Not a startling revelation

Simon Wilson takes time off from defending Phil Goff to defend the Government. He reports:

And in a startling revelation, the ministers claim that the wealthier a household is, the more it is likely to pay for petrol. They say the wealthiest 10 per cent of households will pay $7.71 per week more for petrol. Those with the lowest incomes will pay $3.64 a week more.

This is a complete reversal of the most common complaint about fuel taxes, which is that they are “regressive”. That means, the critics say, they affect poor people more than wealthy people.

The data is not a reversal of the complaint about the fuel tax. In fact it proves the complaint.  Let’s look at the definition of regressive:

(of a tax) taking a proportionally greater amount from those on lower incomes.

The argument isn’t that lower income households spend more on petrol than higher income households. The argument is that a greater percentage of their income goes on petrol.

For almost every commodity and service (except tobacco) a higher income household consumes more of it, than lower income households.

In the first year, the average increase for Aucklanders, who will pay both taxes, is $3.80 per week. Decile 1 Aucklanders will pay on average $2.40, for decile 5 the average will be $3.75 and for decile 10 it will be $5.08.

Now let’s look at the average incomes for each decile

• Decile 1 – under $23,900
• Decile 5 – $64,400 to $80,199
• Decile 10 – over $188,900

So the extra fuel tax as a percentage of income is:

• Decile 1: 0.52%
• Decile 5: 0.27%
• Decile 10: 0.14%

So the article proves the exact opposite of what it claims – that the increase in fuel tax is regressive as it hits lower income households more.

Sad to see the Herald regurgitate Government spin without any critical analysis.

Also some good analysis from Econmissive on Twitter where he points out the data released by the Government includes households that don’t even have a car and what matters is how much households with cars pay.