while I agree that it's nominally a tax on the employer think of it this way - if you quit your job at employer A and are not replaced and take up a job at employer B at the same salary - employer A will pay an amount less proportional to your salary and employer B will pay an equal amount more - in that sense it works the same as normal income tax - it's just calculated BEFORE your gross income rather than after so that it looks on your pay stub like you're paying less tax
It's also a flat tax so it's regressive in that sense - but then the Aussie base rate is lower so they make it up a bit there - you end up with a higher lowest tax rate ~17.5% compared to the NZ 15% and a top tax rate of ~50% compared to the NZ 39% - I bet there's an industry somewhere there converting executive perks into stuff that isn't 'payroll'
Paul - I think that if you are going to be intellectually honest (ha! when did we start demanding that of our politicians ....) and you make a statement like "Australian taxes are lower than NZ ones" you have to compare the same things - you can't leave out the cost of funding Aussie state govt if that pays for stuff that's funded in NZ by income tax (same with health if it's done with an extra tax)
On the other hand I'm well aware that anything you do in this area is going to be an approximation because stuff doesn't always work the same - I think you do your best to get things as close as you can and explain where the differences are
At least it's relatively easy for NZ vs Oz - try doing the US where not only are there 50 different states with 50 different ways of raising funds (Alaska taxes oil, makes a profit and pays some of it a rebate to its citizens, Nevada gambling and prostitution, California its citizens etc) but there are so many different tax writeoffs you can't blindly compare tax tables (all your mortgage interest for example, your ACC payments, registering your car .....)
I agree that if your boss stopped paying state payroll tax you might not see that as a pay increase - but there's a reason that's an ongoing argument between unions and bosses in Oz whenever the state changes the rates - exactly that
Couldn't figure out how to download Keith's underlying spread sheet - but I crunched some numbers for some other ways of looking at the Aussie taxes - below 'Fed:' is the base rate, the second includes the 1.5% medicare (since our taxes also include healthcare - I'm assuming that this is a flat tax) then on top of that I've tried to factor in state taxes (assuming everyone pays it - as mentioned above that's not true) - the numbers I get are:
Fed: 12.3 30 40
With medicare 1.5%:13.8 31.5 41.5
NSW (6%): 19.1 35.8 45.2
Vic (5%): 18.2 35.1 44.6
mentally plugging the Vic numbers into Keith's graph shows higher taxes than the current scheme (Keith's blue line) at almost all points except maybe a tiny bit around $30-40k - taxes there are higher than both Labour and National's schemes
As I understand it it's a bit more like kiwisaver so I'd guess no.
On the other hand the 6% US Social Security I paid into for 20 years is basically lost to me unless some day I move back there. However if I die my (American) wife can claim it ..... let's not give her any ideas ....
how you probably ought to represent it is probably less than that simple - to compare apples and apples probably you inflate people's income by the payroll tax amount which actually reduces the percentage of Federal tax that's paid (because it's a tax on the net after payroll tax)
Also Aussie states only tax payrolls above some limit (say $500k) so very small businesses don't pay it - probably you should deflate the N% by some factor to that that into account
But I agree the "Aussie taxes are so much lower" meme is a bit of a crock because you aren't comparing the same things (when I lived in the US I paid a 33% marginal tax rate - lower than NZ's 39% you might think until you add in the California 10% state tax and 6% Social Security tax - gotta fund those wars ....)
(6% NSW, WA 5.5%, QLD 4.75%, Tas 5.25%)
one comment - the Australian tax rates you show are only the federal rates - as I understand it Aussie state taxes are paid as a payroll tax (your employer pays it at a fixed rate on their payroll effectively lowering you gross pay by that amount) - for example in Victoria you would have already paid ~5% before your gross was calculated (and before the federal tax was taken out)
Comparing Aussie federal tax rates (or US ones for that matter) with NZ ones is comparing apples and oranges
great post - I particularly like the graph, it explains a lot without much cruft.
"Fiscal drag" is nothing new - I remember people moaning about Muldoon relying on it to make his budget .... it's something that almost every western government (left or right, National or Labour) has depended on to quietly up their tax rates, make the budget balance more easily, or so that they can periodically announce a 'tax decrease' - if they didn't all depend on it someone would have passed a law linking tax brackets to an inflation index
Craig - I was being a little tongue-in-cheek - but I do think one of the great unintended consequences of MMP was that it really did shake the parties up in a way that kind of undid a lifetime of politics and gave people who's politics had changed since they'd entered parliament, and who's personal ideas maybe no longer really represented those who were electing them license to cross the floor and find a place where they were happy
I'm not suggestion that we should necessarily have change for change's sake in the way we elect our representatives - personally I think that we should always be striving for something that represents and many of us as it can - not just the dualing moneyed elites of the american system or the hunkered down farmers vs workers of our old system still re-fighting the waterfont strike - but (for all I hate him and his racism) Winston sucking up to the pensioners, the Greens with their supporters, ACT with theirs - I want to see that Legalise Cannabis representing the stoners debating Jim Anderton on the house floor etc etc
But somehow having something that shakes things up in a big way is probably a good way to get some fresh ideas and faces into the place - as I said once every 30 years would be OK by me doesn't have to be tomorrow
while I'm a big fan of MMP I do see value in 'turning over the electoral system', maybe every generation - 30 years or so
Think about Roger Douglas and Marilyn Waring (and many others) - people who got into parliament with one set of ideas and eventually found themselves with different ideas from the people they were with - they were in a position to make a difference but not with their ideas - when MMP came the cards got reshuffled and redealt and everyone got a chance to join a new party
While the current MMP still makes that much easier than FPP you can see the number of small parties slowly dwindling - I thing we're losing or going to lose that diversity of opinion and ideas that are important to have in parliament - I think that the 5% threshold is making it harder for new smaller groups to rise up and get representation - why shouldn't Destiny have a seat if they have the backing or Act or the Brethren or the Socialist Workers or ...
(and to completely change the subject and because I just have to tell someone I must announce that the tui sitting on the tree right outside my window is singing the most amazing song ....)