money rolling in thanks. I appreciate the fact I can ratchet the rent every two years and you have no right not to renew for the next 12 years.

    – why do we have so many DHB’s with all the duplication that implies. Look at the growth we have had in health spending over the last 10 years without any improvement in service levels and waiting times. Its not a doctors and nurses problem.

    – ditto for education. How do we have a free and efficient education when so many families have opted out of the state sector and those that haven’t pay up to $500 per year to send their kids to the local school. The GST received on private school fees is greater than any state subsidy to private schools.

    – why do we have so many terrestrial region councils and layers thereof

    – why is public sector productivity generally in decline?

    – why do we regard benefits as a wage and not as an investment in human capital?

    – why don’t we fund existing community organisations to deliver services particularly to Maori and PI recipients rather than leave it up to a combination of half a dozen government departments who perform the task by remote control

    One could go on and on.

  39. Anita 39


    Are you still around? I think I saw on another thread that you’ve decided to leave, but if you haven’t I’m happy to answer a bunch of your questions from that list.

  40. lprent 40

    Anita: I think he got frightened off by my (perceived) gender.

    It is kind of amusing when you consider the In Real Life realities – like my bald patch. Says a *lot* about the gendered perception of reality.

    I’d write a post on the topic but I got rather bored with it decades ago.

  41. Anita 41

    lprent writes:

    I think he got frightened off by my (perceived) gender.


    I am childishly pleased by this, but I also wanna know your trick – no-one seems frightened by my actual gender 🙂

  42. Spam 42

    claims about productivity, lower tax avoidance, more investment ..how?

    Well, people have already commented on high marginal tax rates (in particular due to welfare abatement). But on the tax avoidance, this graph shows a good illustration: The peaks at 39,000 and 60,000 show where people have structured their tax to avoid paying tax in the next bracket.


  43. RedLogix 43

    I’ve held back on this topic for a while now, but it remains my single biggest dissapointment with Michael Cullen (whom I very much admire in many respects) that he has failed to reform our tax system more radically. There is one major reform opportunity he knows about, but has failed to tackle.. that is the notion of Universal Basic Income.

    This site has a good collection of local content on the idea:


    UBI can take a number of forms, but in its most basic shape it pays all citizens over the age of 18 (regardless of whether they work or not) a fixed annual income, paid weekly/fortnightly. For the purpose of this example, imagine about $10,000 pa.

    As a result ALL targetted benefits, unemployment, sickness, DBP, Super, etc can be largely eliminated with only some much smaller residual top-ups or wider support to social agencies required.

    Then all PAYE is replaced by a single flat tax in the range of 30-35%.

    There are a number of very interesting postives that come out of this idea that rather nicely combine many of the advantaqes of both a progressive AND a flat tax system, while mitigating the disadvantages of both.

    Personally I have long thought that UBI is the potential ‘circuit breaker’ idea that could get NZ politics out of the current stale mode we are in squabbling over taxes versus public services.

  44. Quoth the Raven 44

    Can any of the righties here actually provide any examples of countires with low taxes that have greater productivity and standard of living than those which have higher taxes and greater social spending?

  45. rave 45

    When I read this thread title first I read is as “On the Fart Tax”. Funny that.
    At least Lange died in a ditch (metaphorically) to stop the Flat Tax.
    Who will die in a ditch to get rid of the existing Flat Tax, GST?
    It isnt meaningful to look at figures of gross income tax without looking also at GST and the ‘social wage’ which redistributes taxation.

    Most of the righties would be happy to eliminate the social wage for workers (eg nasty handouts disguised as negative income tax for state dependents) while they boost it for bosses (eg farmers avoiding Fart tax, RUC for truckies and tax rebates on private health massively subsisised already by the public death system) not to mention, Rio Tinto, Fonterra blah blah.

    So when we take into a/c the social wage for bosses, their taxes are considerably flattened already. What is the actual net tax (not evaded but avoided remember) of the big banks, Rio Tinto, Fonterra?

    My point in case you are wondering, is that once the net tax flows are calculated my bet is that we have already exceeded a flat tax regime with a highly regressive tax regime. And that’s even before we talk about who creates the wealth in the first place. Bring back Harry Holland and die on the high ground.

  46. Draco TB 46

    show me an example of a market economy that has ever functioned without capitalists?

    I don’t know of any practical implementation of such – this, of course, is no proof that it won’t work. You cannot find the answer to the future in the past.

    My point in case you are wondering, is that once the net tax flows are calculated my bet is that we have already exceeded a flat tax regime with a highly regressive tax regime.

    Yep, that’s a major reason why I keep telling people on wages to go on contract and get a good accountant 😀

  47. Gustavo Trellis 47

    So how is it fair that 12% of working New Zealanders pay 51% of our tax take?

  48. Anita 48

    So how is it fair that 12% of working New Zealanders pay 51% of our tax take?

    Absolutely fair.

    Right now I am well enough, earn well, and pay whacking great heaps of tax.

    A decade ago, when I was really unwell, I survived on the sickness benefit.

    For some time after that I worked part time (as much as I could) and paid much less tax than I do now in both relative and absolute terms.

    I pay what I am able to toward supporting all of my community – when I am able to earn well I pay a lot more than people who are less fortunate than me, that seems fair to me.

    I pay tax to support our public health system (without which I would be either a permanent beneficiary, or permanently hospitalised, or dead), I pay tax to support our education system so that we all have the best chance to be as productive and happy as we can (as I am), I pay tax to support all other services of government that we need to be healthy, productive and happy as a community and as individuals.

    What is so unfair about that?

  49. sean 49

    Your guys view point is astounding:

    “What’s fair about taking from the poor to give to the rich?”

    How the hell can taxing someone be seen as taking from the poor to give to the rich, when it is their own money?

  50. Its about fairness, something that Aunty Helen knows nothing about. You can bring about all the graphs you want to, but there should be one low tax rate for all.

  51. Gustavo Trellis 51

    What is so wrong about it is that the government has worked itself into a position where it relies on a section of scoiety that has the ability to up sticks and move overseas, where they can earn significantly more. It’a no-brainer, what would you do?

  52. Anita 52


    I choose to stay in NZ. What about you?

  53. mateiro 53

    Quoth the Raven

    “Can any of the righties here actually provide any examples of countires with low taxes that have greater productivity and standard of living than those which have higher taxes and greater social spending?”


    Everyone has basic housing supplied – HDB. Good capitalists rent out their “mansion” to expats and live in their HDB.

    Very much focussed on a user-pays system for luxury items. Basic essentials are free of GST and typically cheap (by Singapore Standards)

    Hopefully once the heathen is shown the door, Mr Key will restructure our economy in a similar way.

    My effective tax rate in Singapore was ~9.5% on total earnings over 180k. I came back to NZ because it is a great country – yet because I am a “rich prick” I am paying ~35% tax. More than $60k in tax for what? SFA, because I end up paying for everything I need and use anyway through everyother tax.

    Shouldn’t Cullen be encouraging people to aspire to be like John Key (Do well for themselves) rather than calling him a prick because he has been successful? This twat is supposed to be an exemplar for our young, entrepreneurs, socially misdirected etc. and he goes around making comments like that…. What sort of opinions is he forming in the minds of the young and impressionable? – Can only loathe him.

  54. Gustavo – are you Burt? It’s just you’re saying very similar things at kiwiblog and at the same time:


    Not taking that ban too well, eh?

  55. RedLogix 55

    Repeatedly we see right wingers fall into the same narrow trap, that taxes are a payment for services they personally consume. This is partly true, in that at some point in our lives most of us will consume education, health, infrastructure, welfare services and benefit from an enormous range of regulatory functions that most people are entirely ignorant of. (Eg you can buy electrical appliances without having to worry if they are safe to use or not…). To this extent tax can be seen as an invoice for services rendered, and those who want to pay less are engaging in miserly quibbles about the line items.

    But many rigthies goes further than this, they are men firmly possessed of a belief in their own great talent and self-worth. This belief that all his wealth and power he enjoys is somehow entirely of his own making and deserving leads to the belief that all tax is at some level a form of theft.

    The Christian viewpoint informs us that this is wrong. (As do most other religions as well.) The underpinning idea of a Creator, who is not only the inspiration and sustaining power underpinning Creation, but a loving God who in His Grace creates us all different, born to differing nations, families and places in history, but also with our own particular capabilities and characters. These things determine our path in life, equally as much as education and application. Oftentimes it seems that great fortune is as matter of grace as anything else.

    Yet all prosperity is absolutely conditioned by one thing. Wealth ONLY exists in the context of a civilised, decent and cohesive society. The greater the wealth, the MORE dependent that wealth is on the efforts of myriad others who have made that wealth possible. No man is a multi-millionare on the back of his or her own personal efforts. (John Key for instance made his wealth by speculating on currency movements between nations. He generated not one jot of benefit to society for doing so, but nonetheless because our current civilisation is exceedingly complex there is a fine living for some to be made by exploiting these sorts of parasitic opportunities.)

    It is indeed entirely fair that those few of us who attain to great wealth should be also obliged to repay a larger share back to society as a whole. We are unavoidably, our brothers keepers.

  56. Quoth the Raven 56

    Mateiro – Good example. New Zealand has a higher GDP per capita than Singapore, Higher personal incomes and a higher Human Development Index ranking. Singapore is not even a functioning democracy. There are other countires you could have chosen that would have worked. Look at the countires that consistently rank the highest for any good attribute. Then look at their taxes. What do you see?

  57. Oliver 57

    Got one wrong, sorry

  58. Gustavo Trellis 58

    God no, I’m not Burt. Shudder. I’m more an advocate for more spread out, frequent brackets that more accurately reflect the reality of our current income levels then the current ones that were drawn up in 99.

  59. Darren,

    Flat taxes give people an incentive Stevo

    Huh? How would the incentive be any different from the current one?

    I get a pay rise, I get more money in my pocket, I am pleased. The End.

    Anita, if you cant see why I cant really help you. All I can say is if your income tax rate goes up the more you earn, the incentive isn’t there for you to work harder. If the tax rates went down as you earn’t more then the incentive to work harder is clear.

    Cheers though, Darren

  60. Darren- Taxing people’s income often results in better spending efficiency than leaving it to them. Even with high taxes there’s still plenty of reason to earn more- you still get a lot more money, it’s just a lot of it is spent on roads and public services instead of going directly to your pocket. If you use public transport, have health problems, drive between cities, etc you’ve benefitted significantly from paying taxes.

    Ari, taxing peoples income is more efficient than letting them spend it? That is the funniest thing that I have heard since Helen Clark studied and lapped up Stalin and Lenin in her university days and trialed it out what she learned on New Zealanders in the late 20th century!

    It is inefficient and wasteful to pay too much tax. Economies work better under lower taxes. It is basic economic fact that I learn’t in the third form.

    Dazza: “Taking money off those who earn it by force’

    pweet – offside! For consistency’s sake you can’t argue tax is theft and simulataneously argue a flat tax system, unless that tax system is flat at a rate of 0%. If you want to argue that, be my guest.

    Lew, we need some tax to run police and armed forces. Nothing else. A flat tax would be best.

    Still waiting for an answer to my original post Stevo, I’m guessing you don’t have one

    Cheers, Darren

  61. Swampy 61

    “In fact, as the Incomes Report shows http://www.thestandard.org.nz/?p=2419 cutting taxes for the rich and cutting benefits to pay for it just made the rich richer and the poor poorer in the 1990s.”

    Funny that even in that article no such claim is made. As we all know the benefit cuts were not linked to tax cuts because the benefit cuts were made in 1991 and the first tax cuts for the same government were not until years later, 1996 IIRC. The benefit cuts were made to address the immediate budget deficit that Labour left on their departure from office.

    If Labour has given tax cuts without reversing the benefit cuts they must be following that kind of policy according to such logic.

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    Local body elections are coming up next month. And it looks like all Palmerston North candidates for Horizons (the Manawatu-Whanganui Regional Council) want to take action on climate change:Climate change is set to be a key issue in Palmerston North for the next three years if those wanting to get ...
    No Right TurnBy Idiot/Savant
    1 week ago
  • BORA reform is stalled
    Eighteen months ago, the government promised to strengthen the Bill of Rights Act, by explicitly affirming the power of the courts to issue declarations of inconsistency and requiring Parliament to formally respond to them. So how's that going? I was curious, so I asked for all advice about the proposal. ...
    No Right TurnBy Idiot/Savant
    1 week ago
  • Corbyn and Brexit
    As the Brexit saga staggers on, the focus is naturally enough on the Prime Minister and his attempts to achieve Brexit “do or die”. But the role played by the Leader of the Opposition is of almost equal interest and complexity. The first problem for Jeremy Corbyn is that he ...
    Bryan GouldBy Bryan Gould
    1 week ago
  • A ditch for him to die in
    Last week, English Prime Minister Boris Johnson boldly declared that he would rather die be dead in a ditch than delay Brexit. Unfortunately for him, the UK parliament accepted the challenge, and promptly dug one for him. The "rebellion bill" requires him to ask for and secure yet another temporary ...
    No Right TurnBy Idiot/Savant
    1 week ago
  • Warning! Warning! Danger Jacinda Ardern! Danger Marama Davidson! Warning!
    Lost In Political Space: The most important takeaway from this latest Labour sexual assault scandal, which (if I may paraphrase Nixon’s White House counsel’s, John Dean’s, infamous description of Watergate) is “growing like a cancer” on the premiership, is the Labour Party organisation’s extraordinary professional paralysis in the face of ...
    1 week ago
  • Union solidarity with Ihumatao land occupation
    by Daphna Whitmore Every Sunday for the past two months unionists from First Union, with supporters from other unions, have set out to the Ihumatao land protest, put up gazebos and gas barbeques, and cooked food for a few hundred locals and supporters who have come from across the country. ...
    RedlineBy Daphna
    1 week ago
  • Climate Change: The wrong kind of trees?
    Newsroom today has an excellent, in-depth article on pine trees as carbon sinks. The TL;DR is that pine is really good at soaking up carbon, but people prefer far-less efficient native forests instead. Which is understandable, but there's two problems: firstly, we've pissed about so long on this problem that ...
    No Right TurnBy Idiot/Savant
    1 week ago
  • No freedom of speech in Turkey
    Canan Kaftancioglu is a Turkish politician and member of the opposition Republican People's Party (CHP). Like most modern politicians, she tweets, and uses the platform to criticise the Turkish government. She has criticised them over the death of a 14-year-old boy who was hit by a tear gas grenade during ...
    No Right TurnBy Idiot/Savant
    1 week ago
  • Speaker: Tadhg Stopford: Why I’m standing for the ADHB
    Hi there, just call me Tim.We face tough problems, and I’d like to help, because there are solutions.An Auckand District Health Board member has nominated me for as a candidate for the ADHB, because her MS-related pain and fatigue is reduced with hemp products from Rotorua.  Nothing else helped her. If I ...
    1 week ago
  • Good little vassals
    The Inspector-General of Intelligence and Security has published their report on whether the SIS and GCSB had any complicity in American torture. And its damning. The pull quote is this:The Inquiry found both agencies, but to a much greater degree, the NZSIS, received many intelligence reports obtained from detainees who, ...
    No Right TurnBy Idiot/Savant
    1 week ago
  • Who Shall We Turn To When God, And Uncle Sam, Cease To Defend New Zealand?
    Bewhiskered Cassandra? Professor Hugh White’s chilling suggestion, advanced to select collections of academic, military and diplomatic Kiwi experts over the course of the past week, is that the assumptions upon which Australia and New Zealand have built their foreign affairs and defence policies for practically their entire histories – are ...
    1 week ago
  • The Politics of Opposition
    For most of the time I was a British MP, my party was out of government – these were the Thatcher years, when it was hard for anyone else to get a look-in. As a front-bencher and shadow minister, I became familiar with the strategies required in a parliamentary democracy ...
    Bryan GouldBy Bryan Gould
    1 week ago
  • More expert comments on the Canadian fluoride-IQ paper
    The Green et al (2019) fluoride/IQ is certainly controversial – as would be expected from its subject (see If at first you don’t succeed . . . statistical manipulation might help and Politics of science – making a silk purse out of a sow’s ear). Anti-fluoride campaigners have been actively promoting it ...
    2 weeks ago
  • The return to guerrilla war in Colombia
    by Gearóid Ó Loingsigh On August 29th a video in which veteran FARC (Revolutionary Armed Forces of Colombia) commander Iván Márquez announced that they had taken up arms again was released. There was no delay in the reaction to it, from longtime Liberal Party figure and former president Uribe, for ...
    RedlineBy Admin
    2 weeks ago
  • Air New Zealand identifies this enormous plot of unused land as possible second airport site
    Air New Zealand couldn’t believe its luck that this seemingly ideal piece of real estate had so far gone entirely unnoticed. Air New Zealand’s search for a site to build a second Auckland Airport may have made a breakthrough this afternoon, after employees scanning Google satellite imagery spotted a huge, ...
    The CivilianBy admin
    2 weeks ago
  • Redline on the Labour Party
    No-one on the anti-capitalist left in this country today puts forward a case that Labour is on the side of the working class.  There are certainly people who call themselves ‘socialist’ who do, but they are essentially liberals with vested interests in Labourism – often for career reasons. Nevertheless, there ...
    RedlineBy Admin
    2 weeks ago

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