The straw that broke the Randian hero’s back?

Written By: - Date published: 12:30 pm, July 18th, 2011 - 63 comments
Categories: capitalism, class war, tax - Tags:

I’ve been thinking about that lawyer Casey Plunket who threatened to leave for Australia over Labour restoring the 39% top tax rate at the stratospheric threshold of $150,000. It means a couple of thousand more tax for the wealthiest Kiwis. Does anyone seriously think anyone will move countries over that? Do we need the kind of people that would?

Lets say our high earner is on $200,000. That’s four times the average wage. You would recognise him if you saw him: he would be a god-like giant lifting the world on his shoulders and doing the work of four mere mortals, which justifies that salary.

How much would Labour’s new tax rate cost him? Only $3,000. That’s partially offset by the $525 he gets from the tax-free zone too, and the GST-off fresh fruit and vegetables. All up, it’s well less than 2% of his net income.

Does a man with net pay of $140,000 a year really care about $2,500 so much that he would go to the cost and trouble of shifting countries, abandoning his job, his friends, his family and other connections? If all that is worth less than $3,000 a year to him, is he really a contributing member of society, or just someone sucking as much as he can out of it?

At the end of the day, the wealthy didn’t flee New Zealand when the 39% rate was introduced, or when much higher rates were in place until the 1980s. In fact, the income of people on the top tax rate exploded under Labour despite this ‘crippling’ tax rate. They didn’t leave then, and they won’t leave in 2012, because a couple of percent here or there in tax simply doesn’t really matter, even to those who protest most loudly that it does.

63 comments on “The straw that broke the Randian hero’s back? ”

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  1. queenstfarmer 1
    18 July 2011 at 12:47 pm

    top tax rate at the stratospheric threshold of $150,000

    Why is that stratospheric? The Australian top rate kicks in at AUD$180,000.

    • Colonial Viper 1.1
      18 July 2011 at 12:58 pm

      because our incomes are generally 30%-40% lower in NZ, for the same job.

      Also less than 2% of NZ’ers earn that much.

    • Lanthanide 1.2
      18 July 2011 at 12:59 pm

      The closest comparison would be the 37% rate, which kicks in at AUD$80,000. Hence 39% not kicking in till $150k really is stratospheric in comparison.

    • The Economic Illiteracy Support Group 1.3
      18 July 2011 at 1:00 pm

      Just think – you’re only one Wikipedia search away from being able to answer your own question.

      The Australian median household income in 2007/08 was AUD$66,820, while the New Zealand household income was only NZ$34,684 in the same period. Note this is household income, not individual income.

      Labour’s proposed top tax rate would kick in at about 4.3 times the median household income, while the Australian top rate kicks in at only 2.7 times the median household income. So ignoring the exchange rate differentials, the Australian rate affects more people because they earn higher incomes. Relatively speaking, it;s entirely correct to say that the proposed NZ rate is indeed more “stratospheric” than the Aussie one, despite the differences in headline rate.

  2. Afewknowthetruth 2
    18 July 2011 at 12:47 pm

    Any society that allows individuals to acquire obscene wealth at the expense of the greater community and at the expense of coming generations is a thoroughly sick society and has no fuutre.

    Unfortunately that is exactly the kind of society we live in.

    As I understand it, in Cuba nobody gets more than three times the average income and everybody has access to free healthcare (which is probably why the corporations that are in control of the US government have been so keen to see Cuba destroyed).

  3. Peter Martin 3
    18 July 2011 at 12:51 pm

    ‘Does anyone seriously think anyone will move countries over that? Do we need the kind of people that would?’

    How many of these high earners have left their countries to migrate to NZ, given our low taxes…?

    • Ari 3.1
      18 July 2011 at 1:07 pm

      If people wanted to migrate to a low-tax country, they wouldn’t pick middle-of-the-road New Zealand. People tend to move here for lifestyle reasons.

      • The Economic Illiteracy Support Group 3.1.1
        18 July 2011 at 1:36 pm

        I hear that Somalia has effectively zero tax, due to having effectively zero government, but I’ve yet to see the success of their plan to attract high-income high-flyers to revitalise their economy. Perhaps Casey Plunket can be the first.

        • Frank Macskasy 3.1.1.1
          18 July 2011 at 2:10 pm

          Funny that, TEISC…

          I keep making that suggesting to folk who continually whinge about paying taxes… and thus far I’m not aware of anyone wanting to move to a tax-free nirvana, minimalist-government, that is Somalia.

          What a shame. I’m sure that Somalia would suit Libertarianz to a “t”. No ‘complicated’ RMA. No pesky regulated economy. No government bureacrats to interfere with these brave entrepreneurial souls.

          No tax.

          Everything user-pays.

          Damn, there should be BOAT LOADS of aggrieved, wealthy tax-payers heading for that Free Market Heaven…

          • Secret Squirrel 3.1.1.1.1
            18 July 2011 at 2:19 pm

            Damn, there should be BOAT LOADS of aggrieved socialists heading for Cuba?
            (There should be good backload deals from Florida)

            • Ianupnorth 3.1.1.1.1.1
              18 July 2011 at 2:47 pm

              I visited Venezuela just before Chavez et. al. got control in the early 1990’s. At that time only the uber rich (e.g. those earning more than US$100K, less than 1% of the population) actually paid tax – and the top rate was a mighty 10%.
              Post Chavez tax rates were aligned to the rest of the world, hence the uber rich got hammered and why they all got slightly upset. But then again, they had developing infrastructure, good health care, education, etc..

              • KJT …
                18 July 2011 at 2:55 pm

                Hence the USA using the Colombian Regime to try and topple Chavez.

                Don’t need examples of successful socialism.

                • Vicky32 …
                  18 July 2011 at 6:49 pm

                  Oh yes. A good 60% of Americans I have spoken with online genuinely believe that Chavez is an unelected military dictator. The propaganda works! 🙁

              • Gosman …
                18 July 2011 at 3:47 pm

                Yes I’ve read the Venezualan economy is going great at the moment with no shortages caused by Socialist inspired policies

                http://english.eluniversal.com/2011/07/14/expanding-state-results-in-shortage-of-staples-and-services.shtml

                • AAMC …
                  18 July 2011 at 5:43 pm

                  Even Chomsky is criticizing Chavez for his slide towards Totalitarianism, such a pity, as it had been a good example of a socialist revolution..

                  http://www.guardian.co.uk/world/2011/jul/03/noam-chomsky-hugo-chavez-democracy

                  • travellerev …
                    18 July 2011 at 6:28 pm

                    Yeah, and he also has come around to some of the 9/11 truth movements arguments.
                    Chavez by the way abdicated his power while in Cuba for cancer treatment so he is not a total control freak it seems.

                  • Vicky32 …
                    18 July 2011 at 7:04 pm

                    Even Chomsky is criticizing Chavez for his slide towards Totalitarianism, such a pity, as it had been a good example of a socialist revolution..

                    You do know that he has complained angrily about having been mis-quoted, don’t you?

                    • AAMC …
                      18 July 2011 at 7:16 pm

                      From Chomsky’s letter..

                      “For the above reasons I want Venezuelans to be aware of my total solidarity with judge Afiuni, while I affirm my unwavering commitment with the efforts advanced by the Carr Centre in Harvard University to release her from imprisonment. At the same time, I shall keep high hopes that President Chávez will consider a humanitarian act that will end the judge’s detention.”

                      The full transcript of his Guardian interview…

                      http://www.guardian.co.uk/world/2011/jul/04/noam-chomsky-venezuela?intcmp=239

                      “Well as far as I’m aware she’s not receiving any trial at all. I rather doubt, I’d be sceptical about whether she could receive a fair trial.

                      I mean it’s kind of striking that, as far as I understand, you probably know better, other judges have not come out in support of her. Which seems rather strange given the circumstances. If Amnesty International does I don’t see why judges in Venezuela shouldn’t. That suggests an atmosphere of either intimidation or unwillingness to consider the case seriously.”

                      Believe me, I hope dearly that Chavez proves to be all he promised to be, but imprisoning the Judiciary when you don’t agree with it is a little more Stalin/Mao than my Social Democracy desires are comfortable with.

                      I would love you to prove my unease wrong!

  4. Colonial Viper 4
    18 July 2011 at 1:00 pm

    The irresponsibility of the wealthy – those who would pay nothing (and sometimes do) to contribute to the running of government and our social welfare system of health, education and benefits for all.

  5. Rich 5
    18 July 2011 at 1:10 pm

    I know plenty of smart, well qualified people (including myself) who’ve moved to NZ exactly because we have a liberal, less greedy society. The more we move in that direction, the more such people we’ll get.

    And they’ll be way better at skilled and management jobs than those who just want to screw money out of the taxpayer and/or their workers.

  6. Secret Squirrel 6
    18 July 2011 at 1:10 pm

    “Do we need the kind of people that would?”

    You could suggest that to Labour as a new party slogan.
    And add “please leave before the election”.

    • Colonial Viper 6.1
      18 July 2011 at 1:24 pm

      Hey SS no need to do that, National is driving them away as fast as now. 3300 in May.

  7. alex 7
    18 July 2011 at 2:14 pm

    Lawyers leaving the country can only be a good thing. There is an endless supply of law school graduates who will struggle to get jobs in this country unless they are vacated by the incumbents. Furthermore, as lawyering is by definition a parasitic occupation, the fewer here the better.

    • mik e 7.1
      18 July 2011 at 7:37 pm

      Alex theres plenty of bean brained bean counters that are trying to turn this country into a feudal state that could go with them,

  8. Craig Glen Eden 8
    18 July 2011 at 2:30 pm

    The truth is its not predominately high earners that leave its skilled low paid workers that leave.

    Casey like the property developer the other day that don’t want to pay tax and build NZ should go, just leave NZ does not need them.

    If the tax rate as it currently stands was working why are so many people leaving?

    All the greedy spoilt people will say oh well it dose not suit me I will leave, well do it,go to Aussie.

    While you are at it take Key and English with you to, please please please take them.

    • KJT 8.1
      18 July 2011 at 2:57 pm

      You really think that skilled builders, plumbers, technicians etc are low paid in Australia??

      If a lot of Lawyers leave we may be able to get rid of our Government make work schemes for lawyers and spend more money on retaining teachers.

      • Craig Glen Eden 8.1.1
        18 July 2011 at 3:59 pm

        No I dont think trades people are low paid in Aussie thats why kiwis leave NZ

        “The truth is its not predominately high earners that leave its skilled low paid workers that leave.”

        You have missed read me I think KJT

  9. battleheed 9
    18 July 2011 at 3:07 pm

    Greedy prick is just a leech, he should piss off sooner rather than later and take all his greedy leech friends with him.

  10. travellerev 10
    18 July 2011 at 4:33 pm

    Hahahaha. I remember the Stones leaving England because of tax reasons. Made an awesome record “Exile on main street” (Just read Keith Richards autobiography “Life’ Great read, brought it all back) Now, they were paying 93% tax at the time.

    Earn a million pounds and go home with 70.000 between the six of them and their manager and crew. Now that is cause for leaving a country and even then they hated it. Almost killed them by the sounds of it.

    And look at Pope Bono and U2. They left Ireland over tax reasons and are getting booed of stage.

    Let them leave, let them find out what it means to up and go and rebuild their lives over a couple of thousands of dollars. Who needs them.

    Let’s nationalise what they can’t take and get on with it.

    • Gosman 10.1
      18 July 2011 at 4:35 pm

      Excellent, you read exactly like Comrade Mugabe. I can’t wait for the Socialist paradise that will magically appear just has it has in Zimbabwe after nationalisation of private property rights there.

  11. travellerev 11
    18 July 2011 at 4:41 pm

    Cowboy hat boy? Whatever. Go do your homework or something.

  12. AAMC 12
    18 July 2011 at 5:50 pm

    I know a bunch of talented motivated people who have recently left this country. Not one of them in a response to tax, rather as a response to the conservative old boys club that is doing irreparable damage to their opportunity and their futures.
    The more I wave goodbye to, the closer I get to also pursuing a higher tax rate in a more equitable country… it’s just there aren’t many options.

    • travellerev 12.1
      18 July 2011 at 6:36 pm

      Funny how when there is more income inequality the social cohesion is the first that crumbles and the sense of trust disappears and people generally feel more taken advantage off and unhappy.

      • AAMC 12.1.1
        18 July 2011 at 6:55 pm

        And their distrust of and apathy towards politicians grows which results in an abdication of power to those who have perpetuated the problems they’re facing.

        “social cohesion is the first that crumbles and the sense of trust disappears and people generally feel more taken advantage off and unhappy.”

        Or does it just tarnish the glow of the American Dream for long enough for people to realize the extent to which they are taken advantage of?

      • mik e 12.1.2
        18 July 2011 at 8:06 pm

        Brain Gaynor is right on the money the old boys club just want to make a quick buck and thats s why there is no long term plan for the economy under the right ,just let predating profit makers strip the economy and w,ell be just tenets in our own land[Quote John Key].The reserve bank chases its own tail the productive sector destroys itself every time it starts making headway. Rising interest rates force the dollar up increasing profit by margin and then dollar value, while our economy falters either farming if commodities are high manufacturing and tourism falter the opposite when farming is faltering, we need to stabilize our currency by saving more when inflation is high and increasing tax to pay down debt and reverse when inflation is low that early pay off of debt would bring down our dollar plus the increase in savings would make us less likely to need overseas borrowing help our dollar go down.Heaven help us if we found OIL our dollar would shoot the the roof and every other sector of th economy would be destroyed by being over priced real good strategy Gerry Brownlee & John Key typical no plan laissez fair

    • Colonial Viper 12.2
      18 July 2011 at 8:16 pm

      People gotta wake up, and soon. The vital life blood of the country is drip drip dripping away, the National blood letters promised all of us a cure but that cold deadness in our country’s finger tips and toes is getting worse not better

  13. Kaplan 13
    18 July 2011 at 8:26 pm

    Is it fair to assume that it is this Casey Plunket?
    http://www.chapmantripp.com/people/Pages/Casey-Plunket.aspx
    Who is also “the co-convenor of the New Zealand Law Society Tax Committee, and a member of the Government’s Rewrite Advisory Panel”
    He seems to by quite the JK groupie
    http://www.chapmantripp.com/news/Pages/Way-to-go,-Mr-Key.aspx

  14. Drakula 14
    18 July 2011 at 9:34 pm

    Oh well lets give Casey Pluncket a ticket to Somalia a tax free haven!!!!!

  15. Drakula 15
    18 July 2011 at 9:40 pm

    Of course the ticket will be one way and not negotiable, meaning he won’t be able to cash it in!!!!

  16. deemac 16
    18 July 2011 at 10:52 pm

    please note how the trolls try to divert any factual discussion of the situation in NZ to pointless (on this site anyway) discussions about Cuba or Chavez or whatever? We need to ignore attempts to distract us from the task at hand, ie to expose the bankruptcy of the NACT govt’s economic plans.

    • Colonial Viper 16.1
      18 July 2011 at 11:27 pm

      🙂

    • AAMC 16.2
      19 July 2011 at 8:33 am

      And there goes the problem in this country. Attempting to live in a bubble and ignoring the lessons the rest of the world teach us.

      I would have thought for instance, the Fresh Water Economists hailing from Chicago had some influence over not only the GFC but also NACTional economic thinking, and having such recent evidence of the failing of that thinking should inform our desire and increase our ability to get Key n co out.

      Equally, it is important that the “Left” when and if one of it’s prophets fail, acknowledge that failing and let it inform their thinking.
      Otherwise, this game of politics truly has become useless.

      I don’t see broadening the worldview as an act of trolling.

  17. jbc 17
    19 July 2011 at 12:11 am

    I left in 2000 after the first 39% tax hike. It was a much bigger hit at the time, cutting in at about $60k if I recall correctly.

    Anyway, the problem with individual income tax is that salary and wage earners can not escape it. Skilled professional salary earners more so, since they tend to earn more. Business owners can dodge it.

    At the time I was struggling – split with partner – refinanced and doubled my mortgage an in the middle of fixing up a 90 year old house. Nobody’s fault but tax was already my biggest outgoing and I had bills that I was already wondering how to pay. The 6c rate hike was a punch in the eye for sure.

    I remember a conversation I had with the electrician. To cut costs I was working with him while I took some leave so we chatted a lot. Turns out he paid very little tax and lived pretty well. I knew his hourly rate and how busy he was. 39c rate did not touch him. The benefits of being able to expense and depreciate which he explained in great detail. IRD “It’s our job to be fair” – well, not really.

    Somehow that started a train of thinking that ended with me cashing up and voting with a plane ticket.

    So, long story, but I can confirm that the 39c rate was all the push I needed at the time.

    I had another push a few years later when the govt announced an incentive for expats to return. In order to qualify you needed to be out of the country for 10 years… so here I am still out of country. Unintended consequences I guess.

    • Colonial Viper 17.1
      19 July 2011 at 12:36 am

      So, long story, but I can confirm that the 39c rate was all the push I needed at the time.

      The thing is, that’s not the really interesting part of the story. It is to you of course as it was your life decision then, but in terms of generalisability it’s not.

      Turns out he paid very little tax and lived pretty well. I knew his hourly rate and how busy he was. 39c rate did not touch him. The benefits of being able to expense and depreciate which he explained in great detail.

      This is the really interesting part of the story. There are some real insights to be gained from examining this part.

      And its working with this part which will allow ordinary PAYE affected earners to receive a $5000 pa tax free allowance.

    • lprent 17.2
      19 July 2011 at 12:54 am

      Yep. But the basic problem is that PAYE is too effective, so a higher and higher proportion of the tax take has come from it since it’s introduction. When I have contracted, it is a lot easier to expense everything and to drop tax levels markedly, but a lot of irritating hassle. GST has a wider capture but is really really regressive – it is a higher proportion of lower income earners total income because almost all of the exemptions like property are rich people’s toys apart from rent.

      You can argue about the spending side as much as you like, but basically the vast majority of the spending is there for a purpose. The biggest chunk in superannuation. Government should only reduce revenue when it has already reduced spending. Unlike these current idiots who bank the savings in spending in tax cuts before managing to make the cuts successsfully. Which is basically why they now have a debt problem.

      But the overall tax base needs broadening in several directions. At present too many people are escaping being taxed – which is why PAYE and GST are high.

      I have no real issues with having a progressive tax system provided the extremes aren’t that high. At one stage my father was on a nominal 60+% – which encouraged him to spend more time playing with property. What is irritating is seeing people wasting effort and putting the money into avoiding tax rather than into something productive – because that is what the tax system tells them to do. My guesstimate is that currently something like 40% of the wealth is tied up like that – mostly in trusts.

      That is what needs to be targeted so that those who don’t bother avoiding tax, like yourself and me (and who are extremely productive) – don’t overpay tax or have to waste effort avoiding it.

      There have been a number of times in the last couple of years I have been tempted to follow you and others offshore. This government seems to be trying to drive those of us productive ones remaining away. In classic conservative style they are not concentrating on anything useful for the fuure. They are merely repeating the idiocies of the 90s.

      J: I would suggest staying away. It doesn’t look pleasant the next few years with these short term thinkers in power.

      • jbc 17.2.1
        19 July 2011 at 2:34 am

        PAYE is unfortunate in that those most impacted by it aren’t the really mega-wealthy, but are employees who have no escape. Probably employees with skills in high demand. I’ve heard it said that one of the reasons PAYE is so effective is that it is unavoidable. Like taking candy from a baby.

        So on one hand the CGT is a useful broadening move, but then the burden is put back on the higher salary earners as well. Sure it is a tiny percentage of voters so not really a big deal to tap them for a few more dollars.

        Ask yourself the question: why not lift the company rate to match? 😉 Then you can see that this personal rate is all about squeezing the people that have nowhere to hide.

        Re-opening the company/personal tax gap is not a smart move.

        I don’t expect to get any sympathy for my point of view, as I’m now in the same position as my local Pt Chev electrician was in 2000. Since then I have all of my income paid into a company, from which I draw a salary that my family can live on.

        I do find it a little ironic that it was tax policy that pushed me to the business direction, and had the tax appeared fairer to begin with then I would have been (reluctantly) happy to contribute more as an earner.

  18. her 18
    19 July 2011 at 12:08 pm

    No one would leave for that. It would just be another sweetener.

    • Colonial Viper 18.1
      19 July 2011 at 12:28 pm

      Having a good health system, a good education system, top universities, power and transport infrastructure with proper investment, and a great sustainable environment are also good sweeteners.

      And that costs tax money to pay for. And the more we run the environmental and human capital of this country down the more people will go.

      PS the window of Australia being the employment safety release valve for NZ is closing.