at 70k a year i’d say it’s about 30~50% lower than OZ (depends on your trade), u get the smallest share of the tax cut pie, u get no benefit or any sort, and u still can’t afford the house on the beach side of the main road.

the 70k to 100k group should see some greater reduction.

I think you are onto something there. Good long term tenants usually end up with rent below market because they pay their rent on time, don’t have a high maintenance cost and sometimes they even do much of the day to day maintenance as if the house was their own asking only to be reimbursed for costs. Rental increases for these people are likely to be negligible as landlords adjusting to net income changes wouldn’t want to risk loosing a good tenant.

Providing assistance for some people to move more easily, rather than to enable them to pay more, would just make it easier for them to trash a house and ship out. The unintended consequences of making a sector of the market more mobile than previously would change the market, what further mitigation would then be regulated to counter the new form of intervention’s negative effects?

as part of the top 5% we hope you NEVER get on the govt benches

Flat tax 25%
GST 15%
no tax up to beneficiary rate.
limited time benefit.
No WFF.

Govt reduces spending and cuts its cloth to income, like people do.

[DPF: That stays at 33%]

The tax working party thought this might raise over a billion dollars in revenue, which answers part of the quaestion about how the numbers stack up – the GST rise would not in itself provide enough cash to fund the suggested income tax cuts AND compensate superannuitants etc.

But a second key point is that a whole lot of the high income earners who appear to do very well out of the suggested income tax changes will actually be hit hard by the property depreciation change – many will be worse off.

The trouble with all the calculation is that everyone’s circumstances are different both in terms of what they spend money on and where the money comes from.

How Taxes Work
Bar Stool Economics, something to which we ALL can relate!

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. They could all just pay $10 since they all drank beer or if they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest of the 10) would pay nothing. The fifth would pay $1. The sixth would pay $3. The seventh would pay $7. The eighth would pay $12. The ninth would pay $18. The tenth man (the richest) would pay $59. So, that’s what they decided to do.
The ten men drank in the bar every day and seemed OK with the arrangement until one day, the owner threw them a curve. ‘Since you are all such good and faithful customers,’ he said, ‘I’m going to reduce the cost of your daily beer bill by $20. Drinks for the ten now cost just $80.’
The group still wanted to pay their bill the way we pay our taxes, so the first four men were unaffected. They would still drink for free.
But what about the other six men – the paying customers? How could they divide the $20 windfall so that everyone would get his ‘fair share?’
They realised if they divided the $20 savings by six they could each reduce the amount they were paying by $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill the same way Tax Savings are dispersed, and he proceeded to work out the amounts each should pay.
And so, the fifth man, like the first four, now paid nothing (100% savings)
- so 5 men are drinking for free. The sixth now paid only $2 instead of $3 (33% savings). The seventh now pay $5 instead of $7 (28% savings). The eighth now paid $9 instead of $12 (25% savings). The ninth now paid $14 instead of $18 (22% savings). The tenth (the wealthiest) now paid $49 instead of $59 (16% savings).
Each of the six was better off than before.. And the first four continued to drink for free, now along with the 5th too. But once outside the restaurant, the men began to compare their total dollar savings. ‘I only got a dollar out of the $20′ declared the sixth man. He pointed to the tenth man: ‘but he got $10!’ ‘Yeah, that’s right,’ exclaimed the fifth man.
‘I only saved a dollar, too. It’s unfair that he got ten times more than I!’ ‘That’s true!!’ shouted the seventh man. ‘Why should he get $10 back when I got only two? The wealthy get all the breaks!’
‘Wait a minute,’ yelled the first four men in unison. ‘$20 was given back and we didn’t get anything at all. This system exploits the poor!’ The nine men surrounded the tenth and beat him up.
The next night, the tenth man didn’t show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!
And that, ladies and gentlemen, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

We gave up being a rich country a long time ago.

Better to compare ourselves to other fool’s paradises, living off the back of borrowed money and supporting large government.

NZ tax thresholds are also ridiculously low. Cullen in 1999 made a great statement that at 39% the proposed top wealth tax was quite low compared to the US which at that time was 49%. Cullen just didn’t mention that at that time the US top rate kicked in at $400,000 USD (Circa 10x the $60K NZD threshold he said was rich).

It’s this kind of dishonesty (lies of omission) that let Cullen get away with the rort of over taxing what are really middle earners so he could spend on targeted groups to make sure Labour got re-elected. Socialism always fails, just socialists are too dim to remember from one failure to the next that it was their ideology that stuffed the economy. 2008 was pretty much a re-run of 1990 yet dim-bulbs lefties still think redistribution and welfare are the way forward.

If Cullen had a tax policy rather than a tax method then yes he would have raised the top threshold each year to reflect the policy intent. The problem Cullen had was that he based his party marketing on the policies of envy and to lift the top threshold would have given tax cuts to rich pricks year on year. See Cullen was so bound by his ideology and his position that taxation is about plucking the goose with the least amount of hissing that fairness didn’t enter into the equation.

It is easy to denigrate a rich prick who wants a tax cut and make them look greedy – which is exactly what Cullen played on.

Rob Salmond is equally myopic, see he thinks that just lowering the rate at each threshold maintains the progressive nature of the tax system when in reality it make it more progressive. Lefties seem to think the tax system is a one way trip with progressiveness, it’s OK when it is getting more progressive but the world ends when it is less progressive. Once again fairness has no place in the equation except when that is required to win an election.

If we lowered all rates keeping the thresholds the same as Rob suggested earlier up thread then low income earners would get circa 10% reduction in actual tax paid tax and high earners would get circa 5% reduction in actual tax paid tax – but sadly Rob appears to either want to ignore that little fact and pretend he knows what he is talking about or he just fails to understand how progressive taxation works eventhough he claims to have a fair solution.

Lefties eh, it’s just too much to expect them to understand that their ideology has never worked.

I confess to not being familiar with OECD tax rates, but a quick google search led me to this site which doesn’t seem to bear that out:
http://www.oecd.org/document/60/0,3343,en_2649_34533_1942460_1_1_1_1,00.html#pir

Happy to be corrected, but a quick scan of the data seems to show NZ taxes are higher than many OECD countries.

However, I dare say that a $2billion reduction in spending is not that spectacular in comparison to total government spending yet it would make a huge difference to income tax.

You think Australia is short of buildable land?

Paul – 1. I am interested to see the reputable cross-national studies showing that most high income earners do not pay the high income rate. Where should I start? 2. DPF will tell you that we still have all those loopholes in NZ even now (he noted that half the highest income earners do not pay the top rate today), and I would note that we haven’t heard anything much about closing them. 3. I have a high opinion of DPF’s abilities and appreciate his willingness to put his views there for us to discuss. I just wish he would start the discussion with a scenario that is realistic, rather than with an unrealistic scenario that just happens to overstate his case. Makes for a better discussion, don’t you think?

Owen – You may also consider another difference between Auck, Syd, Mel, CA, and FL on the one hand vs TX and GA on the other, which might explain lower mortgages. That factor has nothing to do with regulation, it is differences in the availability of buildable land.

In Auckland, Melbourne and Sydney (and the cities of California and Florida etc) Smart Growth and MULs mean that the typical median income household spends 50% of their income on the mortgage for their median house mortgage. ie median multiples of 5 to 6 or severely unaffordable housing.
However in lightly regulated states such as Texas and Georgia the median income household spends only 15 – 16% of its income on their median house. Affordable housing – mm of 3.0 or less.
the
Now that makes a difference in disposable income and guess which families are better able to invest in the productive sector, savings funds and their children’s education.

Reducing mortgages by more than half would leave far more dollars in low income pockets than any tax cuts.

We know what to do and how to do it but for some reason Governments are missing the big picture.