The government has passed legislation to increase the top income tax rate to 39% on income over $180,000
It’s the biggest tax move planned by Labour for the next three years and yet its impact will be puny.
Labour has been telling its working class supporters its new top tax rate will have an impact on reducing inequality while reassuring the middle class that it will only apply to the top 2 percent of income earners.
Both statements are misleading.
Firstly the biggest impact in inequality I have seen quantifies the impact on inequality at 0.2% on the GINI measure of inequality. Forget it.
Secondly the tax is on incomes so it will impact the big salaries of executives but it will miss the super-rich altogether.
As Inland Revenue pointed out several years back – half the highest net wealth New Zealanders (those 200 or so on the NBR’s rich list) declared incomes of less than $70,000 – where the top tax rate used to kick in. I’d be willing to bet that less than 10% of these super-rich bludgers will end up paying the new top tax rate.
Labour, by ruling out a capital gains tax and a wealth tax, has boxed itself into a corner and at the same time has boxed all of us into policies which will increase inequality and poverty.
It’s a small political party, afraid of its own shadow.