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Thanks, I guess

Written By: - Date published: 5:38 am, March 25th, 2009 - 25 comments
Categories: tax - Tags:

Growing up I always knew the rich had it better than us. It’s only now that I’m one of the wealthy that I realise how much we’ve got it in our favour.

Next week the government is giving me, for no reason I can work out, another $1110 a year in tax cuts. That goes up to $1,500 a year next April, and up to $1,860 a year in 2011.

Then, to top it off, they’ve given me a way to beat the recession. I’ve just chucked $15,000 in a year term deposit. When it matures, I’ll use it to make a voluntary repayment to my student loan of $15,500 and the government will give me another $1,550.

13.5% after-tax return per annum during a recession, you can’t beat that. Of course, you can only afford to pull the trick if you’ve got the money.

I just can’t work out what the point of the government borrowing money so it can give it to someone who already has heaps. If we’re going to borrow, a lot of people could use the help more than me.

Why should I be the priority? I don’t even intend to spend the extra dosh and I won’t be working harder because of it. It looks like they’ve just decided that I’m more deserving because I’m well-off.

I guess it’s true. It really is government by the rich, for the rich.

25 comments on “Thanks, I guess ”

  1. And Thank You for that.
    It’d be good if you could keep posting this perspective over the next few years over here at the Standard I reckon.

  2. Stever 2

    I think the directive from the PM was that you should give the money to a charity. Otherwise, as you point out, the money doesn’t enter the economy as “stimulus”.

    And due to being worse off because of cancellation of tax breaks (to lower-paid people), and the declining value of the social contract, poorer people will need the charity increase.

    You know it makes sense.

    Besides, think of how it’ll boost your moral standing and self esteem.

  3. Alex 3

    Personally, I support a flat tax rate right across the board. Totally fair to everyone. It will never happen though.

    • RedLogix 3.1

      Personally, I support a flat tax rate right across the board.

      Set at about 45%… yeah I could go with that.

    • Pascal's bookie 3.2

      It will never happen though

      Only ’cause no one seems to be able to make it work. The c*mmunists went the 100 percent route: fail. A low enough rate that the poor can afford to pay it doesn’t bring in enough revenue, and higher rates (which the poor can’t afford) recquire transfers, which defeats the purpose of the flat rate.

    • George Darroch 3.3

      We already have an almost flat tax system.

      According to the Economist, only the top 10% pay much more tax than under a 25% flat tax system.

      We already have a 12.5% flat tax on everyone, the flat elephant in the room.

  4. daredtodream 4

    [lprent: Previously banned. Likes changing names]

  5. simon 5

    “Personally, I support a flat tax rate right across the board. Totally fair to everyone. It will never happen though.’

    If the brought in a (higher if already in existence)…
    Capital Gains tax on Houses (with the ‘Home’ being excempt)
    Luxury Tax on Cars above lets say $45,000, boats above $100,000, Planes above $200,000
    An inheritance tax on sums lets say above $100,000 (ie based on total payout not individual ones)
    Tax on company cars and fringe benefits associate with employment
    Tax on work ‘bonuses’ (that are more than 10% of base salary)
    Tax on interest from Bank etc deposits lets say 50% when interest is above $2500 PA

    stopped subsidising Private Schools
    dumped the tax breaks for those with rental properties
    stopped people using Trusts to avoid bankruptcy, paying the ‘new’ flat tax, and the new inheritance tax.

    maybe it would

  6. sally 6

    I’m glad someone’s posted this. Puts it in perspective.

    I think it’s amusing that John Key has jumped at not getting a pay rise this year, and ‘setting an example. Let’t not forget that he’ll still get a nice tax cut next week, where as Joe Average-Wage won’t.

    John Key – Ronald Reagan of the South Pacific.

  7. ieuan 7

    ‘Guest Post’ you need to get some children, that will suck up any spare cash you have.

  8. Stephen 8

    Sally, Joe Average-Wage probably has WFF!

    edit: and as Tim Ellis points alludes, some Joe Below-Average-Wages can now afford Kiwisaver…

  9. Tim Ellis 9

    Guest, if you are earning over $100,000 a year, then I would like to thank you for the amount of tax you pay. The top 5% of income-earners pay 29% of all income tax. The top 15% pay 55% of all income tax. In return, they receive far less than their percentage share of government services. The bottom 58% of taxpayers however pay just 15% of the total tax take. Without people like you remaining in New Zealand, paying the very high amounts of cash that you already pay, the government wouldn’t be able to provide services to the most needy.

    You wrote:

    I just can’t work out what the point of the government borrowing money so it can give it to someone who already has heaps. If we’re going to borrow, a lot of people could use the help more than me.

    This however is a wrong assumption. National isn’t borrowing to pay for tax cuts. It is funding tax cuts primarily by changing the kiwisaver scheme.

  10. Kevin Welsh 10

    So Tim, you are saying that if there were no tax cuts, the level of borrowing by this government would be the same?

    • Tim Ellis 10.1

      If there were no tax cuts, Kevin, there would be no changes to Kiwisaver, so the fiscal effect would be zero. I don’t think Labour are advocating changes to Kiwisaver without tax cuts.

      • Kevin Welsh 10.1.1

        So, in other words, they are not really tax cuts.

        Funny how the wealth of the working class is fair game for redistribution, but out of bounds for the wealthy.

        • Tim Ellis

          Kevin, what do you consider working class?

          How many taxpayers do you consider to be working class? What proportion of the total income tax take do they pay? What proportion of government services do they receive in return?

          I think you’ll find that the answer is that the vast majority of tax is paid by high-income taxpayers to provide services that are primarily consumed by low-income taxpayers. There is a very high degree of redistribution from high-income taxpayers to low-income taxpayers. That situation hasn’t changed. Reducing the burden of tax paid by high-income taxpayers doesn’t take money earned by low-income taxpayers away from low-income taxpayers, which is the definition of redistribution.

          • r0b

            I think you’ll find that the answer is that the vast majority of tax is paid by high-income taxpayers to provide services that are primarily consumed by low-income taxpayers.

            As to “primarily consumed by”, I very much doubt it. Only beneficiaries have assistance that is specifically targeted at them (not the “working” working class). In the “welfare” category the largest spend is on superannuation, which is available to all. The majority of Government’s spending is on health, education, police, defence, infrastructure and the like which is a benefit to all.

            There is a very high degree of redistribution from high-income taxpayers to low-income taxpayers.

            As above I disagree. Say rather that high income taxpayers support most of society’s costs, as they should, because they control most of its wealth.

            In fact you could make the counter argument, that ordinary taxpayers are currently involved, world wide, in a massive payout to high income earners, in the form of tax payer funded bailouts of banks and financial institutions. As has always been the case, businesses prefer to privatise their profits and socialise their losses…

  11. BLiP 11

    Under National the rich get richer and the poor get poorer – didn’t the bewildered and bamboozled vote for a change?

    Hah! Business as usual.

  12. rave 12

    Fat cat tax did you say?
    Cool cat likes a flat white.

    Taxes redistribute income that is already produced by productive workers. No tax for workers. Tax profits flat out.

  13. Daveski 13

    Emotion always works better in opposition than logic or common sense.

    Income is but one measure of wealth. Labour had 9 years to offer solutions to address inequality of wealth (assets) but has only addressed income. There are many many people who are wealthy but do not have higher nominal incomes.

    Second, again it makes for great desk thumping, but the greater the gap between the top marginal tax rate and the company tax, the greater the inefficiencies and the distortion to taxable incomes.

    Third, the changes to the tax rates coming up don’t go anywhere near reversing the changes Labour introduced – not only do the “rich” pay more tax, their marginal tax rates are still higher now than 9 years ago and as others have pointed out, WFF is not an option for most.

    Still, nothing beats a headline and emotive post.

  14. Greg 14

    Hang on, so your not going to spend it? If your planning on putting it in the bank how is this any different to spending it?

    • Phil 14.1

      If your planning on putting it in the bank how is this any different to spending it?

      Plenty different, and a much better idea than blowing the taxcut on a new, imported, TV.

      That term deposit is now available for the bank(s) to lend out to new develping enterprises, or an existing business needing bridging finance. Which is exactly what we need to be happening so that we’re not so dependent on international wholesale funding markets.

  15. Chris G 15

    Well, your sposed to give it all to charity mr Guest Post!

    After all… thats what the Americans do!

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