Net taxpayers

July 14th, 2011 at 10:00 am by David Farrar

There was an interesting exchange in Parliament yesterday:

Michael Woodhouse: Which groups now pay most of the tax collected by the Government?

Hon BILL ENGLISH: Our tax and transfer system is highly redistributive, and the number of people paying income tax is surprisingly small. The lowest-income 43 percent of households currently receive more in income support than they pay in income tax. The 1.3 million households with incomes under $110,000 a year collectively pay no net tax—that is, their total income support payments match their combined income tax. The top 10 percent of households contribute over 70 percent of income tax, net of transfers—over 70 percent of income tax, net of transfers. This system is highly redistributive and we believe it is fair.

I asked the Minister’s office for the data, that answer was based on, and the table below sets it out.

This data deserves a wider audience. As far as I know it is the first comprehensive compilation of net tax, by income brackets.

The gross transfers includes Working for families, Accom Supplement, other benefits etc. It does not include NZ Super though. I suspect if you included that it would be even more dramatic.

So what does it tell us?

It tells us that overall households with income of $50,000 or below pay no net tax at all. Not only do they pay no net tax, they receive around $4.40 in benefits for every $1 of tax they pay. So they pay $1.7b in tax and receive $7.7b in welfare (and this excludes superannuation).

So that is 44% of households are net tax recipients.  And Labour’s tax policy is geared towards having them become larger recipients. Yes Labour’s tax policy announced in January even includes an increase in the level of benefit payments for all beneficiaries.

Now let us look at the households with income of over $150,000. We don’t know if this is one person earning say $150,000 or two people earning say $80,000 each but we do know it includes be definition everyone earning at least $150,000. Household income is used as welfare payments are normally made on a household basis.

So 10% of households have an income of $150,000 or greater. And those 10% fund 71% of net taxation. And these are the households that Labour are saying are not doing their fair share and must pay more.

If we go slightly further down to households with an income of $120,000 or greater – which is 17% of households. Well those 17% of households are paying 97% of net taxation.

Yet Labour seems to think this is not enough. Their tax policy (I don’t mean CGT, but their income tax policy) is that 97% is not enough. Those rich pricks have to be screwed over until they are paying over 100% of net taxation.

So the next time someone talks to you about fairness and tax, use the table above. 10% of households pay 71% of net (income) taxation and 17% pay 97% of net (income) taxation.

No tag for this post.

132 Responses to “Net taxpayers”

  1. wf (374 comments) says:

    Cut and paste! Cut and paste!
    This is just what I needed last night when I found myself amongst a group of tax-the-rich-prick advocates.

    Thanks.

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  2. Gwilly (156 comments) says:

    DF – I would say you have just written your next piece for NZ Herald. Then you will get your wider circulation, which these figures most certainly deserve.

    Wouldn’t it be interesting to know out of the 17% who pay 97% of income tax, just how many of those vote Labour or Greens?

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  3. Brian Harmer (686 comments) says:

    Given that each person is treated as a separate taxable entity, why is “household” a unit of analysis. Income splitting is about the only thing I agree with Peter Dunne on. But since it is not permitted, what is the relevance of “household”?

    [DPF: I trued to get individual data also. The problem is tax is based on an individual basis, but welfare payments are assessed on a household or family basis. As it is easier to group individuals into households than split households into individuals, the comparisons have more integrity at a household level]

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  4. wreck1080 (3,733 comments) says:

    This really is disgusting but we all knew the figures were like this.

    I’ve paid eye watering amounts of tax and there is little I can do about it since it is all income tax.

    Then, I see families around me paying very little tax due to Working for families and their joint incomes may be around the 100k level .

    Yet, I get abused by the lefties for not paying enough tax!!! When I say I might move across the tasman, the lefties say good job .

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  5. CJPhoto (217 comments) says:

    Very interesting.

    Why are households earning $150k + still receiving transfers!

    I would also be interested to know how they know who makes a “household”. For those receiving transfers I assume they have that info but for DINK (double income no kids) they may currently be represented separately. As they would receive no transfers, the numbers may be even worse than 70%.

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  6. realize (21 comments) says:

    Great data. It would be really interesting to see people’s *lifetime* net tax contribution, perhaps binned by age or and average lifetime income.

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  7. Psycho Milt (2,267 comments) says:

    Oh, won’t someone think of the $150000+ families! How we’ve suffered!

    A more interesting table would be proportion of income paid out in GST, petrol taxes, rates etc. Which is of course why “rich pricks” prefer consumption taxes to income tax.

    When I say I might move across the tasman, the lefties say good job .

    You mean, they don’t say “You’ll pay just as much tax there, dumbass?” Your lefties need to smarten up their act.

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  8. krazykiwi (9,189 comments) says:

    @realize – my lifetime tax contribution (personal and owned businesses) would look like a full-length Uzbekistani phone number. I don’t resent paying tax, but I bitterly resent that way it’s wasted on ideologically-driven social engineering and vote buying

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  9. Matthew Hooton (124 comments) says:

    This is shameful. It means the vast majority have no stake in the tax-and-spend system and so have no reason to demand efficiency and efficacy from the government. It also means the NZ government and its services are incredibly vulnerable to an accelerated brain drain. I hope the minister didn’t give you these figures because he is proud of them – more like a problem that needs to be fixed.

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  10. robcarr (132 comments) says:

    Is there a breakdown somewhere by % of households rather than income? The data is highly misleading as stated given the size of all of the groups is different. The only useful stat is the top 10% of income earners paying 70% of the net tax.

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  11. krazykiwi (9,189 comments) says:

    @Matthew – it also means far too many NZers are at the mercy of vote-buying welfare initiatives. successive government have become accomplished faction funders as they seek a mandate to rule us.

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  12. trout (902 comments) says:

    An eye opener for sure but probably of less relevance because there has been a deliberate move to direct tax, away from income tax. So I guess the impact of GST on households should be factored in. It is true that in relative terms the lower income households are hit harder by GST because they spend all their income. I am puzzled though by Labour’s promise to make the first $5000 tax free if their constituency are not paying tax anyway; perhaps it is just a feel good inducement.

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  13. s.russell (1,564 comments) says:

    I’m embarrased to point this out as I agree with the thrust of the argument here, that higher-income earners should NOT be taxed any more and if anything less relative to other people. BUT isn’t there a gaping hole in this analysis: GST? Much of what lower income earners gain from transfer payments they lose in GST. Higher income earners pay this too but it is very nearly a flat tax in its effect. The net result is that the system is not quite as extremely progressive as the table above claims.

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  14. side show bob (3,660 comments) says:

    We pay tax but the idiots give it back to us in the form of WFF, God I love socialism. More please Shonkey. But seriously these figures are quite meaningless. I note what isn’t factored in GST, ACC, ETS, Rates, fuel tax, road tax to name a few. Why doesn’t anyone ever talk about the total tax take, I know, to fucking scary.

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  15. robcarr (132 comments) says:

    Also do you know if student loans are considered a government transfer and if they are, are they then considered a tax paid when paid back?

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  16. voice of reason (491 comments) says:

    Something doesnt seem right with those numbers – what benefits can you get with income over 100k?
    Family tax credit – in work tax credit (whatever the fuck that is) anything else ?
    100k + 2 kids = 0.00 FTC and 0.00 IWTC per week
    100k + 3 kids = $54.00 FTC and 0.00 IWTC
    100k + 4 kids = $75.00 FTC and $85.00 IWTC
    Its all fucked up.

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  17. mawm (211 comments) says:

    @ side show bob – because then they’d have to admit that the government takes about 75% of what you earn if you are in the 150+ bracket. It really makes you feel good knowing that you are putting in 8o hours a week for the government all the way through to mid September, and then the rest of the year for your family and retirement.

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  18. rouppe (916 comments) says:

    Interesting how there is a large drop in the 140k to 150k band… Wonder why that is…

    voice of reason: You still get a government contribution when you visit the doctor, or fill a prescription, or have a public operation. I’m assuming that is counted as a transfer received as it is paid from tax revenue…?

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  19. mattyroo (975 comments) says:

    I would love to see this taken right out to show taxes paid right up to 400k+, that really would water our eyes.

    I had an interesting discussion with a dairy farmer the other day. He was boasting about how he hadn’t paid tax for more than 15 years, which got my hackles up a bit…. When I had a go at him that he has a competitive advantage, subsidised by myself and other net taxpayers, over other dairy farmers, because he elects to run a >$700k overdraft, his only response was: Bullshit!

    However when confronting him about who pays the taxes that build the highways for the milk tankers to run on, so they can get between his dairy farm and the milk factory, he was a bit flummoxed in the debate and ended it promptly.

    I have no issue with people carrying debt to make a healthy profit, what I do have an issue with is our tax system that puts a large percentage of taxation on us idiots that have very little way of avoiding it. I’m not in such a bad position myself, being self employed, but, I do feel heartily sorry for the people earning 200k of wages/salary who have no way of getting out of PAYE.

    High time our tax system was shredded and something more efficient was brought in. Sack all the useless pricks at IRD too, it would be much cheaper for us if they were all on the dole anyway.

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  20. JeffW (320 comments) says:

    The evidence is all around us that reducing the incentive to work is killing our society. Tax needs to be reduced as much for the sake of the future of beneficiaries as for the people keeping the country going. What proportion of crime is committed by beneficiaries? If they received less from government, the need to get a job, any job, would lead to a healthier society. No minimum wage and reductions in the tax take are what is needed for the country to have a future. Support to the low paid through the tax system, not to be paid to do nothing apart from breed and cause trouble.

    We need to add to the figures the number of civil servants, who also pay no net tax.

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  21. mattyroo (975 comments) says:

    I should add that the above-mentioned dairy farmer had just taken a >50k round the world holiday with his wife…. Things must be really bad when you’re so far in the hock that you don’t pay tax, yet can only afford a 50k holiday!

    Shit, I’m starting to sound like a fucking commie!

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  22. mikenmild (10,760 comments) says:

    rouppe

    I don’t think those could be counted as transfers in the table above. To do that comprehensively you would need to analyse the total benefit received from all government expenditure. It would be hard to do that systematically, as you would need to make a lot of assumptions about how much of each government service (roads, police, defence, education, etc, etc) each band of taxpatyers receive.

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  23. Kimble (4,381 comments) says:

    Oh, won’t someone think of the $150000+ families! How we’ve suffered!

    What disingenuous drivel. So this is how you respond when you get smacked in the face with the reality of the income taxation burden, huh?

    Look at what DPF actually fucking said. This information refutes the argument that rich people should pay MORE, it is not presented as an argument that they should pay less.

    GST is levied on everything consumed. The difference between the burden on the poor and the rich is their relative propensities to spend. Are you guys really going to argue that the propensity to save by people on more than $150k per year is going to offset the imbalanced tax burden?

    Households on $50k per year are probably spending $50k (or more).
    Households on $250k per year are probably spending $200k.

    So households on $250k have a consumption tax rate relative to income of 12% vs 15%. Big whoop. Now consider that households on $120k per year are probably spending $120k per year (or more).

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  24. Kimble (4,381 comments) says:

    (roads, police, defence, education, etc, etc)

    As those things are provided for their social benefit, you can assume that the benefit is applied equally across all people and effectively remove them from the calculation.

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  25. robcarr (132 comments) says:

    Hi David,

    Just ran these figures through quickly. I changed my mind on the 70% being a useful figure for two reasons.

    Firstly the % in that table accounts for negatives, i.e. there is over 150% of contributing households.

    Secondly as stated above it doesn’t account for the number of people in the bracket in determining the %.

    If you account for the number of households in each bracket and ignore the negative contributions so there is only 100% contributions the number is radically different – 24.5% of contributions come from those earning over $150,000. If you were to discount beneficiaries and looked only at earners which I personally would this would lower this figure even more.

    Thus the top 10% is probably contributing something more like 20% of the actual tax take of earners.

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  26. db.. (79 comments) says:

    We need a change in definition of “Welfare”, should not be regarded as “income” support.
    Bring back a sense of a charitable “gift” and not some form of rightful reward.
    If it is not gained by work, then it must be either compensation for lost value, or a gift.

    WINZ should do the administration as a charitable organization funded by general taxation and the charitable payments made are part of a social service that must attract GST.
    That means ALL payments that are not “worked” for. This make super the only exception.

    Finally raise the GST to 20% and reduce Income/Company/Trust Tax accordingly.
    Give serious consideration to a flat tax.

    db..

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  27. side show bob (3,660 comments) says:

    mattyroo, sounds like your farmer mate is a bit of an idiot. I’ve known other farmers who have continually run at a loss and think they are clever in doing so, it will end in tears, it’s still better to pay some tax, ask the accountant. I also think you will find that he does pay for the roads the tankers use. Dairy farmers pay so much per litre of milk carted by Fonterra tankers, this adds up to quite a large sum over the whole season. I would assume Fonterra pay vast sums in road tax so yes he is paying for the roads if only indirectly.

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  28. hj (6,368 comments) says:

    What about the 319% tax free capital gain acquired between 1989 and 2005?

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  29. tom hunter (4,428 comments) says:

    Why are households earning $150k + still receiving transfers!

    Thanks to those greedy capitalists at Apple I think you’ll find that iPods are not dropping in price quickly enough, so these families need help.

    An eye opener for sure …

    Really? I can agree at least in the sense that while there have been figures and tables like this for years (just standard government collection), your average front-page reporter does not dig them out: such things are usually left to the business pages.

    We pay tax but the idiots give it back to us in the form of WFF, God I love socialism.

    You’ll love it more when the ETS is scrapped in favour of a carbon tax by the Labour-Green government of 2014. Like Woody Woodpecker across the ditch; prices will be raised on fossil-fuels in order to reduce demand for them (because the left now understand market economics), while subsidies are handed back to people to compensate them for the increased costs of the fossil fuels. Part of the theory is that aligning fossil fuel costs with alternative energy sources will mean greater use of the latter, but since there is no tax rate proposed that would even come close to bridging that gap the effective result will be no real market pressure to reduce use of fossil fuels. There will be people in the middle of this money-go-round who will be employed though. Brilliant!

    But seriously these figures are quite meaningless. I note what isn’t factored in GST, ACC, ETS, Rates, fuel tax, road tax to name a few. Why doesn’t anyone ever talk about the total tax take

    Indeed. I thought of that in the CGT debate but did not have the heart to suggest to Deborah that if all those other taxes were scrapped I’d have more profit for her income tax to work with.

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  30. thedavincimode (6,539 comments) says:

    “and we believe it is fair”

    Wrong Bill. This isn’t “fair”. It is in fact completely fucking UNFAIR.

    Try this Bill – move a vote of thanks for those who pay 70% of the tax and ask them to bear with you while you try to sort out the spendthrift fuckup legacy of the last Liabore Govt.

    And of related matters, perhaps that two-faced spendthrift fuckwit presently masquerading as a potential prime minister might also care to point out exactly why it is that the status quo means those people are not paying their “fair share” and in doing so, the pointless little weasel could inform us in that tedious and soporific tone exactly why it is that people who earn more and pay more tax don’t pay their “fair share” simply because they work harder or are more skilled and earn more accordingly.

    That dribbling, and irrelevant little piece of flotsam might also explain why family homes should be exempt from his new CGT when some people can’t even afford to own a house or some might choose to rent and invest their tax-paid savings in income-producing investments.

    When he’s done that, the snivelling slimey little POS might also care to explain why, given he thinks CGT is efficient (a moot point anyway) and that this country is already over-taxed, he needs to implement a capital gains tax to raise more revenue, rather than to widen the tax base and promote a system that is genuinely fairer in principle by taxing all capital gains at the income tax rate on the basis that all forms of economic gains ought to be taxed, including family homes. That would enable tax rates to be reduced across the board, which is surely “fair”. Surely, after all, that would be “fairer” to those who don’t own homes.

    But of course, we shall hear no such explanations from that limp-gizzarded career failure and insomniac cure who continues to preside over a shallow, dishonest, untrustworthy and corrupt bunch of thieving arseholes who continue to trough the pockets of NZ taxpayers by rorting their parliamentary funding.

    He will continue to try and sell his CGT on the basis of envy of the relatively limited few who do generate wealth through capital accretion paying relatively little tax along the way, and will, in the process, extract more hard-earned dosh from the poor bastards who pay 70% of the tax and have hitherto been too stupid to leave the country.

    Can I be the first to say it Goofy? Good fucking riddance. And a suggestion? Save us all the wait. Just fuck right off right now.

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  31. Inventory2 (10,104 comments) says:

    Outstanding post DPF; well done.

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  32. tom hunter (4,428 comments) says:

    I think this argument would be more effective if you also showed the proportion of total national income earned by the top 10% or top 1% and then compared that to the proportion of tax (total tax also) that they pay.

    If they’re the same then the left should have no complaint. If the proportions are not equal then we can have a real debate about what “fair” means.

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  33. Danyl Mclauchlan (1,065 comments) says:

    The chart appears to support Labour’s argument: loopholes in the tax system mean that people can structure their financial arrangements to avoid paying tax, so the burden of taxation falls on a small number of PAYE earners. Their solution is to broaden the tax system and lower existing income tax rates for the majority (~98%) of income earners.

    If you – and the Finance Minister’s office – think the current system is broken then you appear to be at odds with the PM, who claims it’s ‘the envy of the world’.

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  34. Kimble (4,381 comments) says:

    robcarr,

    You need to justify why you would ignore then net negatives.

    Also, the number of households in the group is not relevant, as the issue is whether people considered ‘rich’ are paying their fair share.

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  35. Kimble (4,381 comments) says:

    Dim, the chart doesnt contain the extra information you would require to legitimately say that people are exploiting loop holes and structuring their finances to avoid paying tax.

    Again, read what DPF said. He didnt say, reduce the tax the rich pay, nor did he say that this system was wrong or that the current share should be flattened.

    All he did was present the current state of things, and say that Labour thinks it would be fair to INCREASE the burden on those people already paying the most.

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  36. robcarr (132 comments) says:

    If you do not ignore them you cannot refer to their level of contribution as a % it is just a random number you have created not a % of contribution. It is a useful figure to judge the difference between the groups but nothing more.

    The number of households in the group is relevant as all the categories cannot be usefully measured against each other if you do not account for it.

    e.g. 5 people pay $1 each they have contributed a total of $5
    1 person contributes $4 so has contributed a total of $4

    You cannot then say group one has contributed more as evidence of the individuals within it being large contributors there is just more of them.

    I’m not sure I factored the rich paying their fair share into my calculations. What would that be? 3.14?

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  37. robcarr (132 comments) says:

    @Kimble Dims point was that Labour is not planning to increase the rate that group is paying. The people subject to capital gains do not have their incomes recorded in there and most likely are actually spread between the categories currently below $150,000+. The capital gains tax would probably lower the share that top group is paying and raise that of the few below it.

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  38. Danyl Mclauchlan (1,065 comments) says:

    Every study of the New Zealand tax system undertaken in the last ten years tells us that people are exploiting loopholes to avoid tax.

    According to IRD, about 2.5% of taxpayers earn more than $120,000 – the very large majority of the $120,000 + households paying the bulk of taxation are two or more income households, that won’t be impacted by a new tax bracket. Instead they’ll pay less tax because of the $5000 tax free threshold.

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  39. Pete George (22,853 comments) says:

    The chart appears to support Labour’s argument: loopholes in the tax system mean that people can structure their financial arrangements to avoid paying tax, so the burden of taxation falls on a small number of PAYE earners. Their solution is to broaden the tax system…

    …with a CGT full of exemptions?

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  40. Scott Chris (5,881 comments) says:

    @Brian Harmer (584) Says:
    July 14th, 2011 at 10:24 am
    “Given that each person is treated as a separate taxable entity, why is “household” a unit of analysis. Income splitting is about the only thing I agree with Peter Dunne on. But since it is not permitted, what is the relevance of “household”?”

    I agree. A breakdown showing every person of a working age’s net tax contribution would be far more illuminating. This is spin.

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  41. virtualmark (1,475 comments) says:

    robcarr … the number of households in each band is clearly shown in the second column.

    Do the calculations and you can see the progressivity in the tax system, both in terms of absolute tax paid and in terms of effective tax rate.

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  42. tom hunter (4,428 comments) says:

    As far I can see from past posts Mattyroo is hardly a left-winger so, for the sake of argument, I’ll assume he’s not bullshitting us about his dairy farmer conversation.

    I had an interesting discussion with a dairy farmer the other day. He was boasting about how he hadn’t paid tax for more than 15 years, which got my hackles up a bit…. When I had a go at him that he has a competitive advantage, subsidised by myself and other net taxpayers, over other dairy farmers, because he elects to run a >$700k overdraft, his only response was: Bullshit!

    $700K? That means he’s paying somewhere between $50,000 and $60,000 per year depending on the bank he’s with. I don’t know the size of the farm but even a smallish one would still be generating $300K in revenue. So in order to pay no tax he would have to be chewing up another $250,000 or so in costs on the farm – more if the farm is bigger. Since Capex (sheds, effluent systems, machinery and so forth) have their costs deducted with depreciation spread over periods of many years, he’s not going to get much advantage out of that. So where’s the rest? Fert? New grass? Crops? Perhaps he’s running a heavy input system, buying in the bulk of his feed rather than the traditional grass-growing approach? It’s possible but even that has limits.

    And 15 years? Yeah – I’ve known farmers like that too – or at least ones who bullshitted that they paid no taxes. But the only way to do that in NZ is to run some very hairy risks in terms of debt loading and spending. As SSB points out they eventually serve more as warnings to others.

    I’d suggest he was simply pulling your tit to rile you up.

    However when confronting him about who pays the taxes that build the highways for the milk tankers to run on, so they can get between his dairy farm and the milk factory, he was a bit flummoxed in the debate and ended it promptly.

    Presumably he does not know about his council rates, which in many places in NZ, contribute greatly to the upkeep of rural roads. SSB has already pointed out the road-user charges and fuel taxes paid by Fonterra as they trundle those big tanker trucks all over the place. It could be that Fonterra (and therefore your dairy farmer scum) are actually subsidising the rest of the road users in this country?

    High time our tax system was shredded and something more efficient was brought in. Sack all the useless pricks at IRD too, it would be much cheaper for us if they were all on the dole anyway.

    I’ll just go for a simpler tax system. Tax collector is perhaps the third oldest profession.

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  43. Kimble (4,381 comments) says:

    Every study of [every] tax system undertaken [ever] tells us that people are exploiting loopholes to avoid tax.

    FYP

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  44. ross (1,454 comments) says:

    Trout said “I am puzzled though by Labour’s promise to make the first $5000 tax free if their constituency are not paying tax anyway”.

    Wrong, they are paying tax. Look at the figures – those earning less than $50k are paying almost $1.8 billion in tax. I am not sure how such a large figure became nothing.

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  45. hj (6,368 comments) says:

    Statistics are like bikinis. What they reveal is suggestive, but what they conceal is vital. ~Aaron Levenstein

    Torture numbers, and they’ll confess to anything. ~Gregg Easterbrook
    http://www.quotegarden.com/statistics.html

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  46. ross (1,454 comments) says:

    It’s interesting that households earning in excess of $130,000 are receiving half a billion dollars in handouts. There’s still room for improvement in the tax system in favour of those in need.

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  47. lastmanstanding (1,204 comments) says:

    Why dont the Lefties just advocate taking all incomes over $100K and then dishing out what THEY think we deserve as WFF.

    They might as well. Just confirms their twisted bowels thinking

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  48. tom hunter (4,428 comments) says:

    I have no issue with people carrying debt to make a healthy profit, what I do have an issue with is our tax system that puts a large percentage of taxation on us idiots that have very little way of avoiding it. I’m not in such a bad position myself, being self employed, but, I do feel heartily sorry for the people earning 200k of wages/salary who have no way of getting out of PAYE.

    Could not agree more. However, since I’m in the same position I found myself paying fantastic amounts of tax in the recent past, since my other business does not require much capital input beyond a car and computer. The result is that I long ago deliberately moved away from earning such high incomes – “downshifting” I believe it’s called. Of course to get to that stage I had to be able to get assets and clear away debt first.

    Actually that’s pretty much the NZ “business” culture. Once you’ve got the bach, the boat, a couple of cars and no debt why should you continue to work your ass off? It may come as a surprise to the left but many “rich” people in NZ actually aren’t that driven to constantly upgrade the Bentley.

    Any tax system that screws that wealth creation, with the intention of keeping me on the grindstone of income production (as Jordan Carter’s suggestions a few years ago seemed to intend), is destined to fail. Indeed it may already have failed. Whatever extra tax revenue the left think they may have generated out of me with the Clark income tax rates has probably been more than wiped out by the tax revenue lost because I refused to cooperate with the system to that degree any longer.

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  49. Scott Chris (5,881 comments) says:

    @hj (1,352) Says:
    July 14th, 2011 at 12:08 pm
    “Statistics are like bikinis. What they reveal is suggestive, but what they conceal is vital. ~Aaron Levenstein”
    :-) :-)

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  50. Pete George (22,853 comments) says:

    ross: those earning less than $50k are paying almost $1.8 billion in tax. I am not sure how such a large figure became nothing.

    The $1762b paid in tax became less than nothing due to the government giving them $7739b back in benefits.

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  51. Mike Readman (358 comments) says:

    What I can’t understand is why less than 10% of people in those households earning $120k+ plan to vote ACT at the next election. I haven’t heard of any National plans to cut their net taxation and the Nats have been in power for over two and half years, they’ve had a chance to change things.

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  52. virtualmark (1,475 comments) says:

    DPF … great post, very interesting information.

    This analysis shows that the net income tax collected is $10,970 million. Combine that with the key facts for taxpayers at http://www.treasury.govt.nz/budget/2011/taxpayers/02.htm and you can work out the following …

    If you scrapped WFF, the accommodation supplements and all the other transfers then you could raise the same amount of net income tax from a 25% flat tax starting at $37,500pa. Yes, your first $37,500pa would be tax free, and above that you would pay a tax of only 25% pa.

    But, say the lefties, what about the “poor”! Fine, even if we halved the net transfers out (from $10,900m pa to $5,450m pa) that could still be funded from a flat tax of 30% starting at $30,000pa.

    And let’s not forget the incentive and stimulus effect that sort of tax structuring would create – how much harder would “the poor” work if they didn’t start paying any tax at all until at least $30,000pa???

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  53. Psycho Milt (2,267 comments) says:

    So, to sum up, the table is political spin and can be ignored because:

    1. It doesn’t take into account other forms of taxation and what proportion of those are being paid by which income bands.
    2. It uses household income rather than individual income, when it’s the individual income that’s taxed.
    3. The only high income earners included are those on PAYE or those too scrupulous or too stupid to weasel out of paying tax on their income.

    Carry on.

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  54. PaulL (5,873 comments) says:

    Mike: Perhaps despite the tax cuts on offer they cannot stomach the other crap the ACT party gets up to, and the petty infighting and mess that goes with it?

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  55. Lance (2,451 comments) says:

    2 hours ago I was contacted by a representative of the Victorian state govt.
    They basically are offering large grants, huge R+D tax write offs and other assistance for my successful technology exporting company to move there.
    In the mean time back in NZ I see stats like this, get call a rich prick and get taxed heavily on any gain whatsoever and spend vast amounts of time and energy complying with regulations from here to Africa while competing products from China no-one gives a shit about whether they meet any standards.

    But I see the dairy farmers are having a wonderful time and paying no tax to boot. Maybe that is all NZ is good for?

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  56. PaulL (5,873 comments) says:

    Psycho Milt:

    So, to sum up:
    1. I’m not sure it purported to take into account other forms of taxation, it talked about income tax. I thought the figures were very interesting. Do you disagree?

    2. DPF has explained clearly why household income was used – because transfer payments are typically to the household. Do you have a suggestion on how this analysis could be done in a more useful way? If you don’t, then it’s hard to argue it’s political spin – it’s just the only data available.

    3. So you’re saying there are lots of high income earners who have a low taxable income? Interesting. Any theories on how or why that occurs?

    I’m afraid that your comment looks awfully like putting your fingers in your ears and saying “lalalalala not listening.”

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  57. ross (1,454 comments) says:

    > ross: The $1762b paid in tax became less than nothing due to the government giving them $7739b back in benefits.

    Pete, your being dishonest. Nearly $1.8 billion is a significant contribution to government revenue. Without it, there would be cuts to health, education, etc.

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  58. leftyliberal (642 comments) says:

    Great to have some data. The presentation is not fantastic though as the percentages need to be interpreted quite carefully, else they give the wrong picture.

    As many have pointed out, household level isn’t ideal, but given that’s what we have to deal with there’s some interesting trends. I’ve taken the liberty of extending the data a bit:

    http://pastebin.com/dXKyLeTb

    Obviously the last 2 columns (net tax as a percentage of income, and net income) are constructed using non-ideal data – I’ve used the midpoint (i.e. 5k, 15k, etc.) for those under 150k, and used 155k for those over – this last one is likely an underestimate.

    The highest income bracket needs to be somewhat ignored due to the lack of decent data – clearly these folk aren’t paying 37% of their income in taxes – the high number is a result of the likely very large underestimate of the 155k income. I suspect a much clearer picture would be present if the upper limit was increased to 250k or so (as that then rules out dual income families which could be in that tax bracket due to two jobs at 75k – not exactly super-high incomes).

    Interesting to note the dip in tax percentage at 100k – could this perhaps be due to this bracket being predominantly 2 50k incomes, whereas perhaps the 90k group contains a higher proportion of single-income families?

    The balance looks reasonable to me, though I do wish we had the brackets going higher so we could see at which point things really ramp up.

    It would be most interesting to have some idea of how much is spent by these households each year.

    Feel free to grab the data and play some more :)

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  59. Sadu (128 comments) says:

    Working for families is such a god-forsaken fuckup of a policy. I pay some tax to the government, they deduct some admin fees and pay for some beaurocrats, office buildings, accountants, branding people etc, and then give some of it back to me as WFF supplements.

    I shudder to think how much money is lost in this back-and-forwards transfer process.

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  60. RightNow (6,669 comments) says:

    I agree ross, $1.8 billion is a significant contribution, in fact it’s almost a quarter of the $7.8 billion those same people receive back in health, education, welfare etc.

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  61. seanmaitland (455 comments) says:

    @Psycho Milt – woooossshhhh – way to completely miss the point

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  62. tom hunter (4,428 comments) says:

    When I say I might move across the tasman, the lefties say good job.

    You mean, they don’t say “You’ll pay just as much tax there, dumbass?”

    I do wish both left and right-wingers would stop doing this comparison of international tax rates. it was bad enough in 1999 when Helen Clark easily evaded some dumb reporter’s question about the proposed increase in the top earner rate to 39%: her response being that it was then 39.6% in the US. No follow-up from the reporters to the effect that the limit at which one hit that rate at the time was about $US 300,000 per annum, compared to Helen’s $NZ 60,000. Not to mention the numerous standard deductions that render pointless a straight reading of the US income tax tables for comparison.

    That aside, we might be better off asking the question that any ordinary person asks themselves when they decide to head for Aussie: will I be better off financially over there.

    In other words, there’s no point laughing about the fact that “You’ll pay just as much tax there, dumbass?”, when your actual after-tax income amounts to a larger amount of a more valuable currency that enables you to more easily buy any number of things (though not an inner-Sydney home)!

    That brings us back to creating and boosting private sector incomes via the creation and growth of new businesses, and I just can’t see how the squabbling about a new marginal tax like CGT or some piddling lift or reduction in income tax rates, is actually going to effect that (as opposed to theory).

    The bigger impact is the overall one: what contributes to creating and growing new businesses, a larger state tax burden or a smaller one? And of course that in turn is coupled to the question: what do we want our governments to do for us and how big does that demand make them?

    Sadly, I’m pretty sure I know the answers – and all the rest flows from that.

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  63. ross (1,454 comments) says:

    PaulL, the table is largely meaningless. Those making capital gains won’t be included in the figures unless they have other income. And then the table will be distorting their true earnings position. The table doesn’t explain why those households earning more than $130,000 are getting half a billion dollars in handouts. It doesn’t explain the % of indirect tax paid by the different households. I suspect that the % of indirect tax (as a proportion of income) paid by those on lower incomes is greater than the % of indirect tax paid by those on higher incomes. One of the government’s main sources of revenue is indirect tax.

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  64. mikenmild (10,760 comments) says:

    tom

    Sadly, knowing the answers is the easy bit. Implementing them is a political process, ie convincing sufficient individuals that your answers are the correct one.

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  65. ross (1,454 comments) says:

    Rightnow, you seem to be saying that it would be great if those on lower incomes paid more tax. Well, if NZ was a high wage economy, you would get your wish. But John Key has given up on that idea – closing the wage gap with Australia has been put in the too-hard-basket.

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  66. RightNow (6,669 comments) says:

    sorry ross, your inference is off-base. I’ve got no problem with what they’re paying, as long as they have no problem with what I’m paying ;)

    PS – Australia is about to cut their own legs off, won’t be hard for us to catch up with them once their carbon tax has time to do it’s work of economic destruction.

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  67. kiwi in america (2,437 comments) says:

    Envy or ‘rich prick’ taxes the world over always fail to raise the amount of revenue their usually left wing promoters claim. It’s because socialists have no clue how the wealthy job creating class (who clearly pay a huge majority of the tax AND who create jobs and those workers pay PAYE AND they produce goods and/or services which are also hit with GST) think and operate.

    There are a variety of ways they can respond to envy taxes. Aside from the fact that they all have top quality accountants who find as many legal loopholes as possible, there are plenty of avenues of legal avoidance. They invariably can move assets around different entities (some offshore) to take advantage of exemptions or new tax thresholds (all CGT regimes are rife with exemptions), they can alter the timing of income by retaining earnings inside entities or by increasing expensable purchases. Many alter the output of their productive entities sometimes to stay under the thresholds when new higher tax rates kick in, most are already comfortably off and so have no need to expand businesses and thus profitablity and so some will go into a holding pattern to wait out more business hostile governments only to resume growth oriented activities when a new more business friendly government flattens the tax structure. In extreme cases (eg Michael Fay, David Richwhite, Alan Gibbs) the very wealthy, when faced with a government hostile in both taxation policy and regulatory zeal coupled with anti big business rhetoric, they just up sticks and take their assets and businesses out of NZ and become tax residents in lower tax juristictions (eg Switzerland) thus denying the NZ treasury their millions in tax.

    The net effect of all this is to reduce the taxable incomes of the very wealthy and thus lower, or undermine, the tax take from the new higher marginal taxes.

    Without the family home included (which the Greens and Mana would dearly love to be included in any CGT), the amount of new revenue raised from even a broad based CGT that exempts the family home will be slow and will be undermined by the various creative strategies that those most subject to its ravages will impliment on the advice of a slew of tax professionals whose practices will swell from the fees generated from all this new advice. Labour of course will opt for a rosy scenario of new revenue and pledge to spend most of it further bloating an already bloated welfare state to add more voters to the rolls of those who already rely on government transfer payments to live.

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  68. mattyroo (975 comments) says:

    As far I can see from past posts Mattyroo is hardly a left-winger so, for the sake of argument, I’ll assume he’s not bullshitting us about his dairy farmer conversation.

    tom, I’m as far removed from a lefty as one can get. The story is deadset true.

    $700K? That means he’s paying somewhere between $50,000 and $60,000 per year depending on the bank he’s with. I don’t know the size of the farm but even a smallish one would still be generating $300K in revenue. So in order to pay no tax he would have to be chewing up another $250,000 or so in costs on the farm – more if the farm is bigger. Since Capex (sheds, effluent systems, machinery and so forth) have their costs deducted with depreciation spread over periods of many years, he’s not going to get much advantage out of that. So where’s the rest? Fert? New grass? Crops? Perhaps he’s running a heavy input system, buying in the bulk of his feed rather than the traditional grass-growing approach? It’s possible but even that has limits.

    He holds a number of dairy farms and it sounds like he does a lot of continual improvements. I don’t know where all his costs go, but he seemed pretty sincere on the 700k OD.

    And 15 years? Yeah – I’ve known farmers like that too – or at least ones who bullshitted that they paid no taxes. But the only way to do that in NZ is to run some very hairy risks in terms of debt loading and spending. As SSB points out they eventually serve more as warnings to others.

    That is what he reckoned…. He did say that he nearly went to the wall a couple of years ago, so I believe that he is running some pretty hairy debt levels. The tax credits he mentioned that he carried forward from that period were pretty staggering too. He told me that his three advisers, Bank Manager, Accountant and Farm Economist, all tell him to carry high enough debt that he doesn't pay tax….. Scary!

    I’d suggest he was simply pulling your tit to rile you up.

    Not so sure about that.

    Presumably he does not know about his council rates, which in many places in NZ, contribute greatly to the upkeep of rural roads. SSB has already pointed out the road-user charges and fuel taxes paid by Fonterra as they trundle those big tanker trucks all over the place. It could be that Fonterra (and therefore your dairy farmer scum) are actually subsidising the rest of the road users in this country?

    I agree that the rates and the RUC’s of the tankers will be paying for the roads and possibly subsidising others. I was just using it as a point to illustrate both his economic illiteracy and that there are services that are paid for out of general taxation, that he and his farm gets the benefit of, whilst not paying tax.

    I’m not calling the dairy farmers scum by any means. I appreciate and realise what they and the industry do for our country, both directly (foreign export earnings) and indirectly (keeping the country afloat, which in itself allows all the over-leveraged Ponsonby latte set to enjoy low interest rates).

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  69. ross (1,454 comments) says:

    DPF,

    You forgot to quote the rest of Bill English’s reply:

    “The Inland Revenue Department did an exercise where it tabulated New Zealand’s 100 richest people, and found that over half of them were not paying the top personal tax rate.”

    Who would’ve thought?

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  70. Pete George (22,853 comments) says:

    Ross, all statistics can be dissected and quibbled over, but a couple of things are fairly clear – many lower income households (and people) receive more from the government than they pay in tax, and people on higher incomes pay the bulk of tax, nett.

    Those households with incomes between $10k and $30k pay about -20% tax, so even if all their other spending was GST liable they would still be nett receivers of government money.

    Most richer people think it’s fair they should contribute and pay some tax. They quible about paying most of it when some poorer people don’t even try but expect others to pay “a fairer” share to cover the costs

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  71. seanmaitland (455 comments) says:

    @ross – thats completely irrelevant to the point DPF was making Ross, hence it not being needed there.

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  72. tom hunter (4,428 comments) says:

    … convincing sufficient individuals that your answers are the correct one.

    Which I would not mind if the debate was not so easily skewed by people promising more free public stuff, coupled with the argument that the costs can be met by some mysteriously untapped source of wealth.

    What I see above is simply a more subtle and sophisticated version of Michael Moore’s speech in the US some months ago, that America was not broke: that there was tons of money sloshing around just waiting to be grabbed.

    That’s an easy argument to win, and to date it has, for decades. As such I’m rather fatalistic about the “debate” but both cheered and saddened by an observation a friend made to me in the wake of the ’87 stockmarket crash, as he observed the failure of his efforts to warn his sharebroking clients (he worked for a very high-end outfit that dealt with supposedly smart, high-end investors: companies, like people, only really change when the blowtorch is applied to the goolies.

    My arguments will only win when we run out of money, which the so-called “Blue Model” is doing around the world. That’s not an optimum approach, but here we are.

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  73. RightNow (6,669 comments) says:

    The thing that gets me ross, is I’m not actually averse to helping those that need it. I’m averse to wasting money on those that don’t, including politicians, useless ministries and many NGO’s. Oh, and ‘climate change mitigation’, which is just another excuse for more taxes.

    “… if they can fool the people into thinking that they really want to pay taxes to save the earth, that’s a dream for politicians.”
    Richard Lindzen

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  74. PaulL (5,873 comments) says:

    ross: disregarding the information in the table because there’s more information you’d like to have seems a bit silly.

    This table gives an interesting fact. I’d be interested in more detail. I suspect, for example, that the characterisation of those earning 40-50K as negative net taxpayers is incorrect, and that in fact half them are net taxpayers, and half them net receivers. Such are the hazards of statistics. That doesn’t detract from the information here that the NZ income tax system is already heavily progressive, and that Labour are proposing to try to make it more progressive still.

    The information that I’m seeing tells me that:
    1. Maybe we should be asking whether everyone who should be paying tax is – i.e. instead of increasing the tax rate on those already paying tax (seems likely to mean some of them find a way to stop paying tax), we focus on ways to bring more people into the net
    2. Maybe we should be looking at the churn and inefficiency in the system, and asking whether it’s effective to tax people and return money in this way. Why give a cohort $2.6b, and then waste time in taking $400m of it back off them. Why not just agree to a tax free threshold of $30K, reduce the payments to that group to $2.2b instead, and save all that churn and paperwork?

    I think it’s interesting, but you’re right that it doesn’t illuminate every corner of our tax system.

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  75. MikeE (555 comments) says:

    “This system is highly redistributive and we believe it is fair.”

    Shouldn’t a comment like that get him expelled from the National Party..

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  76. RRM (9,468 comments) says:

    How much tax did companies pay on their profits last year in NZ?

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  77. Psycho Milt (2,267 comments) says:

    @Psycho Milt – woooossshhhh – way to completely miss the point

    I get the point: National/DPF is laying some groundwork for attacking Labour’s tax policies by coming up with some bullshit stats that supposedly show people on 120000+ are paying almost all the taxes already, so a higher top rate would be a shameful thing to impose on them. I addressed that point.

    It could be you imagine the point to have been something else. If so, all I can say is there’s one born every minute.

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  78. Elaycee (4,303 comments) says:

    RRM (3,568) Says: July 14th, 2011 at 1:41 pm “How much tax did companies pay on their profits last year in NZ?”

    That reminds me – whatever happened to Unite’s PAYE monies that were supposed to be held in trust by Matt McCarten?

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  79. Psycho Milt (2,267 comments) says:

    I’m afraid that your comment looks awfully like putting your fingers in your ears and saying “lalalalala not listening.

    My comment looks awfully like pointing out how stats can be manipulated for political purposes. Your inability to understand statistical tables isn’t my problem.

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  80. Pete George (22,853 comments) says:

    Psycho – and you can see bullshit groundwork on other blogs too. Try “Eddie” on The-Standard-that’s-not-a-Labour-blog for the past week – far more blatant and over the top than here.

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  81. virtualmark (1,475 comments) says:

    Okay Psycho Milt, I’ll call you out.

    1. Other than the table DPF has provided, and the Treasury’s key facts for taxpayers (you can read at http://www.treasury.govt.nz/budget/2011/taxpayers) … what other statistics do you think are relevant?
    2. What do you think is the “fair” portion of tax those earning over $150,000pa should be paying?

    PaulL is right – it looks a lot like you are the one trying the political spin, not DPF. DPF brought out some hard numbers. Where are yours? Have you got game? Or is all you’ve got a lot of flailing and arm-waving?

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  82. Falafulu Fisi (2,176 comments) says:

    PG said…
    Most richer people think it’s fair they should contribute and pay some tax.

    There is nothing stopping them from doing so.

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  83. mpledger (429 comments) says:

    It would be interesting to know that number of working adults in each household. Household income goes up with household size so that 9.7% of households earning over $150,000 could equate to a high proportion of the population. From working with this type of data data from surveys I seem to recall 30% of people live in over $150,000 households.

    The other thing is that is the DPB counted and how? Only the income over the amount paid by the non-custodial parent should be counted. Otherwise, the amount the non-custodial parent pays should be considered a tax.

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  84. bij (66 comments) says:

    i refer you back to this: http://publicaddress.net/onpoint/table-62-rich-pricks-others/.

    aside from the fact households=/=individuals, rich pricks pay more tax cos they earn more income. arguing they should not pay any more because they already pay lots misses the point: they are ABLE to pay more.

    a good argument against making them pay more is that it will not make them WANT to earn more income, let alone pay more tax. Evidence from other countries suggests NZ is a long way away from that threshold.

    DPF’s post obfuscates the issue: he has calculated ‘benefit’ as a proportion of the total INCOME tax take, rather than total tax revenue. Given the importance of indirect taxes and their incidence on society, it seems naive to talk about ‘net tax’ and ‘benefits’, but only in relation to income tax.

    All of this is a little convoluted, and a good argument for a nice and tidy universal minimum income (like Sir Roger’s preferred option), or some negative income tax variant (WFF is a complicated version). “From each according to his ability, to each according to his need…”

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  85. deserthead (9 comments) says:

    Taxable income would of course exclude tax-free capital gains.

    I expect this would skew the table somewhat….or possibly by a huge amount

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  86. RRM (9,468 comments) says:

    Good point mpledger –

    6 out of my 12 colleagues here at work are young (24-30yo) professionals flatting with 2 or more flatmates that have similar circumstances and employment. So there’s half a dozen people you might not immediately suspect, who are living in $150k+ households right there.

    So it’s not necessarily a tiny core of conservative, land-owning Mum & Dad type National voters that are paying for everything :-P

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  87. Ed Snack (1,738 comments) says:

    That 50% or so of the “richest pricks” in NZ don’t pay the top personal tax rate is not particularly astounding, I would guess that the great majority structure their affairs through trust or company structures and have relatively little direct personal income. I’d also guess that many are not quite personally “rich” in the same way, they own shares and are the beneficiaries of and trustees in various trusts. Thus finding out just how much actual tax they pay that could be deemed personal is probably relatively difficult. That doesn’t however mean that they aren’t paying through a combination of company, trust, and personally more tax than is evident in the Income Tax tables.

    Youu can have a company pay all sorts of expense for you, if scrutinized they won’t be tax deductible by the company (and/or subject to FBT) but those won’t show up as personally attributed tax payments. Trusts I’m less familiar with but I’m sure there are ways to make some expenses deductible, but almost certainly not all. And I guess not all very wealthy people necessarily invest in high yielding assets.

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  88. deserthead (9 comments) says:

    As I think has been pointed out by other commenters, does Gross Tax Paid include GST or other revenue streams?

    If not, I’d expect this could also change the table, perhaps significantly

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  89. bij (66 comments) says:

    @ RRM: Indeed. My wife and I are in that top income household bracket, due to living with others. We don’t get any ‘benefit’. I had no idea I was a rich prick!

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  90. Lucia Maria (2,208 comments) says:

    DPF,

    Is the statistical data that table is generated from available as well?

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  91. virtualmark (1,475 comments) says:

    RRM and bij, I think you will find that flatmates are not considered a “household” in this context.

    The reference to households is because welfare payments like WFF are based on households … which I guess are roughly defined as a group of people linked either by blood, marriage or adoption.

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  92. virtualmark (1,475 comments) says:

    deserthead,

    Remember that “rich pricks” pay GST too, and since they presumably spend a lot more then they pay a lot more GST. It may not be quite as pronounced a difference in their relative total tax paid but I would expect the difference to be relatively linear … so a household on $50,000 probably pays about half the GST than a household with $100,000pa.

    Yes, some wealthier households may be saving a portion of their income. But presumably that is only being saved in order to be consumed later … at which point it will get hit by GST.

    So the “rich” aren’t escaping GST, although some may perhaps be deferring a portion of their GST to the future.

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  93. PaulL (5,873 comments) says:

    bij: a good argument for not making them pay more income tax would be…..because it’s their money. I think those making the argument to take more of someone’s money should be the ones who have to make the argument. It’s like me asking you to justify why I shouldn’t take your car – it’s much flasher than mine. Surely you have a property right in your car, the person proposing that it be taken is the one who needs to explain the rationale.

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  94. grumpyoldhori (2,410 comments) says:

    Falafulu Fisi would you like the choice of paying no tax ? and not getting any use of anything that taxpayers money goes to, no roads, hospitals etc etc etc, your choice would be what ?

    Do public servants pay any net tax at all ? none of them are in competitive industries so the whole bloody lot are charity cases, with a few exceptions.

    I notice no one has mentioned how fucking rates have gone up again, when I rang and asked how many had been made redundant in my council the answer was none, the woman I spoke to was shocked that laying people off instead of hammering old widows for extra loot was an issue that should come up.
    Talk about born to the fucking purple.

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  95. tom hunter (4,428 comments) says:

    a good argument against making them pay more is that it will not make them WANT to earn more income, let alone pay more tax. Evidence from other countries suggests NZ is a long way away from that threshold.

    In terms of tax rate percentages that might be so, although obviously a lot of room for debate.

    But as I pointed out earlier, the threshold is more likely to be the total after-tax income in actual money and how far it goes. Several hundred thousand Kiwis living in Australia, with more going every day, would seem like fairly good evidence of that threshold. Clearly, a Kiwi who has hit the top Aussie rate (45% I think) won’t be returning home just because it’s only 35% in NZ.

    They’re not looking simply at the rate or even the income: they’re looking at wealth creation and the ability to enjoy it, and it’s been a damn long time since NZ looked like being good for that in most types of business, which is why people have gone for property and property speculation. What’s the response: they’re wrong and/or bad and it should be stopped. Fair enough – and the replacements for that sort of wealth creation?

    More to the point, people won’t be returning home if all they see is a never-ending increase in the demands of the state and the accompanying tax burden (something probably guaranteed by …to each according to his needs), so that they might one day be staring down the barrel of 45% in NZ on a much lower income. Expectations of the future count for a lot too – and I have no confidence that new taxes, increased tax rates and a steady increase in the overall tax burden is going to make this country wealthier. Clearly the Left disagree – and they’ll have the numbers.

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  96. berend (1,634 comments) says:

    The most interesting thing is the answer of the National Socialists: This system is highly redistributive and we believe it is fair.

    That’s why it won’t change folks. You get John Key in there, and they take government spending from 29% to 36%, and borrow $380 million a week.

    Throw them out, they are the true wreckers of this country.

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  97. tom hunter (4,428 comments) says:

    P.S As I explained earlier I’m one who has reached that threshold, which is why you’re not getting $200K in tax revenue from me anymore. When I looked at where I was getting, it just was not worth the candle.

    I would also point out that most of the wealth I’ve built up was courtesy of getting the hell out of NZ for the better part of two decades. In no way could I have matched what I’ve got now by staying in this country.

    More importantly, it’s likely my kids will run the same course, though whether they’ll return to NZ is uncertain.

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  98. bij (66 comments) says:

    @ PaulL: i don’t buy the ‘it’s my money’ argument. we vote for the discretion to tax and spend – to complain is to desire living in a state of nature. Without public spending, you would have no money, either through infrastructure that enables economic activity, or through the maintenance and enforcement of property rights.

    obviously this can be abused and corrupted by right and left, but it doesn’t detract from the objective of taxation, spending, and redistribution: “From each according to his means…” etc. i know a lot of my good friends don’t want to concede this as an objective, so lets agree to disagree :)

    public servants do create wealth, and some get paid well because their job is not easy (although probably not well enough to attract the best candidates…). 30 years ago, electricity and radio engineers would be working for the Govt, now because they have been corporatised or privatised means they create wealth all of a sudden where they didn’t before? maintaining the rules around property rights and maintaining social and economic order is essential and without it no wealth would be created. obviously there is potential for a lot of waste, but as long as the lack of competition is being countered by good public management principles, the benefits of having public servants far outweighs the costs.

    btw, i am not a public servant.

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  99. carryon (1 comment) says:

    This is the SIMPLEST of questions.

    If those over $120k household income are paying so much, why have they been able to accumulate the bulk of their assets without it being scavenged by the tax system?

    Perhaps it is skill, or cunning, or employing good tax lawyers/accountants.
    Maybe even straight out fraud or other criminal actions.
    There are not too many options left.

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  100. Psycho Milt (2,267 comments) says:

    1. Other than the table DPF has provided, and the Treasury’s key facts for taxpayers (you can read at http://www.treasury.govt.nz/budget/2011/taxpayers) … what other statistics do you think are relevant?

    1. The proportion of income tax paid by individuals earning $150,000+. A household in which 2 people earn $80,000 each isn’t facing a tax increase under Labour’s proposals.
    2. As already mentioned, the proportion of indirect taxes like GST paid by the various income bands.
    3. A clear statement declaring that the table doesn’t show only the income tax portion of tax paid by households in the tax column, but the entire net benefit from taxation in the benefit column – ie, that the benefit level isn’t inflated by leaving out the amount the households pay in GST, petrol taxes etc.
    4. An estimate of how much tax is avoided by “rich pricks.”

    What do you think is the “fair” portion of tax those earning over $150,000pa should be paying?

    What I think a fair top rate of tax would be counts for jack shit. However, I’m willing to take a punt on the concept that people won’t suffer the slightest hardship from having to pay more tax than they do now on income above $150000.

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  101. krazykiwi (9,189 comments) says:

    @berend 4:14 – hear hear..!

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  102. tom hunter (4,428 comments) says:

    However, I’m willing to take a punt on the concept that people won’t suffer the slightest hardship from having to pay more tax than they do now on income above $150000.

    I think that’s a fair punt to take.

    The real question is whether those people will think it’s worth continuing to earn that sort of money, especially here in NZ. I did not and I know I’m not alone. Now did that produce more or less tax revenue?

    “From each according to his means…”

    I suppose we could just agree to disagree, but clearly anybody who still believes that – especially after the rather brutal testimony of the 20th century – must think such a system will not steadily spin out of control as a result of metastasising into (paraphrasing a certain TV character): The wants of the many outweigh the wants of the few.

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  103. virtualmark (1,475 comments) says:

    Psycho Milt:

    1. The proportion of income tax paid by individuals earning $150,000+. A household in which 2 people earn $80,000 each isn’t facing a tax increase under Labour’s proposals.

    Individuals earning $150,000+ are 2% of taxpayers, and contribute 17% of the income tax collected.

    That’s $3.788 billion. Which is the same as all the income tax paid by the 60% of tax payers earning less than $35,000pa.

    Rich pricks. They’re just not doing their share.

    2. As already mentioned, the proportion of indirect taxes like GST paid by the various income bands.

    You should assume that all post-tax income is consumed, if not immediately then within the life of the taxpayer, and so the proportion of GST paid is linear based on income.

    The rich pricks might save a bit more – hey, maybe that sort of attitude is why they became rich pricks in the first place – but that just time-shifts consumption rather than stopping it.

    There are non-GST transactions, such as rent and mortgage repayments. But again I would expect they are broadly linear across the income bands.

    3. A clear statement declaring that the table doesn’t show only the income tax portion of tax paid by households in the tax column, but the entire net benefit from taxation in the benefit column – ie, that the benefit level isn’t inflated by leaving out the amount the households pay in GST, petrol taxes etc.

    Your wording is hard to decipher but here goes … the gross tax paid seems to be the gross income tax collected from those households, the gross transfers received appears to be the gross receipts for those households from WFF, accommodation supplements etc.
    For those households the (total wages + salaries) – gross tax paid + gross transfers in = cash available to spend. We should expect households pay GST on that spending.

    4. An estimate of how much tax is avoided by “rich pricks.”

    Well, the simple answer should be that it is practically none – if people aren’t paying tax that is due then they are exposed to prosecution by IRD.

    For all your arm flapping the simple points remain:
    1. The “rich pricks” pay the overwhelming percentage of the total income tax collected, both on a gross and net basis.
    2. Those households earning less than $50k per annum are net beneficiaries from the income tax system, not net contributors.
    3. Even allowing for those households paying GST, petrol taxes etc I would still wager households earning less than $40k per annum are net recipients of cash from the government, not net contributors.

    Labour and the rest of the left spend far too much time frothing at the mouth about rich pricks and far too little time trying to work out how to raise the pre-benefit incomes of lower paid workers. It’s easier to wage class warfare against people who don’t vote for you than it is to come up with real solutions for the lower paid.

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  104. bij (66 comments) says:

    @ tom hunter: i think you missed my point. wants > means (or ‘ability’) > needs. it does not have to be absolute, as Marx suggested was inevitable. I think we disagree that it will spin out of control, since we are already there.

    We now essentially have: ” [33% tax] From each according to his means, [$$$benefits] to each according to his needs.”

    btw, who was the TV character?

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  105. Luc Hansen (4,573 comments) says:

    Unfortunately, Farrar’s misinformed interpretation – not helped, admittedly, by the misleading format of this table – will now be quoted ad nausuem.

    Like that $380 million in borrowings per week that turned out to be front loaded. I worked out for myself, from Double Dipton’s own figures, grudgingly admitted, that the true figure was $270 million per week and treasury belatedly confirmed that figure.

    Ah, lies and stats…stats and lies…

    Don’t ya luv ‘em?

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  106. Luc Hansen (4,573 comments) says:

    Which reminds me, can just anyone call the minister’s office and get all sorts of juicy data?

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  107. Psycho Milt (2,267 comments) says:

    Individuals earning $150,000+ are 2% of taxpayers, and contribute 17% of the income tax collected.

    Just so: 17%. Compare that with the figure of 71% Bill English and DPF are peddling by using household income instead, and you get the point.

    …the gross tax paid seems to be the gross income tax collected from those households, the gross transfers received appears to be the gross receipts for those households from WFF, accommodation supplements etc.

    It may “appear to be” just those gross receipts to you, but the fact that significant transfers are going to households upwards of $120k makes it appear to be not just those things to me. What appears to me is that only a proportion of the tax households pay is being counted, but all the transfers are being counted – in other words, the proportions of transfers received are inflated, especially for the lower incomes. Happy to admit error if someone can demonstrate it.

    if people aren’t paying tax that is due then they are exposed to prosecution by IRD.

    I wrote avoided, not evaded.

    For all your flapping, the simple points remain:
    1. People earning $120k+ don’t pay 97% of net taxation.
    2. Net taxation is about more than income tax.
    3. As long as non-PAYE earners have a shitload of loopholes open to them so they can pretend to have low incomes, bleating about high income tax rates for the rich just makes you look ridiculous.

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  108. Graeme Edgeler (3,267 comments) says:

    The 1.3 million households with incomes under $110,000 a year collectively pay no net tax—that is, their total income support payments match their combined income tax.

    I would have thought that a supposedly free market individualist government would have realised people don’t collectively pay tax, they just pay tax.

    The statistic is dishonest.

    I am in a household earning less than $110,000 a year.

    This statistic implies that I am not a net taxpayer. Well, I am. But I’m happy for a refund if Bill is offering, especially if this is the sort of analysis my taxes are paying for.

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  109. Chris Blackford (1 comment) says:

    There are different figures on the treasury website. They are for individual income tax, so I suppose it is possible that the differences could materialise when households are taken into account? Otherwise perhaps the minister’s office are mistaken? I honestly don’t know enough about how tax works to figure which is the case.

    http://www.treasury.govt.nz/budget/2011/taxpayers/02.htm#_whopaystax

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  110. kiwigunner (213 comments) says:

    So under the proposed system my $110k job sees me pay around $41K in tax leaving me $69k to play with. Whereas someone on $40k pays no tax and gets $40k to use. I’m $29k better off than them and I get to contribute to the provision of quality roads/hospitals/schools/etc etc. Actually I’m ok with that.

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  111. kiwigunner (213 comments) says:

    But those arseholes on mega bucks who pay little or no tax – we should go after them – we all know them, they are usually proud of avoiding paying their share, they laugh about it whilst living the type of life that those on $40k could only dream of.

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  112. valeriusterminus (247 comments) says:

    Cool – A “9″ column table to play with!!
    So;
    Column 1: Phone survey question: What is your total household income?
    Columns 2 and 3: NZ Census results: Religion – Zoroastrian – thats me !!
    Columns 4 and 5: IRD hard facts !!
    Columns 6 and 7: Well thats just magic – who the F**K knows !?!
    Columns 8 and 9: Extrapolated from the previous – it must be Right!

    Hey DPF show it in the raw!
    Then the derision ascribed to this rubbish can be questioned.

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  113. Cactus Kate (545 comments) says:

    No taxation without representation to a new level. For their should be no representation without net taxation.

    Forget MMP, STV or FPP the entire system is broken when people do not pay any net taxation yet can vote themselves consistently a higher income.

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  114. Luc Hansen (4,573 comments) says:

    Well now, Cactus Kate, that certainly introduces interesting concepts of voting qualifications. Notably, withdrawal of voting privileges for students and the many self-employed who structure their tax (thanks to kind folk like you) so as to eliminate any tax liability – I confess, it’s exactly what I did when I was in business.

    What other subjective restrictions on voting spring to mind?

    No-one in a burqa? After all, so many of our men get the knocking knees syndrome at the sight of a woman in a veil!

    Ah hell, just no Muslims! Most of them here are refugees and on the benefit anyway, aren’t they?

    And no Christians – we want people who have the intelligence to go with the scientific method, don’t we? None of this six days rubbish. Being a dedicated follower of science is what makes us intelligent beings, right?

    So defiintely no climate change deniers need apply.

    Hmmm. I guess that means certain ACT members can’t vote either!

    Bloody good job, many would say (moi excluded, of course).

    But seriously, Kate, I do think if we had a Jon Stewart over here he would be salivating at the idea of you as a parliamentary candidate :-)

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  115. James (1,338 comments) says:

    bij (22) Says:
    July 14th, 2011 at 4:24 pm
    @ PaulL: i don’t buy the ‘it’s my money’ argument. we vote for the discretion to tax and spend – to complain is to desire living in a state of nature. Without public spending, you would have no money, either through infrastructure that enables economic activity, or through the maintenance and enforcement of property rights.

    What socialist bludging shit! “WE” do NOT vote for the discretion to tax and spend…others gang together under a system of tyranny called “democracy” and claim this gives them the right to rob you…might makes right in other words.Before there’s any “public” money there must first be private enterprise to create the wealth that gives the ‘public” its money via state taxation (theft).Aside from policing,law courts an a military there is no public service that the private market cannot provide better, cheaper and more efficiently ….if only we were allowed to try it.

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  116. James (1,338 comments) says:

    Nice line of bullshit Luc.Considering that “Climate change deniers” is now a more fitting label for the increasingly discredited band of Warmists you identity with then I’d be careful what you wish for….;-)

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  117. James (1,338 comments) says:

    An intelligence test for voters would also not be a bad thing.Too many simply aren’t qualified to make an informed decision so why should those who are get cancelled out?

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  118. sagenz (30 comments) says:

    David
    A very interesting piece of data. The derision being shown to it among some here is simply indicative of the power. It would be wonderful to get the same data sliced in a more granular way, such as by age group and household size.

    The groupings hide the obvious fact that pensioners and individuals without families with medium incomes will pay a higher proportion of income than households with children at all income levels.

    It also reflects the fundamental truth that turkeys will not vote for Christmas. When 50% of households pay no net income tax they have no incentive to do anything other than vote for politicians who will promise them a higher burden on those earning more than them.

    If you ran a poll asking the questions to arrive at peoples view of what proportion of net tax the top 17% of people pay you would arrive at vastly different (and lower) figures than 97%. (This has been done as you probably know). That is indicative that statists and higher tax supporters have been winning the information agenda. People confronted with those facts will not see it as being completely reasonable to impose still more taxes on higher earners.

    That argument needs to be made and won if New Zealand is to move on from its socialist tall poppy mindset. Short term turkeys do need to be convinced of the long term foolishness of their voting.

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  119. Psycho Milt (2,267 comments) says:

    The derision being shown to it among some here is simply indicative of the power.

    Right, because people just wouldn’t deride a really obviously false use of statistics for political purposes – where would be the humour in that?

    If you ran a poll asking the questions to arrive at peoples view of what proportion of net tax the top 17% of people pay you would arrive at vastly different (and lower) figures than 97%.

    I expect you would, given that the top 17% don’t pay 97% of the tax.

    For their should be no representation without net taxation.

    Now there’s an excellent new policy for ACT to pursue – disenfranchise the overwhelming majority of the country’s superannuitants and all those business people who’ve faked a tiny income. If you do become an ACT candidate, please pursue this idea fiercely in ACT’s name with every journo who’ll listen.

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  120. Luc Hansen (4,573 comments) says:

    @james 3.33am

    That’s threadjacking. Get your butt over to GD for that one!

    Make my day.

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  121. ross (1,454 comments) says:

    Cactus Kate said “the entire system is broken when people do not pay any net taxation yet can vote themselves consistently a higher income”.

    Only politicians can change the tax structure…so neither you nor I can vote ourselves a higher income. But maybe you’re making a veiled reference to John Key and those Tranz Rail shares…a conflict of interest to be sure.

    But I’d be interested to know more about your policy of representation by taxation. No doubt you will elaborate on it as the campaign progresses…oh and are you one of those receiving a hand out from the government?

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  122. ross (1,454 comments) says:

    I have a variation on the representation by taxation these of CK:

    The 230,000 households which receive more than $130,000 and also receive a hand out clearly believe that welfare is a great thing. Their vote will automatically go to a party of the Left on election day. However, it’s not all bad – they get to choose which party….

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  123. virtualmark (1,475 comments) says:

    Psycho Milt,

    Individuals earning $150,000+ are 2% of taxpayers, and contribute 17% of the income tax collected.
    Just so: 17%. Compare that with the figure of 71% Bill English and DPF are peddling by using household income instead, and you get the point.

    You clearly aren’t interested in recognising pragmatic distinctions between gross and net income tax, and between individuals and households. I can only assume this is because you are either (a) inept or (b) they’re politically inconvenient for you and so you’d rather stick your fingers in your ears.

    DPF clearly explained what the statistics in his table were. They are certainly clear enough to draw some conclusions about where the gross income tax is predominantly drawn from, and who benefits from redistribution.

    Yes there are other taxes. But their effect is much smaller than income tax, and you have presented no evidence that the “rich” aren’t bearing a similarly over-weight portion of the burden of those other taxes.

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  124. virtualmark (1,475 comments) says:

    ross,

    Cactus Kate said “the entire system is broken when people do not pay any net taxation yet can vote themselves consistently a higher income”.
    Only politicians can change the tax structure…so neither you nor I can vote ourselves a higher income.

    And there’s the intellectual rigour and honesty of the left. Yes, only politicians can change the tax structure … the self-same politicians that explicitly target their policies at a particular voter base. The same Labour politicians who are far too happy to play the “vote for me and I’ll take money off other people and give it to you” card

    But maybe you’re making a veiled reference to John Key and those Tranz Rail shares…a conflict of interest to be sure.

    WTF has that got to do with this post on taxes? Misdirect here often?

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  125. dave (985 comments) says:

    DPF this is nothing new. it is what is to be expected in a low wage economy. Be interesting to see how many of the net taxpayers are public servants.

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  126. ross (1,454 comments) says:

    virtualmark, you seem confused.

    It was John Key who promised to close the wage gap with Australia…a vote catcher if ever there was one. And now Key says he’s given up on achieving that objective because it’s too hard. So much for higher incomes.

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  127. Luc Hansen (4,573 comments) says:

    A little research by yours truly brings up the fascinating fact that personal income taxes account for only 53% of government revenue.

    So one could say only that 3% of our hard earned dollars gets redirected to benefits/super.

    A little tweaking, say a tiny increase in gambling tax, could swing the balance so no-one needs to angst about their tax going into an actual person’s bank account. It’s actually going to roads, schools, universities, war etc, etc.

    There you are.

    Feel better now?

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  128. wawot (8 comments) says:

    The 97% of tax is payed by 17% figure is not actually quite right.
    It’s 97% of 154.5% (the positive tax payed) so it’s not actually a percentage.

    The percentage would be 97/154.5*100 = 62.8%

    Still seems shocking that 17% of households pay 62.8% of the tax.

    It would be interesting to calculate how much they earn of the total ‘cos if the top 17% pay 62.8% of the tax but also earn 62.8% of the money it kind of wouldn’t be shocking at all.

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  129. Psycho Milt (2,267 comments) says:

    virtualmark, you seem confused.

    Is he what. Somehow I always end up having to spell it out in words of one syllable for right-wingers. OK, for those with poor reading comprehension, here’s the scam:

    If we go slightly further down to households with an income of $120,000 or greater – which is 17% of households. Well those 17% of households are paying 97% of net taxation.

    Yet Labour seems to think this is not enough. Their tax policy (I don’t mean CGT, but their income tax policy) is that 97% is not enough. Those rich pricks have to be screwed over until they are paying over 100% of net taxation.

    The mark reads this and believes Labour’s income tax policy will affect 17% of households. Labour looks bad, DPF’s work is done. But the tax policy actually only affects 2% of individual income earners, so the mark’s been played for a sucker. The scam lies in using household incomes for a conclusion about individual incomes. It’s a pretty obvious scam, but obviously it’s clever enough to fool a good proportion of Kiwiblog commenters.

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  130. mpledger (429 comments) says:

    It’s wrong to do this by households because it doesn’t properly reflect the impact of the DPB where two households benefit from the government (where there are two living parents).

    The government pays the custodial parent to maintain the child, call it $y. The non-custodial parent pays some of the money to the government, call it $x (which I assume is generally less than $y). So the income the custodial parents gets is $y-x of tax payer money and $x from the non-custodial parent. For the household of the custodial parent the $y-x should be the amount counted in the table not $y.

    The $y-x is actually an unrealized benefit to the non-custodial parent because that parent is not having to pay that extra amount that is considered necessary to maintain his/her offspring. That $y-x should be tagged as a benefit against the non-custodial parent’s household.

    And then things would look a lot more interesting.

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  131. OECD rank 22 kiwi (2,811 comments) says:

    Boom, there goes Labour’s election chances!!

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  132. Sleepyday (1 comment) says:

    Interesting table. However, it doesn’t tell the whole picture. Someone has already mentioned GST but what would perhaps be even more enlightening would be to include total earnings for each of the various income brackets.

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