Monday, July 18, 2011

DOWN TO THE DOCTOR’S: Who Pays The Tax? [update 2]

_richardmcgrathLibertarianz leader Dr Richard McGrath invites you to come on down to his surgery for an inoculation against this week’s stories and headlines on issues affecting our freedom.

This week: Who Pays The Tax?

Someone posted this to me recently, so I have to acknowledge the work of David Farrar in getting this information out first. However, Bill English’s comments merit further comment, which is why I reproduce much of what has been posted already on Farrar’s Kiwiblog.

First, a table which apparently comes from Bill English’s office (so take that for what it’s worth), followed by the Minister’s answer to a question about who pays most of the tax collected by government (as opposed to tax collected by gangs and various other extortion rackets outside of the IRD):

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Hon [sic] BILL ENGLISH: Our tax and transfer system is highly redistributive, and the number of people paying income tax is surprisingly small. The lowest-income 43 percent of households currently receive more in income support than they pay in income tax. The 1.3 million households with incomes under $110,000 a year collectively pay no net tax—that is, their total income support payments match their combined income tax. The top 10 percent of households contribute over 70 percent of income tax, net of transfers—over 70 percent of income tax, net of transfers. This system is highly redistributive and we believe it is fair. (My emphasis in bold).

So there you have it. On average you have to earn over $110,000 a year before you pay any net tax, even though you start paying net tax on income bands above $50k. That makes nearly 79 per cent of New Zealand households net welfare beneficiaries, supported by the other 21% and by the $380 million Bill English borrows every week.

So most of the country are moochers.

And the 10% of households who have visible earnings over $150k pay 70% of the tax collected.

Bill English admits this system is highly redistributive and he believes it to be “fair.” Fair? It’s outrageous. It’s so biased against success that it almost makes a person want to give up. Or emigrate. Or vote Libertarianz. Be advised: if you dare to work hard, or innovate, or invent; if you are an entrepreneur, if you succeed (or even if you fail) you will be punished!

Now be advised too that this is the system presently in place—even before David Cunliffe gets his hands on your wallet, your business and your art collection. Even under the system as administered by Sire Double Dipton, you will not be given an opportunity to employ others or to use your profits as capital investment. Instead, you will hand most of it over to the government as income tax, GST, ACC levies, consent fees, permit costs, etc.

Mr English believes that’s fair, because Mr English is in every way that matters  an old-fashioned redistributive Marxist. Mr English is a man who believes in the maxim “From each according to his ability, to each according to his need.” (And as we know, Mr English and his family are very needy.)

That approach is fine when the community is a voluntary co-operative, where people can come and go of their own volition. That does not apply in New Zealand. We can’t opt out of paying tax, which of course is filtered through government departments before it reaches those to whom it is officially destined.      

Greece… Ireland… Italy… Spain… Portugal… New Zealand. We live in interesting times.

And still 53% of people support that nice Mr Key and good old Bill English. No wonder Labour are faring so poorly in the polls. They and National are fighting over the same group of voters: those who want to live at the expense of everyone else.

There are only two political parties that want to abandon this self-destructive Marxian death cult. One is led by Don Brash, the other by me. Both our parties are “lunatic fringe” extremists. Both parties are “right wing”, and “racist”—or so the media would like you to believe.

Neither party appears likely to play any meaningful role in government of this country in the near future, for the simple reason (as a much wiser head than mine once opined) that there hasn’t been a revolution in people’s heads. And because 10% of the country are paying for the other 90%, and none of those turkeys will be voting for Thanksgiving any time soon.  Frankly, things haven’t moved on since 1990; we’ve been in a time lock through the eras of Prime Minister Spud, Headmistress Shipley, the long decade of rule by Clarkistan, and what now looks to be six and possibly nine years of the Smiling Assassin and his sidekick Billy Bob.

Do New Zealanders really want to change? Or do they value the equal destitution of a collectivist state above the uncertainties of freedom and the accompanying obligation to think and act and experience consequences? Looks like that crab bucket mentality that tennis ace Chris Lewis wrote about all those years ago is still thriving. It’s so damned hard to shift people away from a mindset of utter denial about where our economy is headed. Perhaps the future is too scary to face.

And that’s the thing about the Libertarianz and ACT parties. They scare people, because people will do anything to evade reality.

See ya next week!
Doc McGrath

UPDATE 1: Rob Salmond takes issue with the Farrar/English figures, saying the rich are not paying so much as they say—and then argues govt should get out there and soak the rich anyway. Read: Tax Burdens: Some Facts (For a Change).

UPDATE 2: And David Farrar responds, saying Rob Salmond can’t count.

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8 Comments:

Anonymous Mort said...

interesting figures.
looks like the Libs are wrong. 50k earnings threshold is too damn lenient.
You need to adjust your threshold to 80k, and then make flatten the tax take to 15% and then address the wanton waste of churn in Govt.
WFF, IRD, MED, WINZ, MoWA, Fam Comm, ComCom etc sould all be run with 10-20% of their current staff.

All the excess floor space taken up by the useless ones could be turned into high-rise dairy farms. At least the effluent produced will have productive wealth generation component

7/18/2011 03:00:00 pm  
Anonymous B Whitehead said...

Yet again, there is another attempt to make the tax system "fairer", totally neglecting the fact that if everyone was taxed at the same rate, the richer people pay more tax in total anyway. It seems inevitable that NZ will end up hopelessly in debt just like the european countries mentioned, It will be interesting to see the fallout, when Greece starts defaulting on it's loans, bearing in mind that the majority of Greeks oppose cutting back on government expenditure.

7/18/2011 03:23:00 pm  
Anonymous Anonymous said...

"Hell hath no fury such as the middle-class when their subsidies are at risk"
Can't recall Englishman who parodied the above early 1980's.
Equivalent to turkeys not voting for Xmas dinners featuring themselves.
1 site referred to "Silent Assassin" as jonkey ~ rhymes with donkey; "Double Dipton" was "bling"
Peter

7/18/2011 03:30:00 pm  
Anonymous Anonymous said...

Why are you linking to communists?

the richer people pay more tax in total anyway.

Of course not: a truly flat tax would be say $5,000 per person

It seems inevitable that NZ will end up hopelessly in debt just like the european countries mentioned,

NZ is already in debt at least as deep as Greece and worse than Spain and Italy.

On an long-term adjusted exchange basis, NZ is significantly worse than Greece.

As far as I can see, we're solvent only because our economy is just seen as a pimple on Australia's butt.

7/18/2011 07:28:00 pm  
Blogger Andrew B said...

Mort - WFF, IRD, MED, WINZ, MoWA, Fam Comm, ComCom should all be run with 0% of their staff - that is, they shouldn't be run at all.

Can't say I agree with your reasoning here Sheriff: "On average you have to earn over $110,000 a year before you pay any net tax, even though you start paying net tax on income bands above $50k. That makes nearly 79 per cent of New Zealand households net welfare beneficiaries, supported by the other 21% and by the $380 million Bill English borrows every week."
You can say those (35.3% of) households earning $50k to $110/120k are having their tax payments all but wiped out by the 43.6% earning less than $50k, and that the remaining 17% pay 97% of the net tax take. And while I understand the maths, the "on average" you preface the "you have to earn over $110,000 a year before you pay any net tax" comment with and the "nearly 79 per cent of New Zealand households net welfare beneficiaries, supported by the other 21%" don't seem like fair representations of the facts. The fact is, those households earning $50k to $110k/120k are net tax payers and you could just as well write off those beneath them against the top 9.7% of taxpayers as any group of net tax payers.

The sheer inequity of it can be compared by comparing the ratio of net tax paid to the proportion of the population for each $10k band, as in these numbers below:

Households Net tax to
earning Population
ceiling Proportion
($10k bands)
10 -0.92x
20 -2.33x
30 -1.52x
40 -0.57x
50 -0.38x
60 0.27x
70 0.66x
80 1.39x
90 1.63x
100 2.32x
110 2.24x
120 3.02x
130 3.23x
140 3.91x
150 3.84x
over 150 7.29x

Put those numbers in a chart - it's appalling.

7/19/2011 04:29:00 am  
Blogger Andrew B said...

Sorry column a should be "Households earning ceiling ($10k bands)", column b should be "Ratio of net tax paid proportion to Population Proportion."

7/19/2011 04:30:00 am  
Blogger Dinther said...

"Of course not: a truly flat tax would be say $5,000 per person"

The first sensible comment I hear about tax in a libertarian view.

A flat tax rate is not fair at all.
10% of a million is heaps more than 10% of 40 thousand, yet both civilians receive the same services.

If tax is a payment for services required to run a limited libertarian government, then surely every person pays the "membership" tax at the same AMOUNT. Or is it so that libertarian cops protect rich people with more vigor than poor people?

7/19/2011 03:28:00 pm  
Anonymous Anonymous said...

every person pays the "membership" tax at the same AMOUNT.

Absolutely.


libertarian cops protect rich people with more vigor than poor people?


Just as is the case today, even in communist old NZ, private "cops" will provide security to those who pay them. In general, cops do not need to be paid by taxes by the state. As with commercial mediation and arbitration today, civil and commercial dispute resolution also need not be provided by the state - and apart from the "leftertarian fringe" - I've never seen a convincing argument in favour of state provision, especially monopoly state provision, of "justice".

The idea that "Jack is as good as his master" is certainly a communist idea; it may be a "leftertarian" idea; it is certainly not a libertarian idea.

7/20/2011 05:22:00 pm  

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