Thursday, April 27, 2023

Cam Slater: They Might Pay Half the Rate, but They Pay 68% of All Tax

The IRD and the Government have released a report that shows the wealthy in New Zealand pay an effective tax rate of half that which ordinary wage and salary earners pay. Missing from the media and the report is the fact that this is all entirely legal and that none of those the report is about are being prosecuted.

That means the report is a political exercise designed to soften us all up for increased taxation.

The wealthiest New Zealanders pay on average only 8.9% tax on their income, according to a long-awaited study of 311 rich-listers conducted by Inland Revenue.

Revenue Minister David Parker said the low tax rate was explained by the fact they received about 80% of their income in form of capital gains, much of which was earned through trusts and companies and which was often untaxed.

A separate Treasury study, also released on Wednesday, estimated that the average Kiwi effectively paid 20.2% tax on their income, once GST and benefits they received from the Government were taken into account.

The equivalent effective tax rate for the wealthy individuals studied by Inland Revenue, with government benefits and GST included, was 9.4%, meaning that – most commonly – they were effectively paying less than half as much tax on every dollar they received in income as the average New Zealander.

The Treasury study also estimated that the richest 1% of New Zealanders together owned just over a quarter of the country’s wealth.

What the report fails to say is just how much of the total tax take the wealthy pay. Fortunately, a week earlier another report was released that does precisely that. It shows that 21.2 per cent of taxpayers paid 68.5 per cent of income tax.

The OliverShaw report used OECD tax criteria and took account of Working for Families and other tax credits, and was based only on income, corporate and investment taxes, but not GST.

It showed the top two tax brackets for those earning between $70,000 and $180,000 a year and those earning above $180,000 made up 21.2 percent of taxpayers and paid 68.5 percent of income tax in the 2021 tax year. Those earning $180,000 to $300,000 constituted less than 2 percent of taxpayers, but paid 9.3 percent of income tax.

The report assessed that people with annual taxable income of $70,001 to $180,000 paid an average rate of tax of 23.9 percent; those on $180,001 to $300,000 paid 28.9 percent; and those on more than $300,000 paid 31.7 percent.

But taking into account various tax credits to find an average effective tax rate, the lowest taxed were retired, home-owning, high-income earners, while those paying the highest average effective tax rate were single, unemployed people in rented accommodation.

However, Oliver said all things considered the tax system was reasonably fair and equitable.

Just looking at the effective tax rate paid by the wealthy is, with respect to the IRD, an exercise in comparing apples with oranges, especially as the majority of the “income” that IRD claims the wealthy earn are from untaxed capital gains.

Treasury reckons a comparable tax rate for a “middle wealth” Kiwi was 20.2 per cent – that rate includes GST they pay and any benefits someone might receive like Working for Families. If you leave those out, their tax rate is even higher.

The median wealth of the families was $106 million – but a handful of extremely wealthy people meant the mean wealth of those families was $276m.

Revenue Minister David Parker said the report showed “tradies, nurses, school teachers, hospitality workers, hairdressers, cleaners, engineers and small business owners all pay much higher effective tax rates than their wealthier fellow Kiwis.

“We tax those who earn all their income from salaries at a much higher rate than the very wealthy,” he said.

The culprit in all of this is capital gains, which are largely untaxed in New Zealand.

And this group of people made a killing in capital gains – something the Government is not changing today, Parker said.
NZ Herald

Note the words of envy in the reportage and the statements from David Parker. What these envious idiots fail to grasp is that capital gains are NOT income, you can’t eat a capital gain. Gains need to be realised before they can be eaten; sometimes gains turn into losses, and quicker than you can imagine. Losses are of course able to be offset against actual income.

Click to view

The IRD knows this perfectly well and so do the politicians, but they play the politics of envy anyway.

The fact that they ignore the fact that this small group of wealthy people pay the vast majority of the tax shows it is all about envy. The real tax rate may be lower but the actual tax rate exceeds every other tax bracket combined by a considerable margin.

The Government may not want to be talking about increasing taxes just yet, but if they are returned then the grasping hand of the socialists will almost certainly be dipping into the already over-taxed pockets of those in the top two tax brackets.

Cam Slater is a New Zealand-based blogger, best known for his role in Dirty Politics and publishing the Whale Oil Beef Hooked blog, which operated from 2005 until it closed in 2019. This article was first published HERE

1 comment:

TJS said...

I realized this when I read that report. My problem is I think we all pay too much taxes for the over bloated govt. bureaucracy. Way too many MPs as well and it seems that everytime we have a govt. we have at least two prime ministers so that's two salaries one for each of them when they leave often going into something else just as lucritive. It's like 'I'll leave now and you have a go and if we lose you get your pension too'! Who knows they could do another swap before October.

This govt.s cost the country a huge huge huge amount of money and all wasted, such a crying shame while honest Jo Blo works 40 hrs a week pays his taxes never takes time off work and gets penalised with high inflation and a salary which is unlikely to receive any increase to match inflation.

It's ludicrous as the same argument was used five years ago but Labour made it worse for them, except for govt. employees.