Tax
The Dom Post reports:
Prime Minister John Key is urging Kiwis not to be jealous if the rich get more from Thursday’s Budget tax package – because the rich are crucial to the economy.
The top 10% of taxpayers pay 76% of net taxation. Yes 10% pay 76% and 90% pay 24%.
But it is expected to deliver little more than $6 a week extra to low and middle-income earners as across-the-board personal tax cuts are clawed back by a rise to 15 per cent in GST and extra tax from property investors.
Once again – the tax changes are not about redistribution. They are about changing the incentives so there are greater incentives to work, save and invest overall and less of an incentive to invest in property beyond your own home.
Those earning more than $500,000 a year would get a $481-a-week tax cut, and even taking into account their extra GST payments, they will be more than $300 a week better off.
Why choose $500,000 a year – a salary level probably 50 people are on? Why not $800,000 or $1.2 million a year if you really want to get the envy going.
Anyway, some facts:
- The higher the tax rates, the more it will be (legally) avoided. Hence why only half of the wealthiest 100 NZers are even paying the top tax rate. That NZer on $500K a year may in fact end up losing money through the tax package if his or her income comes through a trust at 33%, as they will have extra GST to pay and no reduction in trust tax.
- Those who will be hardest hit are those owning multiple residential investment properties. These are not low income people. They will be people in the top tax brackets. They will end up paying more tax overall.
- Someone on $500,000 a year will still be paying almost $160,000 in income tax and $25,000 in GST. If they shift to Australia that is $165,000 less tax available to fund welfare etc.