The Herald article then goes onto report the graph below, showing that after the top income tax rate increased from 33% to 39% in the 2022 tax year, there was a "spike" in the numbers of taxpayers earning just below that figure. The Herald said "The suspicion is people do this to avoid having much, if any, of their income taxed at the top rate". Well, the bunching could equally be explained by bog-standard economics, namely that when tax rates greatly increase at a certain level, people exert less effort since working to earn more above that level would lead to less money in their pocket. For example, if the top tax rate went to 100% above $180,000 then no-one is going to work at all to earn anything above that threshold - leading to extreme "bunching". Maybe the Herald could have the decency to report this explanation before attacking the rich and labelling them as dishonest and fraudulent folks who "rort" the system, which builds up public animosity to those folks.
Click graph to view
Sources:
https://www.nzherald.co.nz/nz/politics/nz-tax-system-is-fairer-than-widely-believed-despite-big-earners-rorting-top-rate-rejected-report-finds/E3TYHZRYYRFXFIXKHFR2IXBR7E/
Professor Robert MacCulloch holds the Matthew S. Abel Chair of Macroeconomics at Auckland University. He has previously worked at the Reserve Bank, Oxford University, and the London School of Economics. He runs the blog Down to Earth Kiwi from where this article was sourced.
Click graph to view
Sources:
https://www.nzherald.co.nz/nz/politics/nz-tax-system-is-fairer-than-widely-believed-despite-big-earners-rorting-top-rate-rejected-report-finds/E3TYHZRYYRFXFIXKHFR2IXBR7E/
Professor Robert MacCulloch holds the Matthew S. Abel Chair of Macroeconomics at Auckland University. He has previously worked at the Reserve Bank, Oxford University, and the London School of Economics. He runs the blog Down to Earth Kiwi from where this article was sourced.
3 comments:
I have worked bl**dy hard for my money, to give myself choices and to be financially secure and independent. And I have paid my tax along the way and supported charities and generally tried to be socially responsible. I have never been on a benefit and not even made an ACC claim. What is so reprehensible about that? Why is that so loathed? I was taught by my parents who grew up during the Depression and World War II and who had to deal with post war consequences.
There will be many who have achieved similar with much tougher backgrounds than mine - refugees etc.
I am proud of what I have achieved and the whiners and complainers and grizzlers and lazy and jealous can go jump.
I am happy to contribute in a social context for those that truly need it ( and there are always a few) as that is part of being a social group.
The rest - get over it.
Never let some inconvenient facts get in the way of a good prejudicial rant.
I really appreciate the Professor calling out the NZ Herald for sloppy (deliberately misleading?) reporting...not for the first time, too!
I don't know whether then Minister Parker sought an IRD report to demonstrate that our highest income earners were paying tax at disproportionately low rates, or whether he simply cherry-picked a highly hypothetical part of the report to suit his own political purpose.
In any event the Herald at the time, faithfully reported Parker's socialist rant.
In the real world, our highest income earners pay a disproportionally large portion of the actual tax take, and our lowest earners pay little.
What the report stated, as a conjectural point of view, was that "if" NZ had a capital gains tax, the taxes currently paid by the wealthy, would represent a tax rate of (if I recall correctly) about only 22% as opposed to a much higher rate from those who had much lower capital gains.
But predictably the pathetic Herald duly reported the "rort" that apparently was being perpetrated by our greedy wealthy.
I remain pleasantly surprised that there are still some academics able to shift facts from left wing propaganda....well at least one, Professor MacCullough.
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