The problems with the current tax system

The Herald takes a look at the tax system:

The most significant problems facing the tax system can be simplified as follows:

The mobility of the tax base: New Zealand is heavily reliant on both its corporate tax take and on the personal taxation of high-income earners representing a low percentage of the total workforce. Companies have the third-highest tax burden in the OECD (measuring tax revenue as a percentage of GDP), and the Treasury is still concerned the company tax rate is among the highest in the smaller OECD economies.

The burden of personal tax is also high, with New Zealand again the third-highest in the OECD in percentage terms. In the 2009 Budget the top 1 per cent of taxpayers pay 15 per cent of the tax, while the top 3 per cent pay 26 per cent. It is not known if these high effective rates of tax contribute to our having the highest diaspora (population of New Zealand-born expatriates) of skilled workers in the OECD, but highly skilled people are mobile and sought after in the global economy.

Taxes that damage economic growth: A related problem to our high taxation of business (in particular company) and personal income taxes is that, according to the Treasury, there is growing evidence these types of taxation are bad for productivity and the most negative for growth.

An concise summary. Labour will wail if the top tax rate is dropped that this is giving tax cuts to millionaires, but tax reform is not about redistributing income, as much as it is about better economic growth so everyone does better. Plus as the Herald reports NZ is dangerously reliant on what Cullen calls the rich pricks.