The Jane and John examples
May 20th, 2010 at 3:09 pm by David FarrarTreasury have given some examples of overall change in net income for various persons or couples. You can see which one may be closest to you. In order they are:
- Foreign owned company has NZ subsidiary earning $8 million and interest expenses of $5.6m and net profit of $400k due to thin capitalization rules. Under new rules taxable net profit increased to $1.52m, so firm is $313K worse off.
- Professional landlord with 25 properties earning $112,000 and depreciation of $52,000. $15k a year worse off as now pays tax on $112,000 of income not $60K
- Business owner which makes $120,000 profit but pays salary of $48,000. Has spouse and two children. $8k a year worse off as no longer eligible for WFF.
- Couple each earning $150K owning 10 properties costing $4m and now worth $6.5m. No tax paid on rental income of around $35K a year due to depreciation. Overall $5,600 a year worse off.
- Unemployed person on dole pays $100/week rent and gets $36 accom supp. $53 better off.
- DPB beneficiary with three children paying $300/week rent, $130 better off.
- Student on student allowance and $100/week rent and $40/week accom supplement. Earns $9K part-time. $140 better off.
- 19 year old on minimum wage pays $100/week rent. $330 a week better off
- Retired couple own home, no mortgage or investments. $560 better off
- Single superannuitant in own home with $10K a year investment income. $620 better off.
- Sole earner earning $50K and $120/week rent. $830 better off.
- Couple with two children, earning $80K and $40K with one investment property which generates $2,700 profit and $3,000 depreciation. Property has doubled in value from $300K to $600K. $1,225 better off.
- Couple earning $50K and $26K with two kids and $300/week mortgage. $1,285 better off.
- Couple saving for first home both earning $60K, $1,000 a year interest, $250/week rent. $2,100 better off.
- Couple earning $100K and $40K with three children. $600 a week mortgage. $3,170 better off.
So of the 15 examples, four are worse off. The foreign owned company, the two professional landlords and the company owner who was claiming WFF despite their high income.
The student and the two beneficiaries are marginally better off by $1 to $3 a week. This reflects of course they are not generally (yet) contributing to the economy, but are a net cost on other taxpayers.
A 19 year old on the minimum wage is around $7 a week better off, and those on the pension around $10/week better off.
A sole earner on the average FT wage is $15/week better off.
And those who pay the most tax currently, are of course even better off. They get to keep more of their earnings.
May 20th, 2010 at 3:14 pm
And those who pay the most tax currently, are of course even better off. They get to keep more of their earnings.
And that sums it up really.
Vote:May 20th, 2010 at 3:20 pm
well done Bill/JK etc .. thank god silent T had nothing to do with this budget .. onward and upward from here .. even philu gets something
Vote:May 20th, 2010 at 3:24 pm
No: 8 is incorrect – 19yr old is not $330 per week but $330 per year better off. Otherwise an excellent summary.
Vote:May 20th, 2010 at 3:26 pm
You are kidding me ain’t you.
Vote:Just run the calculator for my staff. Average better off by between $9 and $20 before paying for the extra ETS costs, increased interest rates, increased local body rates etc etc etc etc.
No releif for the young members of our community. No youth rates.
Take your hand of it and have a good look at the content.
May 20th, 2010 at 3:29 pm
DPF: And those who pay the most tax currently, are of course even better off. They get to keep more of their earnings.
If you only count raw dollar values, right?
Vote:May 20th, 2010 at 3:32 pm
Do these 15 examples factor in the extra 0.4% inflation (RB estimate) as a result of the ETS? How about the additional 5c/litre on fuel?
Like a magician, Key has us looking at the flashy stuff while the NZ’s most insidious new tax is about to burrow into our pockets.
Vote:May 20th, 2010 at 3:34 pm
Brilliant economic thinking!
No 11 will of course get made redundant because No 1 and No 3 are being gouged to pay for Nos 5, 6 and 7′s subsidised lifestyles. Then after spending all his redundancy money and boosing the government’s coffers with the extra GST, he will find his rent goes up to compensate for Nos 2 and 4 losing income to the thieves of Wellington.
Yes, folks…. this is a radical new approach to the problem of declining productivity and economic collapse. It could almost have been written by an international banker more used to finance fiddles than actually producing something for a living. Oh wait…..?
Vote:May 20th, 2010 at 3:59 pm
I’d be very interested to know the assumptions they make when calculating the GST, as its not listed anywhere on the website and there is absolutely no way they could calculate how much my GST would differ per year based on my income and rent/mortgage.
http://www.taxguide.govt.nz/
Website without said assumptions listed is clearly propaganda.
Vote:May 20th, 2010 at 4:07 pm
This is one of the best tax budgets we have had. I get the impression the Government would like to do more. I would like a two-three step rate – 10-17.5 under 100k and 24% for money over that and a top company rate of 24c. Now then we will be cooking with gas. Perhaps a further rebalancing of GST to 17.5% – the same as the UK. By keeping discipline on spending we could do that and more. Increases in Government spending should be linked to growth in the economy. Another 10 years of a National Government and we might be there.
Vote:May 20th, 2010 at 4:57 pm
@MikeE – The “About Us” page lists it very clearly: “Other than rent or mortgage payments, all income is spent on items that incur GST;”
That’s very much a worst-case scenario. My wife and I are both middle-income earners. 20% of our income goes to rent, 30% to savings, 50% is spent. This means we win more than the site suggests (assuming our savings aren’t spent on GST-bearing things. We’re going overseas at the end of this year and then savings will go towards a house, so this is correct for us)
Vote:May 20th, 2010 at 4:58 pm
Nah half of us will leave in ten years and the other half will either be to young to work, be a beneficiary or have died.
Time to adopt the Nike slogan.
Just do it.
Vote:May 20th, 2010 at 5:42 pm
http://www.propertytalk.com/forum/showthread.php?t=25836
Vote:May 20th, 2010 at 6:24 pm
The Budget widens the gap between rich and poor, and thereby increases relative poverty.
Offsetting income tax cuts against GST increases:
A beneficiary gets nothing.
Someone working part time and earning $20K a year is slightly less than $3.00 better off a week.
But someone earning $100K a year is around $42.00 better off a week. [5 times the income = 15 times the tax cut. Goodo!]
Oh, and then there is Paul Reynolds on $7,000K a year. He gets another $1500.00 a week from the tax cuts.
Vote:May 20th, 2010 at 6:30 pm
Hey Toad
Does Frogblog put up with people calling for the violent overthrow of the government?
Vote:May 20th, 2010 at 6:35 pm
“The Budget widens the gap between rich and poor, and thereby increases relative poverty.”
Only a Green would think that the best way to close the gap between the rich and the poor is to take more money off the rich, it would not cross his mind to think of ways to increase the prospects for the so called poor unless it was to give them more handouts.
How do you think these people became wealthy in the first place Toad?
“A beneficiary gets nothing”
Nor bloody should they.
After nine years of being robbed it is time we gave back some of that money to the people who earn it Toad, in other words….diddums.
Vote:May 20th, 2010 at 6:39 pm
Just in case you missed it Toad, this quote is take from Frogblog
“3:08 mandalamess: How do we overthrow this govt? ”
Not deleted, not edited, therefore I can only conclude that the Greens are all it.
Vote:May 20th, 2010 at 6:41 pm
Wrong. The government takes $1500 per week less of Paul’s own money off him. Good for him.
Vote:May 20th, 2010 at 6:44 pm
So Toad, in your world, a beneficiary, who takes from the country, is “entitled” to a hand-out equivalent to those who get off their arses and make something of themselves (thereby contributing to the country, making money which flows into the government coffers and then out again to your beneficiary mates)? In this nirvana, where is the incentive to improve yourself? Why would someone want to aspire to work their arse off and earn the kind of money Paul Reynolds does (or even the kind of money Paul Bloggs the checkout dude at Foodtown does) when they can glue themselves to the couch and have the Paul Reynolds’ and Paul Bloggs’ fund their lifestyle?
Not only should a beneficiary get no more of working kiwis’ hard-earned, there should be strict limits around how long most of them can continue with their hands out.
As Margaret Thatcher once said, the biggest problem with socialism is that eventually you run out of other peoples’ money to spend.
How the fuck did the Greens ever get 5% voter support with this type of bullshit attitude?
Vote:May 20th, 2010 at 6:46 pm
@Offshore_Kiwi – The Greens prey on the financial ineptitude and welfare dependency of their constituency. That is tantamount to abuse IMO.
Vote:May 20th, 2010 at 7:09 pm
If this is the most significant tax restructure in 20+ years then it is no wonder this country floats like a feather on the economic winds. How the #### can that be called restructuring, it’s tickling the rates and removing some long complained about distortions. Hell don’t get me wrong, this kicks ass over Labour’s 9 years of having their heads up their asses calling $60 rich while picking welfare victims and gouging middle earners. But hey is $70K really worthy of the top income tax rate? Do we still need 4 tiers of progressiveness? Is this a real first step on implementing John Key’s ‘ambitious for NZ’?
Come on National, ride this budget to a snap election on the pretense of getting the election out of the way for RWC. Shake off the ‘not this term’ shackles and bag some real reform steps before 2012 so we can remove all this highly targeted taxation and highly targeted welfare nanny state from our lives.
That is… before the next Labour govt come along and put it all back on again and give us another predicted 10 years of deficits because of a recession caused by stagnant growth and the middle class over gorging itself on it’s own money.
Disclosure: I have a vested interest on iPredict for a snap election.
Vote:May 20th, 2010 at 7:23 pm
“Come on National, ride this budget to a snap election on the pretense of getting the election out of the way for RWC.”
In your dreams. That would require the balls Key doesn’t have. Unfortunately, he’s a socialist eunuch, a castrati, in a position of power. Neville will sink us even deeper.
Vote:May 20th, 2010 at 8:09 pm
That shut you up, didn’t it Toad.
Vote:May 20th, 2010 at 8:15 pm
I notice that National haven’t done anything about the brutal effects of the attribution rules.
More proof that National are leftie pinky socialists
Vote:May 20th, 2010 at 8:38 pm
Toad – bugger off to North Korea. I am sick of these whinging socialists complaining about the rich getting richer – so bloody what. Go and pay more tax if you feel so guilty about it.
A few simple truths. The middle classes got a hell of a lot richer under the Clark Cullen years than I can expect to do so under Key / English. Cullen set up an environment where I could and did make a lot of money – sadly I could have made even more if I had taken a few risks.
But here is the reality Toad. If I have say $1m – then being smart and just getting 5% growth I could expect to be worth $1.05m in 12 months. The person with say $1000 in 12 months may only have $1,050. All other matters being equal. What has to be established is an economy where people can work hard and grow their wealth. That is what this budget has strived to do. Leftard losers will remain poor because they will fail to take responsibility for their own lives- expect the state to be their nanny. I have nothing but contempt for such losers.
Vote:May 20th, 2010 at 9:09 pm
“#3 3.Business owner which makes $120,000 profit but pays salary of $48,000. Has spouse and two children. $8k a year worse off as no longer eligible for WFF.”
This may a wrong example, but if they have over 10% control of a “closed company” it comes under a look through provision already and any retained profit in the company (the only way I can see them not returning the difference in the profit) has to be declared as a business adjustment for WFFTCs. Strickly speaking they wouldn’t qualify for WFFTC currently.
Vote:May 20th, 2010 at 9:28 pm
That is all very theoretical, but what about the costs of the ETS Tax from 1 July.
Treasury forecast electricity increases of 5% and petrol increases of 4 cents per litre which the Reserve Bank has calculated to add 0.4% to the cost of living in the first year.
Where are these reflected?
They are not.
It is like the tables you quote in your earlier post David that purport to show households in the three income bands of (a) less than 40K, (b) 40-85k and (c) 85k plus as being 0.7%, 0.4% and 0.7% better off.
Deduct the cost of the ETS at 0.4%, you find those households on 40-85k gain on average absolutely nothing!!, while the others get a net 0.3% gain.
The budget gives virtually nothing.
Everyone is to be taxed on everything so that we can pay billions of dollars of subsidies to forresters who planted trees in the 1980s and 1990s with absolutely no expectation of a taxpayer subsidy, and for what?
It certainly is not going to help the environment, and it will put our exporters at a huge disadvantage to our major trading competitors.
Vote:May 20th, 2010 at 9:34 pm
Well said Monty
Vote:May 20th, 2010 at 9:37 pm
Brian
Correct
Vote:May 20th, 2010 at 9:38 pm
John B, what is Hong Kong like. and do you advocate those tax policies ?
Vote:May 20th, 2010 at 11:15 pm
@John Boscawen – Exactly!
Vote:May 21st, 2010 at 7:00 am
GST Increase Unnecessary
Thursday, May 20, 2010
ACT New Zealand Finance Spokesman Sir Roger Douglas today slammed the Government’s decision to increase GST to 15 percent, labelling it as totally unnecessary and calling it a reckless revenue grab.“Rather than cut wasteful spending – of which I identified over $3.1 billion – the Government has instead taken the easy option by increasing GST and adding to the significant cost burden already borne by Kiwi families,” Sir Roger said.
“The Government is intent on delivering tax cuts – and that is laudable. But tax cuts delivered by tax increases elsewhere are not the way to go. We need to cut taxes by reducing Government expenditure.
“Worse still, the table of gains and losses from the reduction of personal tax rates and the increases from GST assumes that people save 10 percent of their income. Not only is that not a realistic assumption, it is a wild claim for those on low incomes. Evidence actually shows that those in the lowest income quintile spend more than they earn – suggesting that they will be worse off as a result of the GST increase.
“GST should only be increased if it were accompanied by comprehensive tax reforms that saw all tax rates dramatically reduced. It is lower Government spending, coupled with dramatically lower tax rates that would best encourage productivity.
“Just like the Maori Party, ACT must support the increase in GST as part of our Confidence & Supply Agreement with National – but, that doesn’t mean we like it,” Sir Roger said.
Vote:May 21st, 2010 at 7:27 am
“Just like the Maori Party, ACT must support the increase in GST as part of our Confidence & Supply Agreement with National – but, that doesn’t mean we like it,” Sir Roger said.
A blatant cop-out.
Instead, Sir Roger should be asking for ACT to break away from its deadly embrace with the neo-socialist National Party, but he claims his party has to support the agreement.
Where are ACT’s guiding principles? What a crock and capitulation!
Vote:May 21st, 2010 at 9:24 am
toad: Oh, and then there is Paul Reynolds on $7,000K a year. He gets another $1500.00 a week from the tax cuts.
Fuck that dude is underpaid!
Vote:May 21st, 2010 at 9:24 am
Its all smoke and mirrors. They give with the left hand and take with the right. And that typically means a net loss for us peasants. Still… I never hope for anything from any government at any time. I think we over rate their influence, frankly I am convinced that the orders come from the UN, so National or Labour is pretty much irrelevant. Its just supposed to keep us occupied and thinking our opinions matter.
Vote:May 22nd, 2010 at 12:07 am
Is it just me or do these numbers for rent seem off the planet?
someone owns 25 houses and only makes 112k? WTF? That’s only $4500/yr/property. Like less than $100/wk. Are these hypothetical houses in Meremere or something? They should get the hell out of it, cost of capital on 25 houses at $400k/house at 8% is $800k/ann. They are quickly going broke. Or are they 95% mortgaged, and that 112k is the profit after some enormous interest bills (which they can claim).
Same with example 4, 10 properties returning 35k. Those ones must be where?
Surely with that many properties one is deemed to be in business, and must therefore capitalise them and pay tax on capital gains?
Vote: