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The Right’s blindness towards middle New Zealand

Written By: - Date published: 7:44 am, February 11th, 2010 - 100 comments
Categories: class war, tax - Tags:

I find it frustrating that the debate over tax concerntrates on the top rate rate, which doesn’t apply to 90% of taxpayers. It’s as if the Right, and many in the media, are either blind to the existance of people on normal incomes or severely underestimate their number.

John Key, of course, is the worst. He has repeatedly been asked for assurances that people on low-incomes will not be worse off because of the GST increase. He off-handedly gives that assurance (despite not having the money to pay for all his promises) but when he gives examples of how the changes will impact a low income person he chooses someone on $40,000 or $45,000. $40,000 is in the top 30% of incomes in this country. It’s as if the rest of us are invisible to him. I’m willing to bet he simply has no understanding that 70% of Kiwis have incomes under $40,000.

I guess everyone thinks of themselves as typical, an ordinary battler, and it’s only reinforced by the fact that the wealthy spend most of their time in the company of other wealthy people. There have been commenters on this website who have reacted with outraged disbelief when told that having $650,000 of net assets is rich. Yet that’s the average for the top 10%. The bottom 50% average only a couple of thousand dollars of net assets. It’s the same with our media commentators. Most of them are on high salaries and would benefit from a cut to the top tax rate, so they naturally concerntrate on that with only fleeting reference to the vast majority of people who stand to lose out.

Check out Peter Williams and Pippa Wetzell responding to viewer feedback on the tax package (and their interviews with Bernard Hickey and Phil Goff). The pair are positively bouyant about the tax cuts because it stands to make them lots of money but most of the viewer comments are strongly anti them because they realise they’ll be breaking even at best. It’s fascinating to watch Williams and Wetzell brush off the concerns of middle and low income New Zealanders.

Perhaps the best examples though were the two major dailies. Both the Herald and Dompost proclaimed: ‘$4 billion in tax cuts’, as if there were no tax increases to pay for them. In reality, what we are facing is a $4 billion wealth transfer – most of it going to wealthy taxpayers, like newspaper editors, and coming from the rest of us.

To be fair, a number of journalists have focused on the impact on Kiwis on low and middle income Kiwis like Duncan Garner who told Sunrise “Look let’s be honest, this will end up being tax cuts for the rich. And the gap will widen, unless he can come up with a miracle. I’m not so sure that he can pull enough revenue out of GST to fully fund that compensation.”

Our national debate should be about the interests of typical Kiwis, not the privileged elite. Problem is that the national debate is largely conducted by that elite.

100 comments on “The Right’s blindness towards middle New Zealand ”

  1. Red Rosa 1

    Those figures are simply astonishing. This is NZ in 2010, not the UK in 1850…. Marx would be chuckling.

    The income skew is not so surprising, but are you sure of the asset data?

    The wealth distribution sounds like England 100 years ago, before Lloyd George and Churchill’s Liberal government reforms. Don’t at least half of the bottom 50% have some home equity?

    Back on incomes, certainly the proposed GST/income tax tradeoff will vastly benefit the rich and be financed by middle NZ. You can see that from the bulge around the 50 to 60k mark.

    ‘Middle NZ’ is below most commentators’ radar, and well below any MP’s salary.

  2. gitmo 2

    Is you graph of all NZers or just a selection ?

    • Marty G 2.1

      All taxpayers.

      the link is above where it says “top 30%” http://www.ird.govt.nz/resources/0/e/0ea93380403150a4af59ffedfbf6dc8d/income-distribution-2001-to-2008.xls

      This, dear gitmo, is what I’m talking about 🙂

      • gitmo 2.1.1

        So it includes kids who have $2.20 in the bank etc etc, but does it include income from trusts, income from benefits ? I’d also be surpised if there aren’t considerably more than 13k of people earning over 250k.

        Meh………. I also think the continued use of the “right” and “left” are a bit meaningless.

        • Clarke 2.1.1.1

          Unless the income remains in the Trust, it will eventually need to be declared by the beneficiaries of the Trust when it’s paid out – and this is likely to be the case with most family trusts. So even if the figures are for individual taxpayers only, any income flowing from Trusts to beneficiaries should still be included in Marty’s figures.

          • Jason 2.1.1.1.1

            Uh? There seems to be the suggestion that there’s something sneaky about all this. It’s IRD’s data and they’re pretty clear about it if you’d taken the time to check the source.

            The following people are included in the table: Anyone who filed an IR3 tax return, received a personal tax summary (PTS), or paid PAYE via an employer, including recipients of taxable welfare benefits, New Zealand superannuation, earnings-related ACC, student allowances, and paid parental leave. The data includes people with part-year incomes, and can also potentially include children. However, the following people are not included: Anyone with no taxable income, unless they also filed a return or received a PTS; Anyone who did not file a tax return or receive a PTS because their only taxable income was from interest, dividends or PIES, and was fully taxed at source.

            Kid with paper-run, yup. Kid solely with dosh in the bank, nup.
            It’s what it looks like, NZ’s wage distribution is just highly skewed.

  3. Marty
    I just posed a remark on open mike from yesterdays Oprah show. the particular bit is relevant to Copenhagen, tax’s, free education, etc
    if it some time you could find this bit and post it, it might wake a few people up to what can be like if tax’s are actually higher (50%) and closer to across the board. Results is they have a way lesser wealth gap over the population and way less poverty.

  4. vto 4

    The top tax rate is too high mr marty, that is the point you are missing. Your particular point is entirely predictable and is raised every single time suggestions are made about dropping top tax rates.

    If you are right, then the top tax rates would never ever come down and simply keep rising (especially every time Helen Clark and her merry band of envys got into power). And that is ludicrous.

    As said before, of course the so-called rich will end up with more cash in their pocket during tax cuts than the so-called ‘poor’ or middle – they pay more bloody tax in the first place. Sheesh.

    Its all about balance.

    Also, who is included as taxpayers in your chart? Does it include children? Does it include income-split people? Part-timers? Too many unknowns and variables to be an accurate picture of your discussion methinks..

    • Marty G 4.1

      vto. Thanks for proving my title correct.

      children aren’t taxpayers. Of course it includes part timers, they have to eat and pay the rent too.

      Next time, vto, I’ll give you the incomes of households by decile…. I’m sure you’ll find a way to avert your eyes to that as well

      “The top tax rate is too high mr marty, that is the point you are missing.”

      shit, you must hate aussie then, where the top tax rate is 45%

      • vto 4.1.1

        I’m not averting my eyes mr marty. And children are at times taxpayers you noodle. Ieuan below makes the same point.

        Anyways you have avoided my point, namely, is there ever a good time to reduce tax rates for the ‘rich’? From the mullions of threads on here by you I would have to assume that you never want to see top tax rates drop. And that exposes your own blindness.

        And, again following your reasoning, you must hate the likes of Singapore and Hong Kong. Actually (just sprung to my minor mind) is there any country on the planet where there are low low taxes and the people are not better off than us????

        • Lew 4.1.1.1

          vto,

          And, again following your reasoning, you must hate the likes of Singapore and Hong Kong. Actually (just sprung to my minor mind) is there any country on the planet where there are low low taxes and the people are not better off than us????

          Hell yeah. Are you having a laugh? Plenty of places. Mainland China is one; the Republic of Korea is another. Singapore is another if you place any value at all on civil liberty. Can’t comment on Hong Kong, though — that’s just countries with which I have personal experience.

          L

        • Marty G 4.1.1.2

          It’s not a time to drop income tax on the rich while thousands of kiwi kids still live in poverty and the government is borrowing $240 million a week.

          Some kids have IRD numbers. They are not numerous enough to impact on this graph, of 3.4 million taxpayers.

          • gitmo 4.1.1.2.1

            You knob every kid who has a bank account or kiwisaver (well the vast majority) have an IRD number.

            • Marty G 4.1.1.2.1.1

              oh dear oh dear.

              gitmo. there are 3.1 million working age people, there are 3.4 million taxpayers. therefore, you’re looking at less than 10% of this number being children. Assume they all have incomes below $10,000. Does it change the shape of the graph in a way that matters?

              here, if you actually care, is the distribution of income just from wages and salaries for all taxpayers (and remember this misses half a million retired people and 300,000 beneficiaries, all of whom have to eat and pay the rent)

              http://www.ird.govt.nz/aboutir/external-stats/income-bands-salaries-wages/
              I suspect you’ll just close your eyes to that too or say something stupid about not including parttimers.

              • Marty G

                sorry, gitmo, I must be slow this morning. It only just occurred to me that I’ve been buying your ‘kids don’t count’ premise.

                Look, the point of the post is that I’m not anti a GST increase as long as people on low incomes are compensated. Kids, like others on low incomes, will be paying more GST, why shouldn’t they get an income tax cut to offset?

          • vto 4.1.1.2.2

            “It’s not a time to drop income tax on the rich while thousands of kiwi kids still live in poverty”

            And higher income tax on the rich helps these people in what way?

            I follow the line that money is far more productive churning through the hands of the people than the hands of the govt.

            If people in business, for example, suddenly find more money in their hands they virtually always, in my experience, churn it back into their businesses and/or investments which results directly in more jobs and production and less poverty. No?

            • Lew 4.1.1.2.2.1

              Apparently not.

              Thing is that the people in genuine poverty aren’t very attractive to employers or businesspeople.

              L

              • gitmo

                Which is why we have a welfare system methinks

              • Lew

                And what funds that welfare system?

                Yes! You’ve got it! Welcome to civilised society — goodness, it’s been a long time coming, but you got there in the end.

                L

              • Marty G

                Lew. that was played like a pro. awesome.

              • vto

                Sheesh, what a looney left bunch you are.

                Lew, your comment about those in genuine poverty not being very attractive to employers is just silly. You are perhaps talking about those who can’t help themselves – a very very small part of the population. Druggies, crims, dropouts, etc. Otherwise people who are struggling to find work will be attractive to employers. Your comment holds no water in answer to my proposition.

                But well done on the three of you congratulating each other. You have not answered my point. Again. Is it nice and cozy in that padded room?

              • gitmo

                Lew WTF, I’ve been paying my taxes towards the welfare system since probably before you started doing so – I have no problem with a welfare system.

                Are you joining the band of happy fuckwits who think that anyone who thinks there needs to be a rejig of our tax system is a evil “Righty’ and wants all beneficiaries on a chain gang … I thought you had a few more brains than joining that mob.

                IMO the problem is moving the income bump to the left not tinkering around at the top or the bottom.

              • Lew

                gitmo, steady on, it was just a gentle tickle. The point is that a functioning welfare system is only possible with taxation — and unless that taxation is predominantly levied against the wealthy, it’s generally counterproductive (driving people on the margins of poverty downward). I know that you agree with a lot of this in principle — and yet you persist in the notion that economic growth is a substitute rather than a complement to welfare as a poverty relief mechanism.

                vto,

                I am talking about those people, but also about people from broken homes, who have suffered abuse, have criminal records, have difficulty maintaining a steady address, owning a pair of leather shoes, putting together a CV or having access to transport. These people are of little or no interest to employers because — although they might have a heart of gold, an employer can’t tell, and will tend to pick safer options; and they’re of little or no interest to businesse because they have no money to spend.

                Changing the first will change the second — but that costs money.

                L

            • Marty G 4.1.1.2.2.2

              vto. you’re arguing trickle down economics. That con went out of fashion 15 years ago.

              • vto

                Which is true?

                Money is far more productive churning through the hands of the people than through the hands of the govt.

                Or.

                Money is far more propductive churning through the hands of the govt than through the hands of the people.

                You have made your choice. We completely disagree.

              • Marty G

                there is no universal answer to that question. Well functioning markets are good at getting supply to meet demand but due to market failure, there are obviously times where it is more productive for the govt to spend the money – eg universal education, health, benefits – the welfare state that you support.

              • vto

                I think we keep going off on tangents to each others points. Similarly with Lew above. Gotta go now. Got income to get – used to be in that top echelon but currently in the bottom. Such is life. Later.

        • is there any country on the planet where there are low low taxes and the people are not better off than us????

          You could try Bihar in India – 90% of economic activity is untaxed. Life expectancy is about 40, most of the population is illiterate, there are outbreaks of bubonic plague and caste-warfare and you don’t drive on the roads after dark. But it rates really highly on the IMFs economic freedoms index!

        • Draco T Bastard 4.1.1.4

          Yeah, I’m so glad we’re not like Singapore. As has been said, vto, you’re blind to reality. In reality, when the taxes are low there’s far more poverty and the majority of people are far worse off.

    • ghostwhowalksnz 4.2

      Its the IRD figures so they cover those are earning an income. What do you want them to do . Line them all up so you can count them AND then you will believe it.

      • vto 4.2.1

        Dont get me wrong gwwnzx, its just that statistics can be bent to back many things and dont always provide the full story.

        I am also, believe it or not, on ‘your side’ to a large degree. Increase the incomes and wealth of the less well-off and the entire naton benefits. A-la Henry Ford style back in the model-T daze.

        It is just the eternal bitching at the so-called rich on here and the attendant lack of balance that piques.

        • felix 4.2.1.1

          What do you mean by “the so-called rich”?

          I presume you just mean the rich.

          Funny, show them as many graphs as you like, show them all the numbers in the world, they still think most of the country earns over 70k.

          Why is that?

          • Draco T Bastard 4.2.1.1.1

            They’re delusional. The only world that they see is the one that they want to exist. Reality doesn’t have a hope in getting through such wilful blindness.

          • vto 4.2.1.1.2

            felix says “they still think most of the country earns over 70k.”

            duh.

            you and mr bastard are as delusional as each other. feeding off each others ignorance to pat each other on the back and make straight out dumb and useless comments.

            answer it yourselves – is 70k per annum rich?

            is it?

            • lprent 4.2.1.1.2.1

              In NZ’s wage climate – yes.

              • indiana

                Funny then that you can get WFF tax credits on $70k per annum if you have 2 kids under 12 to the value of $74 a week…you may want to raise the bar on your rich scale.

              • gitmo

                I think you’ve just had a titty twister applied Lynn

                [lprent: Nope. I’m pretty damn hardened against common types of denial of service attacks (we’ve had a lot of inadvertent ones for spambots and search engines) at several levels. But when the load goes up you’ll get delays getting into the site causing time-outs. It is part of the site defences while it handling the load. We’ve been getting a awful lot of traffic this week. The site has alerted me 3 times so far about resources shortages. ]

              • indiana

                Based on your current family circumstances you are not entitled to weekly payments because your family income is over $89000.00

                This is off the IRD site, so perhaps if your household income reaches this level, you can say your rich! I doubt though that 2 parents earning $45k each will be happy about being qualified as rich.

              • vto

                Check any dictionary lprent. Most definitions describe rich as abundance. 70k is not abundance. Not even in NZ’s wage climate.

                But sure someone on 40k is also rich, following your logic. When compared to, say, the people in the same neighbourhood on 20k.. But that aint abundance either. Not very useful for such a discussion is it.

                • lprent

                  Most of the ‘rich’ people I know get there because of immense levels of obsession, leaving little time for intellect, friends and family. They have burgeoning bank accounts and are pretty damn poor in my opinion.

                  The problem is that whatever level you describe as ‘rich’ will be perceived as being too little (“I can’t afford to get a new car every 2 years”). Whatever level you settle at will be arbitrary.

                  On 70k you can live pretty well in most areas in NZ as an individual. It is probably tight if you have to support a household on it.

                  So you’d really need to define your terms of reference – including the lifestyle requirements.

                  • vto

                    Nice piece of squirming lprent

                    • lprent

                      Not really. Try finding a generally accepted definition of ‘rich’ and you’ll find exactly those types of issues embedded in the reasoning. That particular issue has been debated at least as far back as roman times. There were whole scrolls surviving on the subject….

                      I’ll look up a few in English translation when I get back to my library.

                    • gitmo []

                      Reminds me of the riots in Rome during Augustus’s time over tax changes …………. people should delve more into history to gain some perspective.

                    • lprent []

                      Yes I’d agree. There is still controversy over who paid for the mob to form 2k years later…..

                      Spontaneous mobs are about as much of a feature then as say the child-beater parade on Queen Street last year.

                      If you want to look for a real spontaneous protest, then you really need to look at the ones that are under-reported. Like the much large Maori protest on Queen Street. Or some of the interesting habits in the legions after Verspirius (sp?) when they didn’t get paid.

                    • gitmo []

                      Oh dear, still referring to anyone who spoke up against Sue Bradford’s efforts as a “child beater” are we.

                  • felix

                    whatever level you describe as ‘rich’ will be perceived as being too little

                    And there’s the trouble.

                    With a little questioning (if you can be bothered, I can’t today) the vtos of this world usually slowly reveal that they are using a definition of “rich” from their childhood – the infantile idea that being “rich” means “having everything you want, whenever you want it”.

                    Apparently earning twice as much as most people isn’t rich.

                    However much cash they amass they’ll never live up to their arrested childhood fantasy.

                    The truth is it’s an emotional state they’re trying to attain, not a material one and that’s why they can’t put a number on it.

                    • vto

                      Sheesh felix you can be a touch nasty at times “infantile” “arrested childhood fantasy”. And your comment is loaded with complete assumptions. Bit useless. Have I got under your skin?

                      Here are two suggestions for you;

                      1. look up ‘rich’ in a dictionary.

                      2. here is a number. $150,000 plus would be enough to pay for an above average home, have an above average number of consumables (two cars, two plasma tvs, a boat, a bach (just), and flexi work time, restaurants or etc – generally an above average lifestyle). And still have an “abundance” of money leftover. But only just. In fact it would not be enough if you lived in rich suburbs like Remuera or Fendalton. This would be my minimum to comply with any normal definition of rich in NZ.

                      Could you do that on $70,000 in NZ felix? Could you live in Remuera and live such a lifestyle on that? If so, show us a budget.

                      All I see from you fullas is squirm squirm attack attack. No substance. Bit disappointing given the typical claim for the high moral ground in debate styles here.

                    • Lanthanide []

                      I would have to agree more with vto’s definition than felix’s.

                      Edit: As vto found above, it appears threaded comments are broken.

                    • Draco T Bastard []

                      @ vto

                      Was that as an individual, a couple or a family?

                      Yeah, replies broken

                      [lprent: It seems to do it in individual posts. Once it breaks it stays broken. I’ll run this post through a HTML analyzer when I get home late tonight to see if I can find out why. ]

                    • vto

                      Sheesh felix you can be a touch nasty at times “infantile’ “arrested childhood fantasy’. And your comment is loaded with complete assumptions. Bit useless. Have I got under your skin?

                      Here are two suggestions for you;

                      1. look up ‘rich’ in a dictionary.

                      2. here is a number. $150,000 plus would be enough to pay for an above average home, have an above average number of consumables (two cars, two plasma tvs, a boat, a bach (just), and flexi work time, restaurants or etc generally an above average lifestyle). And still have an “abundance’ of money leftover. But only just. In fact it would not be enough if you lived in rich suburbs like Remuera or Fendalton. This would be my minimum to comply with any normal definition of rich in NZ.

                      Could you do that on $70,000 in NZ felix? Could you live in Remuera and live such a lifestyle on that? If so, show us a budget.

                      All I see from you fullas is squirm squirm attack attack. No substance. Bit disappointing given the typical claim for the high moral ground in debate styles here.

                      AARRRGH! MEANT TO BE A REPLY TO FELIX ABOVE BUT IT NOT WORKING.

                  • Macro

                    So are you saying that only about I0% can afford to live pretty well? (i’m taking into account those households with 2 incomes here.
                    I think I would agree with you. Middle NZ has been heavily squeezed in the past 25 years with the heavy adoption of neo-liberal policies by both the “left” and the right, the opening up of the NZ economy to all the effect of globablization – including the influence of cheap labour offshore, and the “rationalization” of labour laws by both the “left” and the right – to the effect that we now have employment laws that are in effect more unjust that pre – 1900 and the start of the labour movement. Now it is mandatory for couples to both work and to farm out the care of their children either to unpaid grandparents, or pre-school child care. (As it was in USSR in the 1950 – 60’s and we looked at in horror!). So much for western progress and the “benefits” of the capitalist system.

              • felix

                vto:

                Yes – 70k is pretty fucking rich.

                Most people will never get anywhere near earning that.

  5. ieuan 5

    A lot of the income on your graph will be from part time positions. A more accurate graph of the relative income of New Zealanders would be to look at house hold incomes or graph the income of those working in full time positions.

    • Marty G 5.1

      Why should only full time workers be counted, ieuan? Why do part-time workers, super-annuitants, students, and beneficiaries not exist to you? Not mention minimum wage full time workers on $26,000 a year.

      I’ll give you a graph of household income deciles next time, I can tell you now, it doesn’t make the issue disappear.

      But I’m sure you’ll find a way to ignore that too.

      • ieuan 5.1.1

        I’m not trying to make an ‘issue’ disappear but if you want to argue a particular point at least start with some clear facts.

        Yes there are a lot of low paid people in New Zealand but you have included in that group part time workers.

        For example my wife works 1 day per week as a teacher and ends up earning about $12K per year, she is actually pretty well paid for 1 day per week but according to your ‘lump everyone together approach’ she is ‘low’ paid.

        • Bill 5.1.1.1

          Her income is low…which I assume is the point when looking at PAYE?

          And the very fact that it is suggested household rather individual income is looked at is another indication of rising poverty, no?

          • ieuan 5.1.1.1.1

            Not sure how you can say her income is ‘low’, by what measure?

            Surely any measure of income has to be related to the number of hours worked.

            Also her income becomes part of our house hold income which is overall pretty good so again I struggle to see how her income is classified as ‘low’.

    • ghostwhowalksnz 5.2

      Pert time ? Many would be . So you know this , or are you guessing
      Do you count property investors as part time

      The grasping at straws is unbelievable.

  6. Hilary 6

    Thanks for this, Marty. I think you just have to keep publishing it regularly until the media gets the message. That most people are actually in that under $20,000 range will actually shock many. Last night John Campbell was talking about the average wage of $45,000 as if it was a low wage.

    • Marty G 6.1

      and that’s the thing. To John Campbell, $45,000 isn’t much money. It’s not intentional or ill-willed, it’s just blindness

      • indiana 6.1.1

        Example 2
        Off the IRD Website:

        Sarah’s total taxable income for the year was $45,000. Here is how to work out the amount of tax due on the income:

        $0 to $14,000 at 12.5% = $1,750.00
        $14,001 to $45,000 at 21% = $6,510.00
        Total Tax $8,260.00, Net wages are $36,740.00

        Therefore the tax due on Sarah’s income of $45,000 was $8,260.00.

        Is it not possible – without getting into too much detail about an individual’s circumstances – to survive on $706.54 in the hand each week?

        Off the IRD Website

        • Bright Red 6.1.1.1

          indiana. I think Hilary and Marty’s point is that $706.54 a week is a significant income. You’re failing to appreciate that most New Zealanders live on far less than $706.54 in the hand each week.

          50% have gross incomes of less then $500 a week.

          It’s that blindness Marty is talking about.

        • Draco T Bastard 6.1.1.2

          What’s that got to do with the information presented? Hell, even just looking at the graph it’s obvious that most people don’t have a $45k/year income.

  7. Peter 7

    I earn over 100k my wife earns about 45k so, with 3 kids we get no state support of any kind. And we vote Labour.

    A tax cut will do very nicely thank you… And no we do not structure our affairs, not able to .. So its PAYE …

    • Lanthanide 7.1

      IMO the only thing that needs changing is the threshold of the 38% rate (which is a good rate) moved out to 150k-180k.

      There are lots of highly skilled jobs in the 80-150k range that I would not consider the recipients of “rich”, and so they should not be taxed at the “rich pricks” rate. These are also the most likely people to move overseas, as well as the people we need to retain the most.

      • indiana 7.1.1

        So your saying that we should model our tax system on the Aussies….

        • IrishBill 7.1.1.1

          Maybe. As long as we use the payroll tax, put employer super contributions up to 9% but don’t adopt their absurd GST system.

      • sk 7.1.2

        38% above 150k in a developed country is fine. I have not seen a case as to why it has to be brought down

  8. Sean 8

    Last night John Campbell was talking about the average wage of $45,000 as if it was a low wage.

    The sad thing is $45,000 is a low wage, in terms of getting a home and raising a family it isn’t adequate. Which is why Working For Families was necessary.

    We waited right through the 90s for the trickle down to employers giving out more money in wages and salaries in real terms, in accordance with the theory – in reality most New Zealanders missed out. Hence the government had to step in.

    This GST increase will not be off-set by the personal tax cut for most taxpayers. It is a backwards step for New Zealand.

  9. Bill 9

    Anybody bothered to point out that the lowest earners already pay far more tax than those with the highest incomes?

    PAYE + student loan + Kiwi Saver = approx 30%+ ofall gross.

    High income pays 30%+ only on a portion of gross.

    Bearing in mind that many low earners ‘never’ pay off student loan, unlike people on high incomes.

    • gingercrush 9.1

      Many low earners don’t have student loans and many opt out of Kiwisaver. Many high-income people also have student loans for some they’re very large and take many years to pay them off too.

      I get the point you’re making its just a poor point to make.

      • Bill 9.1.1

        Fair enough.

        So how about the fact that some of the lowest earners in this country already pay more %age of their earnings in tax than those on the highest incomes and that those same highly taxed low earners are being asked to fund a tax cut for those on high incomes that in dollar terms will be in excess of their own weekly earnings.

        Oh, just noticed you say it’s a poor point rather a point poorly made. Really?

        • gingercrush 9.1.1.1

          The rich are also arrange their taxes in a way that low income people can’t.You could also say the poor get other benefits such as accommodation supplements, student allowances, lower medical bills, working for families etc etc etc.

          The left is spinning this as the low-income support the higher income. That will ultimately depend on what National does at the budget. If they give tax cuts to the low-income via higher tax-free thresholds or shifting of those tax thresholds then the low income could be substantially better off.

          In the end low income taxpayers are never going to win via tax cuts or changes in tax because they don’t pay that much tax as it is and their earnings are low. If you really want to have a go at someone for low-income people I suggest you turn to Labour who pretend to represent them. National is a conservative rural-provincial middle/upper suburban party. Labour pretends to be the low-middle urban-provincial party.

  10. prism 10

    indiana gave figures –
    $0 to $14,000 at 12.5% = $1,750.00
    $14,001 to $45,000 at 21% = $6,510.00
    Total Tax $8,260.00, Net wages are $36,740.00
    Therefore the tax due on Sarah’s income of $45,000 was $8,260.00.
    Is it not possible without getting into too much detail about an individual’s circumstances to survive on $706.54 in the hand each week? Off the IRD Website”

    But the ‘survival’ money is taxed further with GST don’t forget so there is less available to the taxpayer than this figure would indicate.

    lanthanide talking about the 38% tax being moved (if steps for the higher tax rates, say above 20%, were set then indexed five yearly based on inflation the heat would go out of this argument).

    People on low incomes have far less disposable and discretionary money and each extra dollar has a greater effect on them than for those on middle incomes. This would be better –

    The PAYE tax would be fairer for low income people if the first step was to $20,000 @ 10% = $2,000 PAYE + gst 12.5% on $18,000 = $2,250 total tax $4,250.00 and that would help the strugglers and new entrants, school age etc.

    Next step $20,001 to $40,000 @ 15% –
    First $20,000 – $2,000 plus next $20,000 – $3,000 with a total of $5,000 PAYE plus GST.

    Next step $40,001 to $80,000 @ 20%.
    This would bring a graded progression based on rates and steps that could be calculated in your head. Easy to understand and fair and practical enough to leave unchanged for years while inflation stays low.

    • indiana 10.1

      …Along with this would raising the GST to 15% influence people’s ability to be more disciplined with their discretionary spending? In other words, PAYE cannot be controlled by an individual (unless you think that being on the lowoest possible income means you can pay the least tax), BUT the amount of GST you pay can be controlled as it is entirely up to your spending decisions.

  11. ieuan 11

    ‘Is it not possible without getting into too much detail about an individual’s circumstances to survive on $706.54 in the hand each week?’

    The answer (like most things) is it depends.

    If you are single, flatting and this is your first job after training then, yes, it is probably a good start. If however you are trying to raise a family and thinking of buying a house then it is rubbish.

  12. Macro 12

    The problem with the poor perception by NZers to the actual status of wealth distribution in this country is that we consistently have our MSM commentators repeating the “accurate” – but not very useful statistic that the “average” – they are using the mean – income of NZers is $48,000. John Campbell last night did in an intro to something or other – I forget what because I immediately leapt out of my chair in protest and switched him off!
    As the graphs, derived from IRD data, depict above, quite clearly the sum of the top 10% of incomes is more than equivalent to the total earnt by the rest of the population. ie 10% of incomes balance out 90%! To quote $48,000 as an average in such a skewed distribution is tantamount to a lie. – “There are lies, damned lies, and statistics” Disraeli

    • ieuan 12.1

      If the mean value of $48K is so wrong then what figure should be used?

      • Bill 12.1.1

        26k?

        The fact I can’t remember the mode average while the mean average trips off my tongue might say something I guess.

        http://math.about.com/library/weekly/aa020502a.htm

      • Bright Red 12.1.2

        that is the mean wage for fulltime workers.

        A better indicator of the ‘typical’ income is the median income for all people.
        which is $28,000. Something like 50% of Kiwis have an income within $5,000 either side of $28K

        • Macro 12.1.2.1

          Yes I would have said that the median wage is a far better indicator of central tendency – or even the mode (the figure around which most earn). which would be around $17000 to $24000. To use the mean value would be fine if income distribution was in the shape of a bell curve – but as we can all see from the graph above – it’s no where near that.

  13. Red Rosa 13

    Bernard Hickey over at InterestNZ had this to say

    “Instead, the tax system will be focused on extracting more income from those PAYE taxpayers without families who are unable, unwilling or ignorant enough not to have bought rental investment properties. It will have failed the Tax Working Group’s drive for a fairer, broader and flatter tax system to cope with an impending increase in government spending needed to pay the health care and pension costs of baby boomers.”

    Seems the clawback from investment property depreciation will be far less than JK vaguely suggested.

    ‘Step change’ turned into a sidestep?

    • gingercrush 13.1

      Are you really going to listen to Hickey who wants a 25 cent flat tax. No tax relief whatsoever to any other group. Wants Working for Families removed, student loan interest returned, a raise in the retirement age and significant cut to the pension. Mass welfare reform not to mention a land tax or comprehensive capital gains tax.

      I don’t know why the left persist in quoting him all the time. He’s nuttier than Don Brash.

  14. Graph stolen and propagated, with rough decile info here:

    http://norightturn.blogspot.com/2010/02/some-facts-on-income-distribution-in.html

    [lprent: You’re welcome. After all we lift enough from you… ]

  15. felix 15

    edit: this is a reply to vto, below.

    vto, that’s precisely what I was referring to. You came up with a number for “rich” and then immediately realised that although it affords you a lifestyle far and away in excess of what 99% of the population can ever dream of it still doesn’t really seem rich to you.

    Still not “whatever I want, whenever I want it”.

    Double it. Try the same experiment with $300,000 and see how it goes. Much the same I bet.

  16. Tomks 16

    Be interesting to do a chart of household net income. Bet you that a household where one parner earns $100000 and the other works part-time and earns 20K are a lot worse off overall than a household where both earn $60. Address some of those inequalities as well by raising the threshold for the top rate.

  17. Good news. Today, we need inflation to pump up GDP number or sustain housing price. What care about quality of life; that is something the next generation has to worry. Let’s us enjoy the virtual money/number.

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