Cracker: Another Capital Idea...
285 Responses
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giovanni tiso, in reply to
I don’t see anything fair about that.
You also don't see any of that in the law. And this is coming from somebody who would like our CGT to be a lot more aggressive than what Labour is proposing.
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Rik, in reply to
3. The “net” part is net of benefits paid or tax credits given, which appears to be unemployment benefit etc, super (don’t forget superannuation is the biggest benefit going, why does Farrar hate the old?), WFF, etc. As if we don’t all get major benefits from living in a stable state with a nationalised healthcare system, free education, maintained roads, yadda yadda. Farrar omits all the things paid out of taxes that high earners benefit from too. Wow, I wonder why.
I had been wondering about the "net" thing and whether it had featured in some of Keith Ng's figures referenced previously. And then I too thought about the "shared benefits" that we all get (the Holiday Highway!). Given that it is all a bit of a money-go-round it probably makes sense to factor benefits in alongside taxes paid but maybe there needs to also be some mention of the shared components - maybe thats where the nearly $11bil left over in the graphic comes into it.
And then there seems to be some sort of a weird "add up all the benefits paid to families with incomes under $50,000 and then subtract that from those next up the scale and that only leaves those at the top paying any tax" take on it. Seems to me any family earning over $50 is making a contribution. Which is good.
With regard to CGT I did hear something on talkback (yes, I know, talkback) where some property expert from the University of Auckland reckoned that all it would do is drive up rents. Which you would think would make renters go and buy a house instead but apparently due to high rents they would not be able to save a deposit and therefore would be stuck with high rents forever. Or something like that.
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Rik, in reply to
I expect I need some of that advice. I can’t talk to anyone else’s reasons for being in this position, but I’ve been in the top tax bracket for the longest time and don’t have much of a fortune to show for it, other than whatever value my house has risen by in the last 8 years, and the deposit.
Thanks for restoring my faith in PAS Ben. This is the sort of discussion I had been hoping for when I brought this up in this thread and another a few months back - there's these references made to "rich pricks" and people earning "shitloads" and everyone seems to have a different idea of where to set the bar for these.
I guess if you have only ever earned bugger all earning over $100k might seem like shitloads, whereas if you are a family earning $100k you might be wondering how to make ends meet.
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Islander, in reply to
Rik, I've earned both - shitloads and - for the past ten years - less than the average beneficiary earns.
In the shitloads years, I paid maximum tax (over $106,000 in the best 2 years.) But it's been financially downhill ever since.
I have no resentment whatsoever for paying a high tax rate when I was earning high - that should be absolutely the case for high earners. And I find some of the whining going on - not on this site! - along the lines of "But we contribute so much more than just taxes dahling!"
sickening. -
giovanni tiso, in reply to
whereas if you are a family earning $100k you might be wondering how to make ends meet.
Once again: not on the planet I live on. Seriously, the only way a household on a 100k income struggles is if they don’t budget effectively. And if they don’t even bother to budget, I’m not sure why I should be sympathetic. We certainly hammer beneficiaries when they fail to practice that particular skill.
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What Gio said. I fear that a lot of people in the >100K area have either not acquired the money management skills of previous generations, or have inflated ideas of what a normal standard of living is.
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My wondering how to make ends meet is most likely in quite a different ball park to the concerns of people on less income. Yes, I seldom have to worry about whether we'll be able to eat, but several times I've been in the position of waiting a very long time to get paid, and facing huge tax bills at the same time. I'm quite looking forward to being PAYE again...if that's how my current job hunt pans out. That's actually worth quite a substantial pay cut, not to go through that shit again.
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Rik, in reply to
I agree Islander - my income hasn't changed all that much over the years, but back in the day it seemed like a fortune. My only resentment is not the taxes I paid but the amount of money I squandered. I eventually figured out - the less you spend, the less you have to earn. But then I had kids!
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BenWilson, in reply to
either not acquired the money management skills of previous generations, or have inflated ideas of what a normal standard of living is.
The former, in my case, I think. For the latter, I don't think owning a slightly-too-small property in a low income suburb is "inflated". It was well within the means of even poor people of my parents generation. Some of it is also the obsession with property that I fell for too. If I'd just rented and saved money, I'm pretty sure I'd be better off, certainly I'd feel that I had more options.
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Islander, in reply to
I didnt have kids Rik - just family!
Whom I could help & so I did. -
Rik, in reply to
OK, help me out here. Let's say you have a family of two adults and two kids (I'm going to loosely base this on my own situation but I am tweaking the numbers a bit so don't think what I am describing is my "lot" in life) and one of the adults earns $70k and the other earns $30k working 3 days a week. After tax that $70k is $55,980 and the $30k is $25,730 so the after tax income is $81,710. Sounds like a fortune, Im sure.
Now let's throw some expenses into the mix as follows:
Mortgage $25,000.00
Council Rates $3,300.00
Water Rates $500.00
House Insure $500.00
Contents Insure $500.00
Health Insure $1,800.00
Car 1 Insure $700.00
Car 2 Insure $600.00
Car x 2 rego $580.00
Annual fuel x 2 cars $9,000.00
Accounting fees $2,500.00
ACC levies $2,000.00
2 x kids 3 days week childcare $12,000.00
Annual Food bill ($200/week) $10,400.00
Annual Power $3,000.00
Annual Phone/Internet $1,200.00
Total $73,580.00We ate into that $81,710 pretty quick. And that's just the basic expenses - it doesn't take into consideration doctors visits (pretty frequent with kids - and no community services cards for us "rich pricks"), insulating the house (man, what I would give to have a toasty warm house), firewood, clothing.
On a weekly basis that $81,700 works out to $1,571.35 and the expenses work out to $1,415.00 leaving a princely $156.35 left over each week. Which could easily be eaten up in interest rate increases coming later in the year.
OK - some of the expenses are tax deductible - accounting fees, some of the fuel, some of the phone and internet. The ACC levies are not tax deductible but you can get the GST back on them. That still does not leave a huge amount of fat.
So help me out with my "rich prick" lifestyle. Like one of the ever-so-helpful posters said earlier - cut back on the beluga. Oh yeah - he was as funny as fuck.
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Emma Hart, in reply to
For the latter, I don’t think owning a slightly-too-small property in a low income suburb is “inflated”. It was well within the means of even poor people of my parents generation.
It was within my mother's means only because in the 70s the govt offered 3% mortgages...
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giovanni tiso, in reply to
So help me out with my “rich prick” lifestyle. Like one of the ever-so-helpful posters said earlier – cut back on the beluga. Oh yeah – he was as funny as fuck.
Yes, that would be me. Off the top of my head I'd cut the health insurance, seeing as the state provides that. I'd also ask myself if I really need an accountant. And you're spending 12,000 in childcare with a parent home two days a week? We have three kids and the most we've ever spent was $3,000 a year. And 9k in fuel alone?! Our car expenditure (one car) is less than 4k including WOF and registration. You trim some of that, which frankly shouldn't be very hard, catch the odd bus, and you're fine. I'd also assume that not all of the 25k for the mortgage is interest, some of it must be principal, surely, so while all of that money is outgoing, not all of it is an actual expenditure. And you're not going to have such a high mortgage or two preschoolers for very long - in fact I assume yours are both under 3, since after 3 they get most of their childcare for free.
But the example is completely misleading, anyway, since nobody here has ever talked about people who just reach the current top tax rate as being "rich pricks", in fact exactly the opposite: we've said that people on 70k a year _shouldn't__ be on the top tax rate. And even if you tweaked the example to a household with one earner on 100k and the other partner not working, then taxation is higher but some of those expenses disappear or are significantly reduced. So you're still fine. And it's still hard to know what you're on about to be honest.
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I don’t think owning a slightly-too-small property in a low income suburb is “inflated”. It was well within the means of even poor people of my parents generation.
Two things have happened. First, there’s more than 30% more people here than when I was born (1970). A house of the same standard, if we include garden area, is much more sought after than when my parents were buying. And then we’ve had a property bubble that is yet to fully deflate. Affordability has improved, but is still well above the historic average. So yeah, I guess your dreams (and mine) aren’t unreasonable, but the price we have to pay to achieve them relative to our incomes is genuinely higher than we might think if parity with our parents is our measure.
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Kumara Republic, in reply to
@Rik: it'd make sense for the top tax bracket to be raised, but only if it kicks in at six figures (individual, not combined income).
Just to clear a few things up, are the cars merely for getting from A to B (where a 4-cylinder motor would suffice), or do they carry/tow big loads?
A big part of the problem with housing prices is that those calling for relaxation of metro limits, like Hugh Pavletich, aren't interested in 'affordable housing' (which Ian Cassels is nobly looking into). They're more interested in developing plasticky McMansions for one-child families, and speculating on them. Shoebox apartment developers are equally guilty, and unfortunately they've given high-density living a bad rap, when it should be part of the solution. Both are side effects of what is effectively a cartellised housing market. Which is where a CGT might just come in.
Alluding to the original thread, McMansions are the Hummers of housing, shoeboxes are Ladas, state housing is typically British Leyland, and one has to look hard for Toyotas.
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Rik, in reply to
Thanks for your feedback. Let me address some of your points.
Off the top of my head I’d cut the health insurance, seeing as the state provides that. OK - you just shaved $1,800 off my expenses.
I’d also ask myself if I really need an accountant. Yes I do - for a start they are one of my customers and for another I don't know the first thing about accounting so I give them all my invoices/receipts/expenses and they sort the rest out. So you lose on this one - I need an accountant. As does my self employed wife (the figure I quoted was for both of our accountants).
And you’re spending 12,000 in childcare with a parent home two days a week? We have three kids and the most we’ve ever spent was $3,000 a year. Yes we are. And we were lucky to find a place that would take our kids so that my wife could work. And all of the places in our neighbourhood were this price. One of the kids gets ECE, the other does not. Once again - you lose.
And 9k in fuel alone?! Our car expenditure (one car) is less than 4k including WOF and registration. You trim some of that, which frankly shouldn’t be very hard, catch the odd bus, and you’re fine. Wrong again - I drop the kids off to daycare three days a week - that would be tricky on the bus - and then head off to work. My work does involve quite a bit of driving around customers so yeah, I chew a bit of gas up. Like it said - it's tax deductible. My wife has to travel across the bridge three days a week and she would be on a couple of different buses to get there, also she does the pickups in the afternoons which again would be difficult via bus.
I’d also assume that not all of the 25k for the mortgage is interest, some of it must be principal, surely, so while all of that money is outgoing, not all of it is an actual expenditure. What's your point - it's still an after tax outgoing, whether a small component could be considered an "investment" or not. And who is to say that in my example it wasn't an interest only loan?
And you’re not going to have such a high mortgage or two preschoolers for very long – in fact I assume yours are both under 3, since after 3 they get most of their childcare for free. Wrong - between 3-5 even with ECE one kids costs $4,200 for 3 days a week. And that is short days - full days are more expensive. So yeah - when our little one turns 3 our childcare will drop to $8,400/year so we save $4k. But this example was about here and now, this point was irrelevant. But you did sound a lot like my dad on that one. Only his tone would have been warmer.
But the example is completely misleading, anyway, since nobody here has ever talked about people who just reach the current top tax rate as being “rich pricks”, in fact exactly the opposite: we’ve said that people on 70k a year _shouldn’t__ be on the top tax rate. And even if you tweaked the example to a household with one earner on 100k and the other partner not working, then taxation is higher but some of those expenses disappear or are significantly reduced. So you’re still fine. And it’s still hard to know what you’re on about to be honest. The example is not at all misleading - it is pretty accurate for many families (I know some in a far worse situation than the one I describe). There have definitely been "rich prick" comments made about those who earn $100k+ - and here's a $100k example for you. And you know what - you only managed to shave off $1,800! I'm glad I am not paying you for this amazing budgeting advice.
@DeepRed - thanks for taking the time to ask for clarification on a couple of points - you will see I have addressed your queries in my response (above). It is so refreshing to have a poster who stops and think before they post a response full of assumptions. Although - I have to confess one of the cars is a rather large 6 cylinder SUV which I use to drop the boat into the water at the beach in front of our house. The fuel bills are starting to become a drain though so I am looking to downsize (on the advice of a professional budgeting advisor). I agree with you - Labours idea of setting the top tax rate back to 39c in the dollar kicking in at $150k is a good one (in my very humble opinion). I don't think anyone (even me) could argue that when you're earning $150k+ you can probably afford to pay a little more tax. However in my experience people who earn that sort of money usually end up paying very little tax, one way or another.
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Islander, in reply to
However in my experience people who earn that sort of money usually end up paying very little tax, one way or another.
Not in my personal experience at all, actually- mind you, this was in the late 1980s/1990s
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giovanni tiso, in reply to
So you lose on this one – I need an accountant. As does my self employed wife (the figure I quoted was for both of our accountants).
My partner and I are both self-employed and guess what – we do our own accounting. We had to learn, so we learned. We made do with one car. We went to playcentre for a while to save on childcare. You find ways around things. And you’re describing a very particular situation: family with good jobs, two preschoolers and a very big mortgage. A family like that might “struggle” for a while. But then over time the mortgage is reduced, and the kids start school, and the lean times, such as they were, go away. And you’ve got a pretty good house (judging by the rates) in a good suburb (judging by the cost of childcare) to show for it. That’s too hard for you? Then buy a smaller house, or rent for a while longer, or live a bit further from the centre of town. But if three times the country’s median household income is not enough for you [ETA: okay, scratch that, wikipedia data all wrong - median household looks to be over 50k. Still.], then spare a thought for your fellow citizens, and consider that maybe you still need to share with them in your relative riches.
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Sacha, in reply to
Rik the quote tags on this site (explained below the comment box) would make your post much easier to read. And if you highlight some text before you click the Reply button, the text is automatically quoted and inserted into the Comment box for you.
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Sacha, in reply to
There have definitely been "rich prick" comments made about those who earn $100k+
Where? And aren't you conflating individual with household income in any case?
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Stephen Judd, in reply to
I don’t know the first thing about accounting
I honestly think that if you’re self-employed, that is a bad position to be in. Apart from saving the fees, you can’t evaluate whether your accountant is any good. You’re in business now, and that means you really need to know this stuff. When I was contracting, I paid an accountant (less than you) to deal with my income tax, but on any given day I could have run the numbers myself. At that time, by the way, the accountant was a luxury I could afford, given that I was making rather more than you two.
I’d also wonder at the extent to which your various vehicle, insurance and housing expenses ought to be claimed. Do you have a home office? A mobile phone for business? How much of your expenses are business expenses? This could make a big difference to your bottom line. Your example actually is much more complicated and vague than one for a salaried person paying PAYE, since it’s impossible to tell what your net income is or your personal vs business expenses. I appreciate that you’re obfuscating for privacy reasons, but I do hope you personally have a better handle on this than shown in the example.
You seem to be doing a great job on food costs. No criticism there, in fact I’d like to know how you manage.
Given the cost of childcare and travel there and back, are you actually paying for the privilege of both of you working?
It’s very hard to assess how much fat you have without further clarification. I do agree that it seems like there isn’t much left over as you lay it out. I’m sorry it’s hard to make concrete suggestions without asking intrusive questions. There may only be 1800 of obvious suggestions, but there isn’t enough detail provided to say otherwise. At any rate, if 1800 doesn’t matter to you, you can give it to me.
Incidentally, Google tells me there has been exactly one “rich prick” observation in this thread before our present exchange, by Damian, here, in what I would call a jocular tone.
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Rik, in reply to
I'm sure I could get my head around accounting if I needed to - but like I said, they are a customer and we each do a bit of work for each other. Sometimes it pays not to rock the boat.
I do have an amazing house and like I said - the figures I quoted were not mine. So I don't really need to look at making any changes, aside from a possible downsize on the car (but I still need AWD for the beach boat launching, as the sand is sometimes a bit soft at low tide). As I also said - I do know people who are not a million miles from what I described (some better, some worse) and the whole point of my post (which I now realise I neglected to address in response to your "what's you point" query) was this:
Earlier on I posted the following:
I know plenty of people who earn +/- $100k and they are by no means rich or earning shit loads. With a mortgage and a couple of kids you need to be pretty good at budgeting to make ends meet
(ooo Look Sacha - I dooooo know how to use the quote tags! Not bad for an IT guy, huh?!)
And you responded thus:
These people can’t be living in the same country in which I live. Either that, or feel free to send them to me for budgeting advice.
I’d start with cutting down on the Beluga. I know, it’s rough.
I had forgotten it was you who made the (ever so funny) crack about Beluga.
So I painted a picture and came to you for budgeting advice and you did not deliver. Even if we take out the accounting fees as well as the health insurance (hey - once again, you don't know if I have an underlying medical condition for which my HCP advised that I take out healthcare) the situation is still not looking too pretty. It's a bit like Ben said - you're not out-on-the-street poor but you are not rolling in it with a household income of $100k.
And as I said in my original post - I don't know how people on much less than that get by. Obviously - they just go without. Or - as the graphic (http://networkedblogs.com/knlaH) makes clear - some benefits come in to play. Which is a good thing - that's what they are there for.
So what's my point? I'm starting to wonder myself...but basically PAS is a great place but sometimes the conversation gets a bit one-sided and seems to be looked at from only one perspective eg. "let's tax the rich". What I have asked in the past (and got nowhere with) is what is the definition of rich? Who decides? It's no good looking at an equation and only taking one point of view into consideration. Don't just think about those on benefits - think about those on middle incomes and high incomes as well. Everyone should have a say. But really - let's not jump down peoples throats when they make a post that, at first glance, doesn't seem to match with your personal viewpoint or philosophy.
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Rik, seems like you think that taxing the rich means taxing you, but on the other hand you don't think you are rich. Which implies that you think other people have a lower threshold for "rich" than you do. Yes?
Personally, I think being rich is more about having enough assets to live off your savings for an extended period, than having a high income, but that seems to be an uncommon view.
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Rik, in reply to
but on any given day I could have run the numbers myself
Thanks Stephen - I appreciate your thoughts. Actually I may have obfuscated a little too much - I run a fairly complicated spreadsheet that I update on a daily basis which tells me my net position down to the last cent. And I just hand it over to my accountant at the end of the year (I do my GST returns myself) and they do whatever they do. Yeah they are expensive but they are also a good customer so I figure, whatever. And yes - there are some legitimate expenses claimed through the business.
This wasn't really about me - the bits that were (like daycare, fuel costs, insurances, rates) were just figures I could relate to. And I will happily keep paying my health insurance! Along with all the other things I pay for that were not mentioned in my example.
Yes - i don't know how we keep our food bill so low - we sure eat well enough. Must be all those trips out to Whenuapai to 1) get the kids to take an afternoon nap and 2) pick up some damn cheap fruit and vege.
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Sacha, in reply to
Not bad for an IT guy, huh
Good to see you can put that edukashun to use when you want to
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