Posts by Keith Ng
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So they're going to halve the bottom tax-rate?
They can. Or they can create a tax-free threshold. But they point is that, actually, they have enough money to afford this *and* aligning the rate at 30%, which they have ants in their pants about.
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Retracted! See post.
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Matt:
But GST isn't a fixed proportion of income across the income spectrum. People on higher incomes spend more of their money on things that don't attract GST, so GST is at least mildly regressive. Right?
Sure, if we ignore this, *and* we had a flat tax *and* flat welfare system (say, universal benefits), then I can see how a 1:1 shift from income tax to GST would be beneficial.
But we don't. The point I'm trying to highlight is...
Wait. Are we even disagreeing? My point was that any attempts to compensate for GST via the tax system would reduce the revenue gain so much that there'd be nothing left with which to fund rates alignment.
You seem to be saying (if I understand you correctly) that a revenue neutral shift from income tax to GST is possible and desirable.
Is that correct?
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Oh - and re:regressivity of GST, try this:
* According to the IRD income distribution data (so income tax only) the top 10% earn 33.5% of income.
* According to the TWG's GST paper (which was supported by analysis from Treasury, which did GST impact analysis based on HES data), the top 10% of households paid 19% o f GST.I know the two aren't directly comparable - individuals vs households, personal income vs all income types, etc. But that's a pretty big gap.
(Actually, I'm pretty sure % of income going to GST broken down by deciles can be readily extracted from the data that they have there...)
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You know what? I've suddenly gained a much greater appreciation for Gareth Morgan.
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Gary: Most of the income supplements are income-tested, and I'm not sure whether the thresholds are CPI-adjusted as well. Whether changes to WFF will adequately compensate for GST increases depends on more things than I can squeeze into my head right now, but all I can say at the moment is that it's not quite that simple.
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Gary: Yes, I'd be very surprised too, because it'll cost a lot to do it. But, if they only compensated via the benefit system, then signifcant parts of the working poor will get nothing.
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Oh, and since GST comes off expenditure regardless of whether it comes from benefits or earned income, if GST compensation comes exclusively from benefits, it'd disadvantage workers.
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Matt:
I see what you're getting at, but I'm not sure if I'd be comforted by an intertemporal tax refund. There's probably a time value of money argument in there, but mostly, it's the fact that not even economists can pay rent with it.
Re:Benefit level changes, I've been trying to make sense of the compensation section in the GST paper I linked to. It didn't have an estimation of the cost of compensation via the welfare system (though Goff's speech put it at $200m less than the revenue increase), but at any rate, compensation through CPI-linked benefits is only relevant to people who're on benefits.
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Because, well, for a lot of people it's not? I'm sure there are a great many renters who would buy if they could, but that doesn't mean there isn't a solid core of people who can't afford or for whom it isn't practical to buy.
What I meant is that even if just a small portion of renters could afford to buy, their ability to go "no, piss off" has the ability to drive rent down across the board.
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Don't forget the Ric Barker post on red alert - http://blog.labour.org.nz/index.php/2010/02/02/tread-carefully-mr-key/ . Labour arguing for landowners not paying tax?
Here are three questions a landlord has to answer before they get an ounce of sympathy:
1) How much has their property appreciated in value since they bought it? (Probably quite a lot.)
2) How much tax have they paid on this appreciation? (Nuthin' - we don't have a capital gains tax.)
3) How much is 0.5% of the property's unimproved land value? (Probably not much.)