Too Many Message Boards

Does this strike anyone else as deeply unfair & in dire need of changing - preferably tomorrow, or is it fine with everyone else?

Very canny though - govt saying its 'just for the information' because there's an election not far off so as not to put the wind up the opposition while doing precisely that.

Cue ACT paranoia...


https://www.stuff.co.nz/business/1318628...-zealander

• [b]For the average Kiwi, the figure is about 20%.[/b]
• [b]The Treasury says wealthiest 1% own more than a quarter of the country’s wealth.[/b]
• [b]The findings are expected to trigger a debate about tax reform.[/b]

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.









“While views differ on what constitutes a fair tax system, they need to be grounded in real facts and real data,” he said.

First thought - this line

Quote: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.

Wasn't someone on here a while back trying to convince us that half(?) the population effectively pay no tax because of all the government 'handouts'? and that was unfair... presumably to the wealthier half...

anyone recall that thread?

The answer for much of this imbalance is probably as simple as a well implemented CGT. That would capture much of this untaxed income by the well off as well as addressing our housing crisis. Job done!!

(26-04-2023, 03:52 PM)king1 Wrote: [ -> ]First thought - this line

Quote: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.

Wasn't someone on here a while back trying to convince us that half(?) the population effectively pay no tax because of all the government 'handouts'? and that was unfair... presumably to the wealthier half...

anyone recall that thread?

Indeed - that's an often used tactic from the far right; 'poor people are a leech on society' type of bollocks simply because those on low incomes might actually starve if they didn't receive at least some help from govt.

I think that really its well past time to dismantle  greed based Neo Liberalism, & attempt to repair the damage its done to this & other countries.

For reference, found the post here
https://tmmb.co.nz/forums/showthread.php...8#pid22648

Don't hold your breath waiting for a change. We've known about this for decades and nothing has been done to change it. And nothing will...

8.9% of a lot is still waaaaay more than 20% of not much.

A theoretical scenario:
Bob earns $70K/year, pays $550/week rent and spends the rest on stuff that attracts GST. He pays $17.5K combined GST & Income tax per year or 25%.

John makes $5M taxable profit from the company he owns, from which he invests about $500K and spends the rest (after income tax) on stuff that attracts GST. He pays a combined total tax of just over $2M. His business and properties increased in value by 17.5M so his overall tax rate was only 8.9%.

Do you really think it unfair that Bob had to pay a whole $17.5K whereas John got away with "only" paying $2M?

(26-04-2023, 11:07 PM)dken31 Wrote: [ -> ]8.9% of a lot is still waaaaay more than 20% of not much.

A theoretical scenario:
Bob earns $70K/year, pays $550/week rent and spends the rest on stuff that attracts GST.  He pays $17.5K combined GST & Income tax per year or 25%.

John makes $5M taxable profit from the company he owns, from which he invests about $500K and spends the rest (after income tax) on stuff that attracts GST. He pays a combined total tax of just over $2M. His business and properties increased in value by 17.5M so his overall tax rate was only 8.9%.

Do you really think it unfair that Bob had to pay a whole $17.5K whereas John got away with "only" paying $2M?

I not really sure this is a reasonable comparison...  comparing actual dollar amounts as against percentages is only ever going to favour the wealthy - you might as well go with a flat rate of $200/week tax per person to be 'fair' by that measure


But where did your numbers come from?  paying $2M tax on the $5M taxable profit seems rather generous.

The numbers are as follows:
$5M @ 33% = income tax of $1,650,000. The exact figure would be slightly different, taking the average 20% on the first $70K, plus "John" might pay 39% on some of that income, however I'm assuming that most of the income goes into a trust and is taxed at 33%.

After tax income of $3,350,000, from which he invests roughly $500K (so no GST) and spends the rest. GST included in that amount spent is roughly $350K. I'm rounding pretty heavily, but I'm rounding down, not up. And a specific number isn't really relevant to my point (i.e. it stands whether he pays $1.8M, $2M or 2.2M).


As for "fairness", I don't think that can ever be objectively defined. We can probably all agree on things that are definitely unfair, e.g. if Bob & John are both required to pay a flat $100K per year, you'd be hard pressed to find anyone that didn't agree that that would be grossly unfair. My point is that we shouldn't be so quick to jump on the back of the recent report and proclaim that the rich don't pay enough tax when they're paying huge amounts of tax. And it isn't "greedy" for anyone to not be wanting to pay more tax. I'm sure we can all find someone who survives on a lower income than we do, and yet we probably all think someone else should be made to pay more tax before we are. Are we all greedy for wanting to be able to choose what we do with as much of our money as possible?

---

Another scenario to add to the "why fairness can never be objectively defined):

I've two friends who were earning around $300K each. Tax on $300K is $97K. Last year, one of the two decided to take a career "gap year" and just lived off savings/overdraft for the whole year, so he didn't pay any income tax at all (he probably paid a small amount on his investment income, but it would have been less than $1K all up). They both still used public services, their kids went to school, doctor etc. and yet one contributed $97K in income tax and the other next to nothing; is it fair that the those that choose to work have to subsidise the ones that chooses not to?

(27-04-2023, 10:14 AM)dken31 Wrote: [ -> ]Are we all greedy for wanting to be able to choose what we do with as much of our money as possible?

Yes, you are. And it is foolish to ignore the social contract by which we all expect the state to pay for education, health care, police, welfare, transport infrastructure etc, and in return we pay taxes. Would you really like to live in a society without these things?

It does seem that they are trying to get that 'taxing capital gains' in the spotlight by spinning it a bit towards the lost tax revenue from 'income' argument, as against the gain in asset value...

On the whole i'm not opposed to a CGT - is it normally applied on an annual basis or just on disposal of the asset? the former would seem impractical as you would potentially have to sell an asset to pay the CGT, and what if value declined...

Life isn't fair.

I had the choice a few decades back of accepting an ACC payout in a lump sum rather than as a weekly thing. I took the lump thinking I could pay off the mortgage and be independent of that particular government entity. It was a very tempting thought. So I did, and paid out a huge wad of it to IRD because they classed it as income earned in one year and hit me with the top tax bracket.

I still swing between retrospectively thinking it a stupid decision or a wise one. The financial penalty was rough, but getting out from under ACC and all that baggage - that was such a huge relief.

Life isn't fair, but then - not everything is about money.

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(27-04-2023, 10:25 AM)Olive Wrote: [ -> ]

(27-04-2023, 10:14 AM)dken31 Wrote: [ -> ]Are we all greedy for wanting to be able to choose what we do with as much of our money as possible?

Yes, you are.  And it is foolish to ignore the social contract by which we all expect the state to pay for education, health care, police, welfare, transport infrastructure etc, and in return we pay taxes.  Would you really like to live in a society without these things?

America. Land of the free...

Which reminds me of a bit of the latest episode of Succession where a character was ripping into the welfare state system that most civilised nations have but America doesn't. The episode was worth it for that tiny piece alone...

(27-04-2023, 10:14 AM)dken31 Wrote: [ -> ]Another scenario to add to the "why fairness can never be objectively defined):

I've two friends who were earning around $300K each.  Tax on $300K is $97K.  Last year, one of the two decided to take a career "gap year" and just lived off savings/overdraft for the whole year, so he didn't pay any income tax at all (he probably paid a small amount on his investment income, but it would have been less than $1K all up).  They both still used public services, their kids went to school, doctor etc. and yet one contributed $97K in income tax and the other next to nothing; is it fair that the those that choose to work have to subsidise the ones that chooses not to?

on that one I would say fairness doesn't come into it.  The 'fairness' aspect is only taken into account during the policy setting phase.  After that the only criteria considered are the current tax rules... 

the friend having a gap year will be paying a share of taxes in GST anyway...

---

Edit:
and I guess the other point is, the friend will only get away with not working for so long before he runs out of money, reduced quality of life, frugal spending etc - so from that POV it could be considered 'fair'

and I feel there is a problem in your argument when you use the word "subsidise " - subsidising implies the entitlements of one directly affects the liabilities of another, which is just not the case. With taxation policy you are either liable or not - with government subsidies you are either entitled or not - the actions, entitlements or liabilities of any other individual has no bearing...

There can be a shade of defensiveness in posts on threads like these when fairness becomes a major argument. Sometimes fairness is in the eye of the beholder, and be seen very differently by different points of view. The couple who choose to work their arses off and acquire wealth justifiably argue that that wealth is a fair reward and they cannot be compared to the other couple who choose to live their lives with different aims achieving different rewards. This is why I do not think fairness is the best measure when it comes to providing the stuff of life that human beings are entitled to, in a society as wealthy as ours.

Rather than invest time, energy, and political capital in closing every tax loophole we can identify (a game akin to whackamole?) I think we should focus on housing people, mending our health system, and educating our children and above all else preparing for a future that grows more threatening by the day. And yes, we need the tax income to do that, but will we gain enough from rejigging the system to make it a worthwhile exercise, or would we make more from improving productivity, future proofing ourselves from predicted disasters, and building resilience in our children?

Forget fairness, let's focus on making real life better for those who need the help.

The reporters seem to be confusing the concepts of income and economic wealth. I looked for and found the source document at https://www.ird.govt.nz/-/media/project/...0423203807.

At 155 pages I don't plan to read the whole thing. Luckily there is also a summary at https://www.ird.govt.nz/-/media/project/...0420234159.

We currently have income tax that people on PAYE can't wriggle out of but those with trusts and "charities" etc can and often do manipulate for their gain. Loopholes that can and should be plugged. When churches and the like are giving money to the needy within their organisations, fine. But when they run huge businesses, compete with legitimate tax-paying entities and keep all the benefit to those at the top, they should not be able to run under tax-free charity status. That's a huge tax loophole that should be plugged.

We have GST which means that those with plenty of money pay more of it when they buy expensive items which they can afford to do. Those with less money will overall buy less and therefore pay less tax. That brings in an element of fairness.

We used to have inheritance and gift tax. They ended in 1993 and 2011. Maybe both should be looked at again within the overall picture. The gift tax system was at the time getting in the way of people's desires to set up family trusts etc. That's a whole picture that could do with a review.

We don't have capital gains tax (yet). That would bring in revenue when assets are sold but only when they are sold. That wouldn't affect most investors who by definition invest and don't trade. Some of course do sell assets from time to time. Sometimes when they need cash, or maybe to reduce or eliminate debt. Everyone makes a big deal about CGT but I really don't see it doing much. And if it does come in, how do you account for it and what assets qualify? Some assets increase in value over time with "corrections" like we hare getting now for property. Others can be up and down with a great deal of volatility - eg sharemarket. Some assets are reliably income producing, although often not as much as people think. Others can also be very volatile. If we continue to take income tax as we do now, everyone pays according to what they have received. And IR should start with getting the tax off those who should be paying it under existing rules. There was never a need for the "bright line" rule. Income was always due on the sale of property that was purchased with that intention. No ten-year rules. No ifs and buts. If an asset was purchased to sell at a profit, the profit is taxable. But IR doesn't bother.

The concept of "wealth" tax is very difficult. How do you value something that is volatile? And how do people pay when their return on investment is very low. Assets with high ROI are likely to be those that are volatile and people will already be paying income tax when they are getting good income. To have to pay tax when you don't have income isn't really fair is it? And how would IR account for periods when assets reduce in value. Like property at present. Rented property provides an income tax stream whatever the value of the property. Under a wealth tax scenario last year would have been a higher earner for IR but would likely have put people out of the business, or at least would have forced rents up. This year with values dropping, would IR pay the difference back to the taxpayers? I think not.

Overall, whatever happens next needs to be thought through very carefully to ensure it doesn't just create more problems than it solves. Like forcing mid-level asset-owners out of their holdings so that those at the top just end up with more than ever.

Overall, we need a system that provides sufficient public revenue to give us decent health, education, roading and social systems. The way that it is structured needs to be fair to everyone. People need to be able to afford their tax obligations and the rich philanthropists and innovators need to be able to do what they do for society, each in their own way. We need the Elon Musks and Richard Bransons to continue their endeavours in the areas where they are expert. NZers need to have incentives to give to society in ways that are not just part of the tax take.

We also need to be clear about what "greed" actually is. Yes, some of the super-rich got that way from greed. But not all by any means. Many people do a great deal for society without feeling the need to stand up and shout about it. There are also many beneficiaries who don't actually need the benefits they stay on forever. Benefits are a helping hand up for those who have struck hard times. Those who need help permanently should get it, but those who can turn themselves around and become self-supporting again should do so, and at the moment so many don't. We have a huge problem because people who should be working won't, and we now depend on imported labour.

We need a tax system that is fair, rewards those who work, looks after those who need looking after, and can provide the collective benefit necessary to give us the services we all use every day.

(27-04-2023, 11:36 AM)Oh_hunnihunni Wrote: [ -> ]There can be a shade of defensiveness in posts on threads like these when fairness becomes a major argument. Sometimes fairness is in the eye of the beholder, and be seen very differently by different points of view. The couple who choose to work their arses off and acquire wealth justifiably argue that that wealth is a fair reward and  they cannot be compared to the other couple who choose to live their lives with different aims achieving different rewards. This is why I do not think fairness is the best measure when it comes to providing the stuff of life that human beings are entitled to, in a society as wealthy as ours.

Rather than invest time, energy, and political capital in closing every tax loophole we can identify (a game akin to whackamole?) I think we should focus on housing people, mending our health system, and educating our children and above all else preparing for a future that grows more threatening by the day. And yes, we need the tax income to do that, but will we gain enough from rejigging the system to make it a worthwhile exercise, or would we make more from improving productivity, future proofing ourselves from predicted disasters, and building resilience in our children?

Forget fairness, let's focus on making real life better for those who need the help.

I quite like sleeping at night as do most of us, & for quite a few of us that would become more difficult if  things were to become far worse for those worst off.
It isn't a healthy society when there's such a wide gap between rich & poor & that does need to change, because if it doesn't then it will in time lead to something no one wants  - revolution.

It might not be such a dreadful idea if we were a lot less concerned with owning the latest flash gadget & more concerned with the well being of our fellow Kiwis, so I agree with regard to housing, health & education - imagine the enormous difference that would make if it became a priority for EVERY govt here. Sadly, I suspect that some govts would have to be obliged to do that.

(26-04-2023, 09:15 PM)Oh_hunnihunni Wrote: [ -> ]Don't hold your breath waiting for a change. We've known about this for decades and nothing has been done to change it. And nothing will...

Changes to laws depend on the legal profession, who definitely do not profess to be in favour of themselves having to pay more tax, simplifying the law or reducing their billable hours in the slightest degree.
"There's no facet of human misery that lawyers cant make a good living from."  Tax payments qualify as vigorously generating misery, so the profession will not at all  be in favour of fairness, transparency or simplicity in tax collection.
They are more likely to propose a Royal Commission, so-called because the taxpayers will pay a King's Ransom for the endless rort.

Agreed R2x1.

(27-04-2023, 03:18 PM)R2x1 Wrote: [ -> ]

(26-04-2023, 09:15 PM)Oh_hunnihunni Wrote: [ -> ]Don't hold your breath waiting for a change. We've known about this for decades and nothing has been done to change it. And nothing will...

Changes to laws depend on the legal profession, who definitely do not profess to be in favour of themselves having to pay more tax, simplifying the law or reducing their billable hours in the slightest degree.
"There's no facet of human misery that lawyers cant make a good living from."  Tax payments qualify as vigorously generating misery, so the profession will not at all  be in favour of fairness, transparency or simplicity in tax collection.
They are more likely to propose a Royal Commission, so-called because the taxpayers will pay a King's Ransom for the endless rort.

Could we not just triple tax lawyers?

The two who live next door to me have just spent 18 months renovating their property - including putting in a forty foot pool - and the builders are still in there. 

Mind you, they have two screaming ill disciplined brats and an equally ill disciplined border collie so perhaps the builders are actually the better option...

(28-04-2023, 10:28 AM)Oh_hunnihunni Wrote: [ -> ]

(27-04-2023, 03:18 PM)R2x1 Wrote: [ -> ]Changes to laws depend on the legal profession, who definitely do not profess to be in favour of themselves having to pay more tax, simplifying the law or reducing their billable hours in the slightest degree.
"There's no facet of human misery that lawyers cant make a good living from."  Tax payments qualify as vigorously generating misery, so the profession will not at all  be in favour of fairness, transparency or simplicity in tax collection.
They are more likely to propose a Royal Commission, so-called because the taxpayers will pay a King's Ransom for the endless rort.

Could we not just triple tax lawyers?

The two who live next door to me have just spent 18 months renovating their property - including putting in a forty foot pool - and the builders are still in there. 

Mind you, they have two screaming ill disciplined brats and an equally ill disciplined border collie so perhaps the builders are actually the better option...

Perhaps they cancel each other out....