Polity: The truth about the gap between the rich and the rest

Written By: - Date published: 1:31 pm, January 24th, 2014 - 61 comments
Categories: Economy, john key, national, same old national, spin, treasury, wages, you couldn't make this shit up - Tags: , , ,

polity_square_for_lynnRob Salmond points out how “careful” John Key was in his recent speech when looking at how National has been “helping” the people of NZ financially. He and his government have helped themselves and their affluent mates while screwing everyone else. It is pretty clear who has been getting the benefits – since 2010 just the households with at least a hundred thousand dollars income. The bigger the household income – the more National helps.

John Key – lying with numbers yet again.

Here’s John Key in his State of the Nation speech yesterday, talking up his record on inequality:

Household incomes have been rising faster than the cost of living, right across the board, and income inequality has been declining. Despite what our political opponents try to claim, it is simply not true that the rich are getting richer and the poor are getting poorer.

Well, let’s go to the tape.

SOURCE: TREASURY / STATS NEW ZEALAND

This chart plots changes in aggregate (nominal) taxable incomes in various income bands since National’s big tax switch in 2010. It also plots CPI inflation over the same period. Here is what is shows:

  • Top income earners (over $150,000 a year) have been creaming it, with their nominal incomes up 60% in just three years, increasing by over half even once inflation is taken into account.
  • The massive majority of the population earning under $100,000 a year have been virtually standing still. As a group, their nominal incomes have out-paced price rises by a meagre 0.9% per year.

And if you dig further to look at those earning under $50,000 a year, which is still most of the adult population, their incomes have not even kept pace with inflation. Their nominal incomes have risen by only 5.9% over three years, while prices have gone up 7.7%.

The wording of Key’s claim that he is tackling inequality in New Zealand is very, very careful. He is dancing on the head of a pin. And, as these figures show, any gains to everyday New Zealand families are wafer thin at best.1

New Zealanders know that National is misleading them. They know that National’s economy, fuelled by a global recovery, has delivered massive income gains to very high earners, and delivered next to nothing for everyone else. That drives inequality up, not down. And his own Treasury’s figures say so.

 

1.National can probably construct figures that show lower income earners coming out a couple of percent ahead of inflation after tax, using data I don’t have access to. But those same data will show high income earners creaming it even more than the 50% real gains shown here.

61 comments on “Polity: The truth about the gap between the rich and the rest ”

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  1. srylands 1
    24 January 2014 at 1:58 pm

    Interesting. Could you provide a link to the Treasury/Stats NZ data that is plotted in the chart? I can’t find it, and there is no reference in the Polity website.

  2. captain hook 2
    24 January 2014 at 2:03 pm

    Dont bother with that. just check on the price of a 250ml carton of milk and see how much more it costs than it did when national first took office.
    This is a party of profiteers and scammers dressed up as reformers.

  3. geoff 3
    24 January 2014 at 2:06 pm

    Do the CPI figures even take into account things like food?

    • Flip 3.1
      24 January 2014 at 2:19 pm

      The CPI measures the changing price of a fixed basket of goods and services purchased by New Zealand households.
      There are about 690 goods and services included in the basket. They are classified into 11 groups:
      food
      alcoholic beverages and tobacco
      clothing and footwear
      housing and household utilities
      household contents and services
      health
      transport
      communication
      recreation and culture
      education
      miscellaneous goods and services.
      The CPI has an index reference period of the June 2006 quarter (=1000).

      http://www.rbnz.govt.nz/statistics/tables/m1/

      Dec CPI 1188 . In other words prices have gone up 18.8% since 2006 or about 2.7% pa.

  4. srylands 4
    24 January 2014 at 2:25 pm

    It would be interesting to see who has gained 60% in the >$150K group since 2010. But a couple of observations, assuming that the data is correct:

    1. There are not many taxpayers in this group – about 20,000

    http://www.ird.govt.nz/aboutir/external-stats/revenue-refunds/inc-dist-of-ind/

    2. Strong income growth in this grouop means strong growth in tax receipts. Low income earners pay zero net tax. We need strong income growth in high income earners to allow the Crown accounts to recover and to avoid austerity.

    3. Many of these people will be employers, and the income growth is a reflection of recovering business confidence and a strong manufacturing sector – i.e many of these people will be business owners creating jobs.

    If we had an economic recovery showing poor income growth at this end of the income distribution it would be bad news.

    I would like to see a companion chart showing the commensurate strong growth in tax receipts from this group since 2010. Perhaps you could find that and come back.

    • One Anonymous Knucklehead 4.1
      24 January 2014 at 2:29 pm

      You have two options

      1. I’ll find your data. $100 per minute plus expenses and I get to call you “useless gimp”.

      2. Go find your own data, you useless gimp.

    • vto 4.2
      24 January 2014 at 2:31 pm

      Yep, it gotta be good when the top of the pyramid gets bigger than the bottom………….. what a ride, man ……

    • blue leopard (Get Lost GCSB Bill) 4.3
      24 January 2014 at 2:35 pm

      @ Srylands

      I think you are missing the point – I.e. how do the angles of the two top lines on that given chart – and the gap between them and the lowest line and it’s angle correlate with:

      “Household incomes have been rising faster than the cost of living, right across the board, and income inequality has been declining.”

      The chart doesn’t correlate with what Mr Key says – the chart indicates that the opposite of what Mr Key says is true.

      • McFlock 4.3.1
        24 January 2014 at 2:42 pm

        spylands always misses the point – why do you think he’s always ducking and weaving.
        When he’s not on a forced absence, of course.

      • srylands 4.3.2
        24 January 2014 at 3:12 pm

        “I think you are missing the point – I.e. how do the angles of the two top lines on that given chart – and the gap between them and the lowest line and it’s angle correlate [CUT]”

        Sorry I was not addressing your point. No it does not correlate. New Zealand is an expensive country to live in. It has high costs for most goods and services and for most people, low wages. Most people struggle. Things have got better for most people over the last couple of years but I agree that the gains are wafer thin. If you are on a benefit, you are facing severe hardship.

        • Tracey 4.3.2.1
          24 January 2014 at 5:05 pm

          “Things have got better for most people over the last couple of years”

          define “most” and then post your evidence. Even if the poorer have some more money in their pocket than say, ten years ago, if the gap between them and the richest has grown, isn’t the PM lying?

        • blue leopard (Get Lost GCSB Bill) 4.3.2.2
          25 January 2014 at 11:08 am

          ” If you are on a benefit, you are facing severe hardship.” – Srylands

          …And according to Bill English that would be 43% of the population’s households:

          “The lowest-income 43 percent of households currently receive more in income support than they pay in income tax.”

          Link to Parliament transcript

    • lprent 4.4
      24 January 2014 at 3:04 pm

      1. There are not many taxpayers in this group – about 20,000

      Are you really so much of a fuckwit munter that you missed the words “household income”. You are referring to and linked to individual income.

      Perhaps you should look up the number of households and numbers of people in households with more than >150k income. It is rather a lot >200k people would be my bet.

      Let me reiterate that you are evidently a fool. How can even a fuckwit like yourself be so out of touch that you could state such a stupid falsehood without thinking that something was wrong with your numbers.

      • srylands 4.4.1
        24 January 2014 at 3:25 pm

        “This chart plots changes in aggregate (nominal) taxable incomes in various income bands”

        Where does it say that the chart plots household incomes?

        • lprent 4.4.1.1
          24 January 2014 at 4:24 pm

          I said it it in the introduction and John Key said it in the speech that was quoted..

          “Household incomes have been rising faster…”

          Since the whole post was about that statement and the cost of living that he was comparing it to, I’d have thought it was pretty damn obvious. Not to mention that the tax numbers make it pretty obvious. The effective decrease in tax for the wealthy from 2009 and 2010 was a hell of a lot larger than a mere 60%

          • srylands 4.4.1.1.1
            24 January 2014 at 4:31 pm

            The discussion in the sourced website suggests that the data is for INDIVIDUAL taxpayers.:

            “Here is what is shows:

            * Top income earners (over $150,000 a year) have been creaming it, with their nominal incomes up 60% in just three years, increasing by over half even once inflation is taken into account.
            * The massive majority of the population earning under $100,000 a year have been virtually standing still. As a group, their nominal incomes have out-paced price rises by a meagre 0.9% per year.”

            At best I would concede it is ambiguous whether the data is for households or individuals. It is not pretty damn obvious at all.

      • srylands 4.4.2
        24 January 2014 at 4:38 pm

        “Are you really so much of a fuckwit munter that you missed the words “household income”. You are referring to and linked to individual income. ”

        I give up. You are just rude beyond belief.

      • srylands 4.4.3
        24 January 2014 at 4:39 pm

        “Let me reiterate that you are evidently a fool. How can even a fuckwit like yourself … blah blah”

        Goodbye.

      • Flip 4.4.4
        24 January 2014 at 10:55 pm

        48,020 earned >$150K in 2011 according to the numbers I used.

        They represented 1.45% of the income earning population and received 10.33% of taxable income.

        • McFlock 4.4.4.1
          24 January 2014 at 11:17 pm

          sounds like they could do with a closer shearing job…

        • lprent 4.4.4.2
          24 January 2014 at 11:18 pm

          Depends if it was a individual or a household income. I think you’re talking about individuals. For instance my household income well exceeds $150 but my income does not. Lyn earns quite a lot as well. The difference between my largish income and mine plus hers in Auckland means the difference between living well and living too close to the boundary. It is a lot cheaper to share a space with some one than it is is to live along (as I did for a long time).

          Been digging around the household incomes at the stats department surveys. I swear that they are good at concealing their figures.

        • lprent 4.4.4.3
          25 January 2014 at 12:36 am

          …and received 10.33% of taxable income.

          I think you meant paid. But that was merely income tax. As I keep saying, income tax is just one of the taxes. I’m on a pretty good income and income tax is just one part of my tax burden.

          I had a look at the ALL the tax I was paying last year. I don’t claim anything back on PAYE, but PAYE is currently about 22% of my income because of the banding of taxes. I’m on a reasonably high income.

          But as near as I can figure out I pay about 4.2% of nett income on ACC and rates (all of which are taxes). GST is about 11% of the nett income (financial costs don’t get taxed for GST). Excluding GST – petrol taxes are about 1.8% of nett. Alcohol taxes maybe 2% (I don’t drive a lot, but I do like wine and beer when I have time). There are probably some sundry sales taxes for other goods and services so call it 20% of my nett income. So something like 14.4% of my gross income.

          Ok – so 22% + 14.4% ~= 36.4% of gross.

          Now if you drop my income by half and assume that much of my other tax burden remains the same in dollar values (because my consumption doesn’t change that much – same fuel/rates/sales, variable expenditure on GST and ACC), it becomes

          15.4% of gross for income tax and (complicated figuring) 25.3% of gross ~= 40.7% of gross (Note that the total consumption drops by about 18% due to lack of disposable income)

          The effective effect in real dollar terms is that with half the gross income, I will pay about 56% of the total dollar taxes of my higher paid self. Remember that my half pay is just below the NZ average income for someone in paid employment and just above the median individual employed income.

          If I add 50% to my income and assume that my consumption costs remain much the same as my current income (ie I invest for capital value or outside NZ), then the numbers come out at 26.7% and (more complicated figuring) 9.7% ~= 36.4% of gross. Which of course means that if I spend more, I’d get pinged more – but I’d have to have a cocaine habit before I’d notice it. More likely I’d hire an accountant and drop the income tax levels – probably by buying properties.

          At higher income levels than that, the total tax burden as a percentage will drop markedly. But more importantly there are a hell of a lot of people below the median employed income who pay roughly the same non-income dollar values as those at the median. That is why the revenue for the government from income tax is only slightly less than the combined GST and “other” (mostly ACC and various services and sales taxes).
          http://www.treasury.govt.nz/government/financialstatements/yearend/jun12/008.htm – see figure 6
          And rates are on top of that…

          Basically concentrating on income taxes as being the only taxes is a crock. Paying the bulk of the consumption taxes falls directly on those on lower incomes. Paying income taxes falls preferentially on those with higher incomes. The nett effect is that the taxation burden under this government as a percentage of income falls largely on those least able to pay it.

          Of course we could eliminate all tax lawyers and accountants, plus trusts. That would help to increase the amount of income tax paid. Or we could make the income tax system more progressive.

    • framu 4.5
      24 January 2014 at 3:08 pm

      blah blah blah

      the bit your coveniently avoiding is that this top group you kneel down in front of have incomes rising staggeringly faster than the majority – thats the point

      all this talk of tax and job creation is bullshit and meaningless if theres only a small group reaping the rewards.

      ever stop a think that if everyone was earning more then everyone would be paying more tax

    • KJT 4.6
      24 January 2014 at 3:33 pm

      “Low income earners pay zero net tax”.

      Forgotten about GST, User pays, petrol taxes etc, etc, again, Srylands?

      • Hayden 4.6.1
        24 January 2014 at 4:15 pm

        He knows about taxes in Australia, where he lives.

        Anyway, how do low-income earners without children pay no nett income tax? The rebate for under $9880 was removed in 2012.

        • srylands 4.6.1.1
          24 January 2014 at 4:36 pm

          Because they get more back through WFF and welfare payments than what they pay.

          The 6 per cent of individual taxpayers ver $100,000 a year, pay 37 per cent of total income tax.

          If you look at households, those earning over $150,000 a year pay 46 per cent of income tax.

          Households with incomes less than $60,000 per year pay zero net tax – indeed they get positive transfers. They pay $2.7 billion in income tax and receive $8.1 billion in transfers.

          http://www.beehive.govt.nz/release/more-progressive-tax-system-2010-changes

          • framu 4.6.1.1.1
            24 January 2014 at 4:39 pm

            yeah but who wrote it… drum roll… bill english

            • Hayden 4.6.1.1.1.1
              24 January 2014 at 6:55 pm

              Yep. You might as well say “Bill English and 2 solo mums pay zero net income tax” if you’re going to calculate it that way.

          • Colonial Viper 4.6.1.1.2
            24 January 2014 at 4:45 pm

            Well, lets increase incomes at the bottom end then, they’ll be quite happy to start being net tax payers, and you can be happy with that too.

          • KJT 4.6.1.1.3
            24 January 2014 at 4:54 pm

            Like they only pay income tax? FIFY.

            Forgotten also, The average farmer pays about $1800 in tax!

          • Hayden 4.6.1.1.4
            24 January 2014 at 6:53 pm

            You don’t get Working for Families without children. There’s kind of a hint in the name.

      • srylands 4.6.2
        24 January 2014 at 4:32 pm

        Even accounting for that they pay zero net tax

        • framu 4.6.2.1
          24 January 2014 at 4:37 pm

          Interesting. Could you provide a link to the Treasury/Stats NZ data

          • Pasupial 4.6.2.1.1
            24 January 2014 at 6:18 pm

            Framu

            Don’t bother wasting your time with that Aussie shill (my guess is one of the Crosby Textor stable called in to fluff-up ShonKey’s flaccid words). The useless gimp last year used to demand that NZ raise its GST rate to 15%; which demonstrates how much importance to place on his words.

        • Colonial Viper 4.6.2.2
          24 January 2014 at 4:46 pm

          Just like hundreds of NZs richest people, I suppose.

      • lprent 4.6.3
        24 January 2014 at 5:06 pm

        He does seem to get fixated on and only on income tax. I don’t know of any group who pays a zero net tax apart from some groups of beneficiaries with very limited other income. For anyone in work and on very low incomes, the income plus consumption plus sales taxes and rates (through rents or direct) tend to push their net personal tax up close to at least 40%. If they have kids then they get rebates on the smaller income tax portion.

        Taken as a whole, the bulk of the people below the average household incomes pay the bulk of all taxes collected because there are so many of them. On average if they aren’t getting WFF, they pay a similar total tax percentage to people with very high incomes because more of what they spend on is taxed.

        Curiously pontificating fools like srylands never seem to factor anything apart from income taxes into their fatuous bullshit. That is because they prefer to feel as if they are victims rather than uncaring parasites.

        • KJT 4.6.3.1
          25 January 2014 at 8:34 am

          The “zero net tax” was a common piece of right wing lying with statistics a while back. The parrot has just returned.

          Of course, you have to ignore every other tax, and Government charges, apart from income tax, to make it look true.

    • aerobubble 4.7
      24 January 2014 at 4:19 pm

      National raised GST.

      Look. You have businesses and they employ a quantity of the population. Now do you lower taxes and subsidize employment leaving most paying no tax, or do you raise income taxes (as many on the argue implicitly demand when they alert us to how so worthless so many citizens are in not paying tax). No. But its worse, as you raise employment there’s more competition for them and more consumers, that means more chance you National voter will lose their shirt when some upstart moves into their sector. Then add to the mix a shrinking workforce as boomers retire, and of course what would you expect from Key but to start drooling over education to keep from having a debate about the economy. How wonderful for the opposition that his dead ended approach to education is getting the backs up of his base, who worry that not only will the workforce shrink, but the kids coming out of the schools will be box like in their education, if, a big if, the tail has been dealt to. Which is unlikely since more inequality just put more barriers in the way of kids not less (school zones will mean more inequality in education).

      So National are a bunch of loonies. Its not about tax, debt can be washed out by inflation, because the dumb National voter seems to think its a victory to have less taxes, its not. Its the accountancy equation, you can cut into reserves (public services, assets) but it will show up on the other side of the equation as a higher cost to business (unhealthier employees, poorer educated…).

      The question is what is our goal, more efficient society and so economy, or more efficient economy at the expense of society, environment, resources, etc.

    • Tracey 4.8
      24 January 2014 at 5:03 pm

      are you saying that the gap between the rich and poor has not become wider because there are only “about 20,000” earning over 150K (your 1)?

      are you saying that because we need growth of income in the 20,000 that it’s ok for the PM to pretend the gap between rich and poor is not getting wider (your 2)?

      Could you indicate when the current state of affairs which is not “bad news” will translate to a closing of the gap between rich and poor? Please feel free to post evidence from the past 40 years to show how when the top “about 20,000” earn more than $150k the gap between the rich and poor shrinks?

      Perhaps you could come back with that, which will address the author’s post, that Mr Key is being economical with the truth by claiming the gap between rich and poor has not grown under his government.

      To remind you, the Pm claims “it is simply not true that the rich are getting richer and the poor are getting poorer.”

    • Mike S 4.9
      25 January 2014 at 1:50 am

      “Low income earners pay zero net tax.”

      How do you figure that one? I’m on a low income and I definitely pay income tax. So what bullshit have you included to come up with “net tax”?

      • lprent 4.9.1
        25 January 2014 at 8:15 am

        The idiot assumes that everyone has children and/or is on a benefit.
        Then he ignores all other taxes apart from income tax.

  6. KJT 6
    24 January 2014 at 3:44 pm

    Not to mention a great many skilled people who were on the equivalent of 100k plus before 84, who are now on a lot less. My main qualification/job in NZ 40% less, adjusting for inflation, than in 84.

    The reason why so many of us went overseas.

  7. Colonial Viper 7
    24 January 2014 at 4:10 pm

    At a guess, 60% of full time workers earn $50K or less a year. They’ve all been going backwards.

    An economy of the rich, by the rich, for the rich.

    • aerobubble 7.1
      24 January 2014 at 5:17 pm

      It has been argued that people believe that the rich should get given a freer ride because,
      i.) they will be also rich and so feather the nest,
      ii.) that the wealthy will go else where and we will all be poorer,
      iii.) that wealth trickles down.
      Now we are now finding out that,
      i.) that only a fool would believe they have a chance of joining the 0.01%,
      ii.) the 0.01% don’t want more wealth, they can’t tell the difference between 12 and 13 billion, and well it will suck when the majority rise up and tak it all back, why not just stay rich…
      iii.) that the wealthy are not replaceable, which given how many also ran’s there are in industry…
      iv.) that wealth trickles down, oops, no actually the trickle down was the remainder after the minion class carry off all the fees and charges. The minion class are people who get rich by getting in the middle and undermining the wealth of both sides.
      v.) that it destroys not only families, society, culture, but environments, ecology, resources…
      vi.) worse, the growth of the last thirty years had little to do with the neo-liberals, the gush of cheap high density middle eastern oil and the relaxing of finance was implemented by both side of politics, its just the media whores who claimed it was the conservative revolution that did it, those conservative revolutionaries then set up themselves as being anti-govt lovers of liberty, except they lived in government and have overseen the greatest loss of liberty in recent memory.

      It must suck to be one of those Tory voters who have been supporting stupid all this time.

    • Will@Welly 7.2
      25 January 2014 at 12:50 am

      Colonial Viper + 1
      aerobubble – ii) – “the 0.01% don’t want more wealth, they can’t tell the difference between 12 and 13 billion, and well it will suck up when the majority rise up and take it all back, why not just stay rich………….”
      The thing is areobubble, greed is a powerful weapon. And even if an a rich individual isn’t personally greedy, those looking after the finances often are, so they want to inflate the returns, so they get a better return themselves. I think it’s at around $10 million that you start to lose perspective – personally I wouldn’t know.
      Oh, the trickle-down theory of wealth in a neo-liberal society, we soon realized that was just a myth, about the sametime as the wholesale redundancies started, as businesses started to close or retrench.

      • Colonial Viper 7.2.1
        25 January 2014 at 8:49 am

        Look at the middle class department stores like Macys and JC Penney dying in the USA, shuttering stores and laying off thousands, matching the dying of the American middle class.

      • aerobubble 7.2.2
        26 January 2014 at 12:39 pm

        I disagree, yeah for sure peope inflate their value, rig the system, but here’s the thing, if you show them it actually makes them worse off, makes them a expose minority who look stupid rather than the genius minion class. Ah, but wait, that would mean you would have to admit that your
        defeatism, that greed is always with us, meaning that someone will always replace the greedy who get a clue. No, the only way surely to combat the greed is to expose it for how inefficient, counter productive and small minded it is.

        I found many many people who cheered tories on to be quite simplistic, as if they didn’t know how the money was made. We just have to break that notion, that simple mind adherence to dogma says they are sheep more than they are foxes. And when the masses start demanding higher progressive taxes, that wealth is not a right but a responsibility, then we might have a chance to save the planet.

        • Will@Welly 7.2.2.1
          26 January 2014 at 1:23 pm

          aerobubble – so many in middle-management, and upwards have been “taught”/indoctrinated that greed is good and that is what they should aspire too. As I said, some “rich” people aren’t necessarily greedy, they have either inherited or acquired their wealth, but those working for them see the only way they will get rich is to grow that wealth.
          Many going to university today go expressly with the intention of getting a job that will make them “rich”, not what they can do with their qualifications. Our Government is obsessed with getting people into jobs that will directly “grow the pie”, and make them rich.
          Peter Jackson/Sam Morgan left school and went into jobs, which in today’s scheme of things would see them labeled as “failures”. That’s not a personal criticism of either man. But given the criteria laid out by Steven Joyce and John Key, they were “failures”.
          And even old Bob Jones will not contemplate their mantra – he refuses to employ people MBA’s. As rich as the bugger is, he refuses to grease up to those slime balls. He still believes in hard work. Could you imagine Key ever getting into a boxing ring? Nah – too f**king pretty.
          You’re never going to get everyone to agree that there needs to be an even distribution of income and wealth, but if we can get the pollys to start addressing it, then there’s a start. Saving a planet – well, you’ve got a complete different mindset there. Cunliffe still can see the drift.

          • aerobubble 7.2.2.1.1
            28 January 2014 at 11:28 am

            Tell people saving the world is good won’t change their minds, but tell them that better environments increase their house price… …its all about understanding the message.
            For a long time Greens believe Corporations were evil, though right, they stop engaging with them, but in order to change the world they need to make CEOs sweat. CEO sweat when they look like they are off the pace, out of touch with the market, and Greens do that by
            showing the market how short term greed wipes out value. The biggest story around is Energy and the black stuff is only going to get more expensive, by emphasizing this, and then
            expanding on how the growth of the last thirty years was misdirected, channeled into the
            friends of the right by big media, who never earnt it because the growth was going to happen anyway, and leftwing governments were going to loosen finance (and did like Labour in NZ) anyway. The problem was the debate about government was shut down, i.e. what is its purpose was submerged in a cult of greed, government was evil, taxes were too high, etc.
            It may not make people blood boil, to hear that 85 people own half the world, but it will if you
            tell them that wealth was handed over to those 85 by policies of Tory governments supporting the minion class who want to get rich not by growing the economy but by
            shuffling private paper around.

  8. dave 8
    26 January 2014 at 8:36 am

    cold hard facts just get in the way in keys world of bankers fraud and lies.

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