Soft soap for the rich – harsh taxes for the poor

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TrickleDown
It’s no surprise to see New Zealand has one of the world’s lowest tax rates for the rich and the superrich.

A survey by the global accounting network UHY shows New Zealand’s highest tax rates are lower than even Australia, the UK or the US.

Comparing the amount of tax collected for those earning $1.5 million New Zealand came in at 32.6% with Australia at 46.0%, the UK at 45.8% and the US at 42.57%.

Part of the reason New Zealand is so soft on the 1% is because of the tax cuts John Key introduced in 2010 when he dropped the top tax rate for those earning over $70,000 from 38% to just 33%. Overnight more than a billion dollars a year was transferred from low and middle-income earners to the rich and super-rich.

But those tax figures tell only part of the story because at 15% New Zealand has one of the highest GST taxes in the world as well as no capital gains tax. Low-income families pay a much higher proportion of their income on GST than the wealthy (14% for the poorest 10% but less than 5% for the highest-income 10%) while income for wealthy investors and property speculators is not taxed at all.

It all adds up to an immoral, unjust, unfair tax regime which benefits the rich at the expense of the rest of us.

As I’ve pointed out before a worker on the minimum wage pays a 10 times higher tax rate than the Prime Minister.

The minimum wage worker on 40 hours per week earns $29,640 and pays $4,207 in income tax and $4,149.60 in GST giving a total tax of $8,356.60 or 28% of income.

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On the other hand the Prime Minister earns $428,000 from his PM’s salary along with this year’s $5,000,000 increase in his wealth (according to NBR’s rich list) which gives him a total income of $5,428,000. On this total income he pays just $132,160 in income tax and approximately $21,400 in GST giving a total tax of $153,560 or 2.8% of income.

The government says we should take Working for Families into account in considering tax rates but WFF is firstly a subsidy on employers paying low wages before its redistribution of wealth can be considered.

Over the past 30 years workers’ share of the wealth produced by our economy has dropped from around 55% to just 45%.

This crippling loss from workers has been devoured by the idle rich and the corporate vultures who always have their hands out for more.

New Zealand, this land of plenty, now has the softest featherbeds for the idle rich while low-income families struggle with threadbare blankets.

 

35 COMMENTS

  1. Great article and I agree in principal everything. However in practice it does not work as people are reluctant to vote for higher taxes and those that need the policy are not voting or voting for someone else. I say this because if the ‘left’ parties are going to get into power they need to have some sort of strategy about this. John Key’s approach was to defer unpopular policy like assets sales by saying it would happen the next term. Also the more left leaning parties need to work together more to avoid what happened in the last election. They fought amongst themselves which stops people voting. Not only did they fight with other parties but also within their own party like Labour. Also there is a lack of vision and aspiration on the left. There needs to be some hope and tangible result that makes the country better. Helen Clark came across as an intelligent, ethical, authentic no nonsense woman who kept a middle ground while Cullen did so many things for the economy, paying off debt, kiwisaver, asset buy backs etc. The Left need to get a similar duo of skills and real policies with a bit more charisma and then in a graduated way reform the tax system. It also has to be very uncomplicated as we live in a ‘sound byte’ generation. I think Andrew Little understands this the most and has authenticity, if he can team up with a no 2 to add the vision then the country may fare better in the next election. Maybe even a number 3 like Manaia. I don’t mean this in a negative way but more as a way to have a united front to work closely to collaborate on skills missing in Labour. Unfortunately I get the sense that while Grant Robinson has some PR skills he lacks the authenticity that is needed in Labour and seems to be being backed by the right and MSM – warning right there! Anyway to reform taxation you need to change the government and to change the government you need a long term strategy and to understand voters.

    • With the rich importing foreign labour, who are happy for pitiful wages, the Kiwi poor are intimidated into submission for fear of their jobs. This explains a lot of non-voting. The rich taking care of their own tax-evaders is standard, worldwide criminality/

  2. Well said, John. All we need now is for the middle classes to wake up to understand how they’ve been rorted by Key and his cronies.

  3. WWF does need to be taken into account.$10 of this money buys exactly the same as $10 in wages. It could be argued that WWF actually targets those that need it most. Lets compare apples with apples to get the real story. A lot of people will remember when the family benefit was paid to everyone no matter what the income. I suggest the current system is better than that.

    • But remember, Working for Families Tax Credit is only paid to those in paid work so has your mother got a mental illness, brest cancer, been injured or can’t get a job? – well, you won’t be getting that $10 will you. It is just a top up for shitty wages really.

  4. great work on confusing wealth and income. rendering your whole argument invalid. even with a capital gains tax, the tax is only paid when the gain is realised. so john key’s $5m increase is untaxable unless he sold some of it to use as income. 1.2%…. I wonder why

  5. Ah yes . The old One-tyrant-bullying-the-many trick .
    While the first thinking human being looked up at the stars and wondered ; the second human being was wondering how to fuck the first dope on the deal .

    Did the conversation go something like this ?

    ” Hey , you like that star ? I can sell it to you . You can own that star man . You can look up at that star and say to yourself . I own that star ” .
    ” Wow right ? ” Imagine that ? ”

    ” And it’ll only cost you your spear , your fur undies , your wives and your eldest daughter . Or I can do an easy payment plan . What ever’s best for you friend . ”

    The Jewish word for that first person ; the dreamer , the philosopher , the artist , the worker , is schmuck .

    schmuck |ʃmʌk|
    nounN. Amer. informal
    a foolish or contemptible person. you’ve really got to be some schmuck to fall for that one.
    ORIGIN late 19th cent.: from Yiddish shmok ‘penis’.

    How many poorly paid working people are being tyrannised by that mentally retarded , emotional midget that is the Corporate Jonky-Bot ?

    How many dogs does it take to herd 4000 sheep ? One , and it would be busy , I’ll grant you that .

    The psychology of how easy it is , in fact , to control us many by those few is terrifyingly simple . Just turn on the television and you’re gone Brother .

    I watched nick smith slither out justifications for beyond bizarre Auckland house prices . I’ve seen that creepy little simon bridges mouth his words out like a horse chewing ball bearings as off-shore oil rigs are mooted to come here and add to the destruction of our planet and almost certainly our local environment .

    And here we are enjoying the moral outrage that is our perverse tax system .

    I see .

    The rich get richer while the schmucks get schmuckier .

    If you want things to change @ John Minto here’s what you need to do . Pardon my arrogance .

    Employ an actor and get him/her to engage the affected public , you know ? Like a kitten with a laser pointer .

    Or …

    Create a Left Wing MMA ( Mixed Martial Arts ) cage fighting team and ask any Right Wing MMA contestants to scrap it out . And for Christ’s sake , tell them you’re also fighting for … well Christ actually . That way you’ll get the braying , blood thirsty Christians and Fluffy Faced Muslim dead-head fetishists on your side .

    You’d make millions . You’d be rich in fur underpants for the rest of your life .

    • Brilliant CB, I could never quite put my finger on exactly what was up with Simon Bridges, you just nailed it, I’ll never look at him the same again. Also has America stuck their flag in the arse of the comet yet, so they can tell the world they own our whole solar system now their flag is whizzing around it? That’ll be on the spews news soon I expect.

  6. “income for wealthy investors and property speculators is not taxed at all”

    Actually, that’s not correct.

    I’m not by any means wealthy, nor do I own any property. But I have paid taxes on income I have made through FOREX speculation.

    I have an accountant. I need one because I’m self employed and my business is complicated. And so I am sure that if I did not have to pay taxes on this income, my accountant would ensure I did not.

    Its all treated as income. If you trade or make money in speculating, whether it be property, FOREX or trading in commodities, you pay tax on it.

    • Capital gains may or may not be taxed, Lara. It depends on various factors.

      However, as the IRD itself has pointed out on it’s website, there is no capital gains tax in this country. If you’re a wage/salary earner on $100,000, you will pay PAYA on that income, plus GST on nearly all goods and services you purchase.

      If you sell an investment property and make $100,000, you generally pay no tax on it.

      • You pay tax on the income it generates though. You run it at a loss for years and make sacrifices in other areas of your life in the hope that one day you may be able to support yourself in retirement. You deal with people not paying rent, damage to the property, interest rate vulnerability, the prospect of no capital gain at all, and provide housing to those that cannot afford, or choose not to buy their own. Then you have to put up with twats who criticize you for doing it.

          • Yes , have the government own thousands of houses so there are less houses on the market for people to buy, so the price goes up and left can whinge about that, or sell then and increase supply so the left can whinge about asset sales.

            • Those thousands of houses the government owns… the government mostly built!

              Which increased the supply! And its people who are mostly too poor to be able to afford their own homes who are housed in them. They’re not in the “property market” in the first place.

              Its not the state housing stock which is increasing property prices. Bloody hell. What kind of mental gymnastics is that?

      • There’s a difference between speculation and purchasing a property as an investment.

        If you buy and sell property specifically to make $$ on the capital gain, IRD treat that as income and insist you pay tax on it.

        If you buy property as a rental investment and hold it for a reasonable period of time, if you make a capital gain when you sell then no, no tax is paid on that.

        But to say that “property speculators” don’t pay tax on capital gains is inaccurate. That was my point.

        The difference is between speculation and investment.

        But I do agree that for this a capital gain tax would be beneficial to the country. Its hard for IRD to determine intent.

  7. “great work on confusing wealth and income.”

    I agree. (Though I don’t agree it renders the whole argument invalid.) Capital gains tax, for example, is a tax on wealth rather than on income; which of course would be fine except that it would be better to tax all wealth rather than just that component represented by realised capital gain. It would be better still, though, to tax the the yield on capital, the latter being the productive (or potentially productive) part of wealth, levying an “equitable rate of return” tax on unproductive capital, as suggested by Gareth Morgan in his book “The Big Kahuna”.

    The actual yield on capital, profit and interest, is of course already being taxed in the normal way.

  8. ^ …..interesting back in Shipleys day they were mad on asset/means (translated accrued wealth ) testing the elderly …under the guise of applying for pensions…. not happy with that….the neo liberals used the same crap against those most vunerable – the unemployed ,…and took what little they did have before a bloody benefit was granted.

    No matter how you cut it,…neo liberals remain the most greedy , ruthless, liars we have in NZ today. Thier ilk needs to be exposed and made to pay up 35 years of national theft and rort….either that or face prison terms.

  9. Everything makes sense when you accept that john key is a dishonest greedy planet fucker ……………

    Actions speak louder than words so look at his actions through his life.

    Dishonest greedy planet fucker is what he is.

  10. This argument has been thoroughly taken to pieces and you know it – http://mana.net.nz/2014/08/how-much-tax-does-john-key-pay-compared-to-a-minimum-wage-worker-minto/

    Mr Minto, leaving aside the $5,000,000-argument, which really makes no sense whatsoever, I really have a beef with this:

    “The minimum wage worker on 40 hours per week earns $29,640 and pays $4,207 in income tax and $4,149.60 in GST giving a total tax of $8,356.60 or 28%of income”

    $4,149.60 in GST would mean this person would need to spend $27,664 – based on your numbers given that’d be more than the minimum wage earner earns after tax.

    Or, the other way around, income after tax is $25,433. Take away about 40% of that net income spent on rent (no GST on that) leaves $15,259.80. If every single cent of that was spent on goods and services, the total GST generated would be $2,288,97. Combined tax $6,495.97 or 21.9%.

    Basic number crunching Sir, not rocket science.

    I could go on, but to think that you’re teaching our young. God help…

      • John, thanks for your reply. Thanks also for the link. Rather a late admission these aren’t “your” figures, but thanks anyway.

        I’m not arguing about GST being a regressive tax or not, my beef were the numbers you were quoting. Quoting without checking if they even stacked up. Which they don’t. Most others checked, both here and on the Mana site, where you made the exact same argument.

        So, with the quoted numbers simply not stacking up and the stated GST spend totally wrong, your argument of “28% of income spent on tax” is a simple lie. Sorry, there isn’t another word for it.

        Rather than bleat on about how the poor are getting ripped off and the rich aren’t paying their fair share, can I suggest you look at this table and tell me again who is and who isn’t paying their share: http://www.treasury.govt.nz/budget/2014/taxpayers/02.htm#_personal)

  11. That’s a hard situation. People from undeveloped countries
    are more than satisfied with what they gain in NZ. There is a fear in fighting for lower taxes while foreigners are happy to get jobs with NZ minimum wages.

  12. It always puzzles me: why do people accept taxation as ‘the natural state of things’?

    Why is Working for Families so acceptable? And, if the ‘argument’ is ‘we’ll need those kids to look after us in our old age!’ – get real. Times have changed greatly since the old Industrial Age. Many of those kids may never have a traditional job in the whole of their lives and their contribution to the tax pot could well be negative.

    We get to hear The Budget – ‘so much allocated to address Mighty Problems’ – in little dribbles over lots of years – yet it’s rare we ever hear the rest of the ‘letter’ beyond ‘Hi Mighty Problems!’ Never the Eureka! or ‘We knocked the bastard off!’ Never.

    What exactly ARE we getting for all the moneys collected?
    New roads? Yeah, right. Better infrastructure? Hell, no. Life-long affordable upskilling and education? You’re having a laugh.

    Past a certain point, and with the connivance of laws and regulations, money makes money faster than it can be used. Fiddling around with tax rates cannot address this at all. Some other multi-pronged method must be found if rising inequality is to be resolved in the next little while.

    And for those who LOVE to ‘make money’ – can we separate them out from the mass of the population and let them play where they can’t harm the rest of us? It’s natural to them and there’s no need to be cruel or punitive.

    The assorted banks can make pretend money with nothing but a Loans Officer and a keyboard. All that ‘engines of industry and investment’ spin from the 1%… Smoke and mirrors – and we agreed with the fiction.

    The game was made by people and people can change the game, if they can bear to give up their fear and awe. That may not be entirely possible, however.

  13. No money was transferred from one group of NZers to another due to tax cuts, that’s like saying when saying when someone gets a pay rise, somebody else gets a pay cut. We don’t have a net zero economy John, being a Marxist I don’t expect you to understand that concept as you are economically illiterate. When the government gives somebody a tax cut all it does is allows you to hold onto more of your own money.

    • No money was transferred from one group of NZers to another due to tax cuts…

      You are joking, right?! The rich pay less less as a result of the ’09 and ’10 tax cuts; the poor pay more via a GST increase and increase in government charges. You either choose not to understand this for ideological reasons, or have little understanding of the effects of the two tax cuts/increase.

      If anyone demonstrated “economically illiteracy”, you’ve excelled, Stephen.

  14. John did you see the interview when JK explained one of the reasons (he likes to confuse matters when he’s wrong) was the GFC made it too difficult for us to ‘help feed the hungry kids’ as there wasn’t enough money……
    Conveniently he was being interviewed by a muppet, one of those Lame Street Media persons, absent only their National party Baseball caps and Tee shirts, Coran Dan I THINK ??……..Why wasn’t the follow up question, ….then why did we give MASSIVE tax cuts to the rich at the same time, costing Billions, a fraction of which would have solved the problem????

    I guess these ‘interviewers’ realise their jobs are on the line if the dare ask an unscheduled-planned ‘awkward question’.

    • You may not be able to change the world, but at least you can embarrass the guilty. -Jessica Mitford, author, journalist, and civil rights activist (1917-1996)

  15. The minutae over how much exactly the different sectors of society pay in tax is of no great import. More important to affirm that there has been a major shift to the disadvantage of the middle income earners and below.

    It must be reiterated at every opportunity.

    For those who complain about “the politics of envy” and bemoaning a plan that proposes the taking from the “business-creating sector” it need only be asserted that if the growth projections of the Right are realized, they will not face an income cut. Indeed we are encouraging them to use those skills in business creation to maintain and even increase their incomes.

    After all we have swallowed a similar message to justify income reduction for years.

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