When Christopher Luxon announced his tax cuts proposal earlier this year it was widely scorned because, despite costing $1.7 billion, analysis showed most of the money would go to the wealthy.
A person on the minimum wage for example would get just an extra $112 per year while someone on a median salary of $55,000 would receive about $800 per annum. However, those on the highest incomes would get the lion’s share with Luxon himself taking home a whopping $18,000 extra per year.
Despite the negative feedback to Luxon’s proposal National seems determined to press on with a tax cut proposal. If they do, then the focus should be on cutting GST.
GST is a “regressive tax” which means it takes most from those on low and middle incomes and little from the very wealthy. A cut in GST would benefit those facing the toughest times.
Already Aotearoa New Zealand’s tax system is heavily weighted against those on low and middle incomes.
Wage and salary earners pay the highest rates of tax because they pay tax on every dollar they earn and every dollar they spend and for those on the lowest incomes the tax rates are particularly savage. The lowest 10% of income earners spend 14% of their net income on GST while the top 10% spend less than 5% of their income on GST.
Some countries, such as Australia, have exemptions for GST on such things as basic foods, medical and health care products. We have no exemptions.
Considering GST and income tax together, a minimum wage worker pays nearly 30% of their income in tax which the super-rich will typically pay less than 10% of theirs to the government.
In tax talk this is politely expressed as “the income sources of the super-rich do not attract tax as other activities do”. In other words, there is a lot of freeloading going on.
For example, in the 2014 tax year the HWI (High Wealth Individuals) unit of Inland Revenue found that 87 of the 212 New Zealanders with net wealth over $50 million were declaring incomes of less than $70,000 for income tax purposes. They were not even in the top income tax bracket!
If “tax is love” as economist Shamubeal Equab says then there isn’t much love to go around at the top of the income pyramid.
So why does GST affect those on low incomes the most? Simply because people on low incomes spend every dollar they earn but those on higher incomes are able to save and therefore pay a smaller share of their income on GST.
We have what can only be described as a bizarre and immoral tax policy which says the more unearned wealth you gain, the lower your overall tax rate will be. It’s as though the Sherriff of Nottingham designed our tax system. It wouldn’t look out of place in medieval Europe.
Why on earth should we allow those on the lowest incomes pay the highest rates of tax?
What our main political parties know is that their big political donations will quickly dry up if they propose the wealthy pay their fair share of tax. They have allowed themselves to be held to ransom on even the most basic changes to the tax system.
We are already an outlier amongst countries we like to compare ourselves with by having a low top income tax rate and a capital gains tax which is easily avoided.
We have been repeatedly told by politicians from the major parties that the best features of our tax system are its broad base and low rates. It sounds fair but in fact this is the very problem – it is the key driver of income and wealth inequality.
We need a fairer, more progressive tax system which taxes every dollar equally, no matter how it is earned.
And it’s time we got rid of GST altogether.
The $26 billion to replace it can easily be found by taxing the unearned incomes and unearned wealth of the wealthy and super-wealthy. If the 1% pay their fair share in tax the rest of us will all be better off.
So let’s have this debate about tax cuts – starting with proposals to slash GST.
Bring it on Mr Luxon!
Yes – GST removed, especially for food, and other essentials
Wasn’t tax cuts supposed to stimulate direct investment. Something like 70% don’t want to privatize water. What’s up with that?
Some things tax cuts was meant to address
Affordable housing
Education
Food security
Business confidence
Innovation
Job security
Ect
The government is not a warehouse for cash. Increase the amount of tax refund people get. Give people back some money they earnt to all workers in one big whak so a minimum $2000 tax refund for everyone, every year. Then governments won’t have to run a surplus.
Including all beneficiaries should also receive a minimum tax refund of $2000 per year.
Labour are able to lift GST at any time but haven’t done so.
@ bob the first [ and sadly won’t be the last.] , you naughty little boy. You know well enough that when neoliberalism has a strangle hold on our politics within our democracy, or at least the hollowed out version of it that roger douglas and his cronies has left us with, there can be no distinction between one particular party’s intentions and an other’s, so spanking labour for being the greedy, naughty little children they are in favour of the vile natzo’s is a waste of good spanking time. But I know you, or rather your type, and it’s certain that there’ll be more than one or two of you. Your job is to create confusion. To spread loose floor boards about so that after all that tripping we lot will give up and allow the neoliberal status quo to continue on unfettered as its capitalist Machiavellian fascism has enabled it to do for more than 38 years now.
Neoliberals will never tax their own kind. That’d be less likely than finding a naked vampire on the beach with a beer. goff hit the now powerless working class with gst, which is essentially a poverty tax. I had a revelation about taxation and the hyper riche while I was lying on my virgin couch this morning. The real ‘taxes’ ( AKA corporate profit) are hidden within those things we must buy, like food, fuel, housing, rents, electricity, data, clothing etc but it’s not a taxation you might be familiar with. The rich are effectively ‘taxing’ you and me when we buy what was once our stuff and things off them. ‘Profit’, then becomes a tax in and of itself. Neoliberalism is fascist capitalism. That’s the one understanding to keep above all else politically. The great thing for corporations and billionaire privateers is that they’ve made their version of what could be called taxation non taxable in the given sense so they get to keep all our money but they also designed OUR real world tax systems to best benefit themselves so they get to keep our money as well. So, while we must not only pay their version of ‘taxation’ i.e. profit they make from what was once our state owned assets but we must also pay our version of taxes via PAYE and GST to them. A sweet deal aye boys?
Did I explain that well enough? I don’t know if I did. Apols if not.
It’s interesting too, that the capitalist corporate profits they take off us whether we like it or not on our essential services like all those systems and stuff and things we paid for prior to neoliberalism could be considered a form of tax. The corporations make billions of dollars from the rorting and profiteering from what was once our assets. To me, that’s a fascist form of ‘taxation’ and it isn’t democratic. It’s unfortunate that the corporations who wade through all our money while we must also pay them their double-bubbles is a form of taxation that disappears into the rapacious guts of corporate unaccountability while we must make do as best we can while being used and abused. Do you see what I mean?
In my opinion, that’s a bit fucked. And we shouldn’t stand for it. We should re nationalise what was once our taxes paid for assets and we should smash the four foreign owned banks who literally right-field ‘tax’ aka our billions of cash dollars out of our country in their net profits annually. They must be smashed into the dirt, and the same goes for any politician who gets in the way of that while we’re at it.
Spot on CB.
I couldn’t have put it better.
Well done!
Had Roger Douglas not been around New Zealand would have collapsed economically.
And you know this how?
Thought everyone new that?
well the monetarist cabal in the treasury didn’t think that, that’s why they faked a crisis to force an economic coup d’etat bob.
Ok gagarin not aware of that.
Am aware NZ was heading for economic collapse.
there’s really good old doco series on ytube
called ‘revolution’ well worth checking out 3 parts if I remember..the kind of thing TVNZ doesn’t do anymore…
Thanks
Oh dear, the level of peoples political knowledge is highlighted when they put pen to paper.
I’m sorry but until people recognize that inequality is a function of the world, then this conversation cannot be had.
The focus should be equality of opportunity and then a safety net for only those who genuinely are unable to work.
There are too many people who COULD work but choose not to in favor of having a brood of children they can neither pay for or care for.
These are the people who are the cause of poverty for the next generation.
Wealth and status is not a human right that grants more life. Fuckwit.
everytime i need to be reminded the world has some absolute cock wombles shambling about, talking absolute shit, you turn up… hmm… go figure…
poverty is created by rich people stepping on the poor, underpaying and overcharging, treating their employees poorly and donating to right wing parties to create the policy to allow them to do that.
Tried for 30 years trying to get ahead in life and everytime its some rich wanker who wants you to work your arse off for minimum wage.
You’re wasting your time Jays.
These people have never heard of perato distribution, that basically rules the entire universe.
Neither of the purple parties is interested in changing this situation.
People be lacking. Why on earth we would go to people who believe that a government budget operates the same as a family budget just lacks all logic and reason.
For one, infrastructure is underfunded.
Secound is insurance and costs of living keep outstripping pay packets
Third, a handful of people are hording all the wealth and assets
There for cut taxes on high income earners.
That’s just wonderful Johny come lately and Johnys sister. Well done y’know? Just brilliant. Knighthood and dames for everyone.
Lets go Back ‘into’ the Future. 1984-1990 and undo those Douglas, Lange, Prebble, Alan Gibbs, Myers and the rest of the Cabals reform legislation and build Fortress NZ!
Muldoon was onto something then because it is what is happening again now! Isolationism!
If the only (SADLY today) viable opposition party are as right wing as Luxon’s lot, then we’ll NEVER get the right thing done. EVER.
The political system in NZ is corruppt and purposely undemocratic.
If for e.g. (and NOT an analogy for NZ politics per say) my options are to vote for Stalin or Hitler, it’s hardly a democracy. i.e. having two sh1tty options doesn’t make it a fair democracy.
GST first and then follow by making hte first 25 grand tax free. This woulod benefit all whilst bringing the big benefit to those that are on a benefit and are paying taxes on that. But neither L nor N will do that.
I mean L had the chance to do that for how many years now? Almost 6? Oh its okey, they are of the ‘left’.
And National had nine years to do it but oh it’s okay, they are of the “right”.
ok given labours refusal on the CGT how do you make up for the lost GST tax take….what social spending do you want cut mr minto because you and I know that’s where the expenditure cuts will be.
I am not an economist so my thought are only how I see thinks and I am happy to be corrected. We know those on higher income avoid tax through many legal loopholes and it will always be that way so GST is away of getting tax from them that cannot be avoidedI would think that tax free on the first 20000 would be a great help to low wage earners
the thing with all, indeed it’s part of the design. consumption tax hit the poor harder than the rich in comparative terms….but we do love regressive taxes in NZ
To do away with the nearly 18 billion in GST revenue in the present economic situation might be a bit of a stretch, but I agree with Nathan if Luxon was serious about tax relief to lower income earners GST on food is where you start.
But he’s not serious, other than looking after his fellow 10%’ers.
So who are labour looking after Kerman. Oh that’s right, nobody. With their increases in minimum wages and three hundred bucks for some. Food is still too expensive as are houses. The poor are poorer. Oh there’s an idea, why don’t Labour drop GST on essentials .They’re socially responsible.
SO you would freeze wages across the board then.
Wage cuts, freezes and any form of erosion in wages and conditions are violence. Plain and simple.
Each and every worker in this country deserves a pay rise each year, plain and simple.
No you said that Millsy not me. I was just pointing out that Labours answer to the cost of living crisis is non existent. The problem with tax cuts is they creates the politics of envy. If you believe the wealthy shouldn’t benefit from tax cuts it implies they somehow didn’t earn their higher income, or there is something unfair about their higher income. The wealthy certainly don’t need a tax cut but it’s not unfair that they get back part of what they earn just the same as those on lesser incomes. Those not earning enough will never be happy with that idea. That’s why in my opinion a CGT is more acceptable. The wealthy get pinged for working too hard but those struggling on lower incomes won’t. It takes the incentive away from the successful to do better but helps provide funds for those in most need. I don’t believe National will push the right buttons Millsy but whatever they do they’ll be more effective than this Government. In my opinion.
What can only be described as a sort of new-wave of Neo-socialist governments the world over are trying to recreate a sort of China style capitalism everywhere. So you have a ruling class and a worker class (who will “own nothing and be happy” – an actual WEF quote), with the ever present jack boot of the government always hovering over anyone’s neck who dares speak out or goes against the grain.
https://en.wikipedia.org/wiki/Neosocialism
They’ve used every “opportunity” to further whatever the ultimate agenda is – climate change, the pandemic, the war in Ukraine. I guess that’s why the WEF has promoted its “leaders” into all areas of society via its “young global leaders” program.
https://en.wikipedia.org/wiki/Young_Global_Leaders
And yes, our very own Jacinda is a WEF alumni.
https://www.investmentwatchblog.com/young-global-leaders-members-and-alumni-world-economic-forum-wef-great-reset-klaus-schwab/
That link to “Neosocialism” you carry on about leads me to an article about an obcure version of socialism that touted by French left-wing admirers of Mussolini’s Italy in the late 1930’s. Hardy relevant.
The WEF agenda sounds a lot better than what you want, which is basically throwing people out on the street and slashing wages.
No neosocialism is very close to technocracy and corporatism (and you’ll see both mentioned in the wiki). It’s “socialism” in name only. Thin about what we’ve seen happen in the last couple of years. Especially the West’s response to the pandemic.
but the ‘socialism’ word is soo scary it’s the only card the right have, which is funny as the LINO wouldn’t be seen dead within 50 feet of it….once again the right tilt at imaginary windmills
Yes and our very own Jacinda!!
I remember National promising tax cuts last time. The same lines of Labour over taxing people, it was enough to swing the vote in Nationals direction. Immediately the top tax rate got a cut, the following year corporates got a tax cut, and everybody else got nothing.
National used an increase in GST to balance the books.
Our hospitals have become run down, infrstrusture, low pay rates of public servants (excluding management that is).
National is only telling us half a story, the other half is how they intend paying for those tax cuts….
What a great idea!!
Now this is socialism I can support, axe GST.
See Labour Government now introducing GST on retirement savings.
Oops got public backlash PR machine into gear reverse decision.
backflips are never impressive…stupid idea but going back on it inside a day just looks pissweak not a good look for any govt