The media’s current fascination with TOP conveniently overlooks their plans to raise taxes.
This debate typically starts at the wrong point. Tax funds the state’s activities. Surely, the first question should be what are the essential tasks that only the state can or should undertake, and how little of our personal and company-earned money is required to manage those tasks, effectively and efficiently?
Tax is a means to an end, not an end in itself. We keep putting the trailer ahead of the car.
We claim government is a business and should be run like one. No! It is not. And we shouldn’t encourage that thinking. Much of its affairs need to be run in a ‘business-like’ manner but if we see the whole of the state’s activities as a corporate that devotes its energy to increasing its income, we will continue down the dead-end road of poor performance and voter frustration.
Too much of the time of our politicians and bureaucrats is spent doing what businessmen do – trying to increase income instead of focusing on curtailing expenditure or improving the quality of the spending.
Part of the psychology involved in paying taxes relates to PAYE. Too many earners do not know how much of their pay packet goes in taxes. There was an occasion when I visited a large sawmill to speak to the workers. I joined the staff for smoko. I had earlier asked the pay clerk to write down the fortnightly amounts of tax paid by various employees without names. I then asked the staff what they thought was the amount of taxes they had paid in the previous fortnight. No one got within 70% of the amount. All estimates were far too low. They were, to a man, taken back and vowing to learn more.
A further point of frustration is that those who claim our tax system is unfair and fosters inequality typically quote Scandinavian countries as operating superior tax systems. The interesting thing is the top 10% of taxpayers in New Zealand pay a bigger share of the tax burden than their equivalents in the Nordic countries, at over 45%. Our northern counterparts have their top 10% shouldering less than 40% - even as low as 35% - of all income taxes paid.
The same shrill calls for a heavier tax burden on the wealthy rarely want to look at the “net” position of taxpayers. We know that the top 10% of taxpayers are contributing as much as 75% of the tax burden after transfers for Government outgoings are netted off.
Of that 10%, the top couple of percent are carrying an enormous load.
So, if fairness is the yardstick we are already flogging the well off while the rest of us take more than we pay. What do the left wish for? 80% of net taxes paid by the top few? 90 percent?
The level is already in the danger zone when relocation is factored in. It is very easy for the wealthy to move out, taking their innovative, entrepreneurial, employment-creating skills, leaving the rest of us to pick up more of the tab.
Here's something for promoters of a capital gains tax to consider. The CGT tax collected in Australia in the last couple of years has fluctuated wildly, with as much as 70% swings. Meanwhile the cost of raising a dollar of CGT in the poor years has exceeded 75% or $0.75 cents for every $1.00 raised. Avoidance levels are running over 30% against a pure model, with significant distortions emerging having a negative effect on investment decisions.
Taxing capital may make the envious feel better, but it doesn't do much for the country.
As the silly season gains a head of steam and the promises of using your hard-earned wages grow like ‘topsy’ with would be politicians muscling in on your money, take an extra minute to learn what you are currently sending them, what they are intending to add to those forced remissions, and ask yourself, am I getting a “fair” deal, good value for money?
Then figure out which political party is most focused on obtaining best quality spending and how to deliver those services with less, not more of the money they demand from you.
Tax is a means to an end, not an end in itself. We keep putting the trailer ahead of the car.
We claim government is a business and should be run like one. No! It is not. And we shouldn’t encourage that thinking. Much of its affairs need to be run in a ‘business-like’ manner but if we see the whole of the state’s activities as a corporate that devotes its energy to increasing its income, we will continue down the dead-end road of poor performance and voter frustration.
Too much of the time of our politicians and bureaucrats is spent doing what businessmen do – trying to increase income instead of focusing on curtailing expenditure or improving the quality of the spending.
Part of the psychology involved in paying taxes relates to PAYE. Too many earners do not know how much of their pay packet goes in taxes. There was an occasion when I visited a large sawmill to speak to the workers. I joined the staff for smoko. I had earlier asked the pay clerk to write down the fortnightly amounts of tax paid by various employees without names. I then asked the staff what they thought was the amount of taxes they had paid in the previous fortnight. No one got within 70% of the amount. All estimates were far too low. They were, to a man, taken back and vowing to learn more.
A further point of frustration is that those who claim our tax system is unfair and fosters inequality typically quote Scandinavian countries as operating superior tax systems. The interesting thing is the top 10% of taxpayers in New Zealand pay a bigger share of the tax burden than their equivalents in the Nordic countries, at over 45%. Our northern counterparts have their top 10% shouldering less than 40% - even as low as 35% - of all income taxes paid.
The same shrill calls for a heavier tax burden on the wealthy rarely want to look at the “net” position of taxpayers. We know that the top 10% of taxpayers are contributing as much as 75% of the tax burden after transfers for Government outgoings are netted off.
Of that 10%, the top couple of percent are carrying an enormous load.
So, if fairness is the yardstick we are already flogging the well off while the rest of us take more than we pay. What do the left wish for? 80% of net taxes paid by the top few? 90 percent?
The level is already in the danger zone when relocation is factored in. It is very easy for the wealthy to move out, taking their innovative, entrepreneurial, employment-creating skills, leaving the rest of us to pick up more of the tab.
Here's something for promoters of a capital gains tax to consider. The CGT tax collected in Australia in the last couple of years has fluctuated wildly, with as much as 70% swings. Meanwhile the cost of raising a dollar of CGT in the poor years has exceeded 75% or $0.75 cents for every $1.00 raised. Avoidance levels are running over 30% against a pure model, with significant distortions emerging having a negative effect on investment decisions.
Taxing capital may make the envious feel better, but it doesn't do much for the country.
As the silly season gains a head of steam and the promises of using your hard-earned wages grow like ‘topsy’ with would be politicians muscling in on your money, take an extra minute to learn what you are currently sending them, what they are intending to add to those forced remissions, and ask yourself, am I getting a “fair” deal, good value for money?
Then figure out which political party is most focused on obtaining best quality spending and how to deliver those services with less, not more of the money they demand from you.
Former MP.Owen Jennings, a former Member of Parliament and President of Federated Farmers, maintains a keen interest in ensuring agricultural policies are sensible and fit for purpose. This article was sourced HERE
5 comments:
Well said, Owen. Unfortunately, too many are only interested in 'what's in it for me' and fail to see the bigger longer-term picture and grasp how sustainable it really will be. The 'she'll be right' attitude is still too prevalent and as for any 'real' capital gains, there won't be any, but then the left were always poor at understanding economics and budgetary restraint.
Unfortunately it’s already all over. Latest unemployment and inflation rises coupled with 15% to 30% house value falls, means the coalition won’t win. We’ll vote in the other lot for one last sugar hit from increased borrowing, taxing and Public Services growth before the ship of state sinks slowly in the west. Full speed ahead and damn the torpedoes.
Mr. Jennings's manipulation of facts, presumably intended to establish the dubious proposition that the wealthy already pay more than their fair share of tax, is highly selective and misleading.
In 2023 then Revenue Minister David Parker commissioned an inquiry by the IRD which concluded that New Zealand's 311 wealthiest families paid an average effective tax rate of just 8.9%, far lower than ordinary wage earners. Wealthy individuals, more broadly defined, faced a median effective tax rate of 9.4%, compared to over 20% for what the IRD called "middle-wealth New Zealanders."
The IRD inquiry also found that only about 7% of the income of the richest New Zealanders came from taxable sources like salary and wages. Labour's very modest proposal for a capital gains tax is unlikely to change that figure very much. And because his figures concentrate on income tax, Jennings ignores the impact of the highly regressive GST tax, which now makes up around 40% of government tax revenue. Since its introduction in 1986, GST has resulted in a massive shift of the tax burden from the wealthiest to the middle and lower income layers of the population.
And for all their purported knowledge and capability Terry, how well did Labour run the country's finances?
In a word, appallingly! We'll be paying off the debt they amassed for generations. Heaven help us if they get to hold the treasury benches again.
Your claim Terry that GST has shifted the tax burden from the wealthy to middle income earners is very dubious. If you are talking about actual percentage of a persons income goes in GST, you may have a point. But basic economics tells me wealthier people obviously spend a lot more, especially on high priced luxury goods, thus a lot more GST. Also remember lower income people often get more income tax rebates than they they pay out, so often GST is the only tax they pay. If they are smart they can buy less non essential goods and thus save more. If you don't agree please feel free to prove me wrong
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