NZ earners' tax burden second-lowest in OECD

[phatsharpie]

Interesting:
http://www.nzherald.co.nz/employment...ectid=10644470

But I do think mandatory (or at least opt-out) saving for superannuation is a good idea.

-B

[SueDonim]

Sounds good to me (though I know others on the forum don't seem to be too thrilled with low taxes (or at least with tax cuts)).

Based on the people I spoke to on my recce (who are in a position to know), it is likely that KiwiSaver or some other Super scheme will be mandatory in time. They noted that Australia started as optional and moved to mandatory and cited it as one of the key engines to Aussie economic growth in the past 20 years or so

[Super_BQ]

I don't like the term "tax wedge" used in that article. Why don't they just use what most economists say "Disposable Income" which is common terminology for all business and economic writings?

The the aspect that the article completely ignores is the how much their disposable income buys in their respective OECD nation. A dollar in NZ buys a lot less than a dollar in the US. What comes to my mind is the cost of houses in NZ - simply incomparable.

Actually I will go as far to say that the level of income taxation is of moot interest. It's the cost of standard of living that is the most important! (rich OR poor)

[James 1077]

I also disagree with just looking at tax rates when you are comparing different countries. You could have a zero tax rate and be borrowing for all government spending - all that this means is that future taxpayers need to pay their own plus your taxes.

A far better way of looking at it is total government expenditure divided by GDP. This then lets you know exactly how much as a percentage of the country's income the government is taking.

I like the idea of tieing it in to a "tax freedom day" which is the day the average person starts working for themselves rather than the government - having a tax freedom day public holiday would really let people see through all the stealth taxes etc to the actual amount of tax that they are paying / will pay as a result of government spending in that year.

Doing this lets you see that, for 2008, the government took 39% of income and so tax freedom day was 21 May. By comparison the UK was 14 May, Australia 22 April and the US 9 April.

http://en.wikipedia.org/wiki/Tax_fre...ound_the_world

[phatsharpie]

The tax freedom day concept is pretty interesting, but it doesn't seem that useful as a comparison between different countries. In addition to the collection of data issue as pointed out by the Wikipedia article ("Many other organizations in countries throughout the world now produce their own "Tax Freedom Day" analysis. According to the Tax Foundation, Tax Freedom Day reports are currently being published in eight countries. Due to the different ways that nations collect and categorize public finance data, however, Tax Freedom Days are not comparable from one country to another."), the other problem is that different services are provided via taxation among different countries. For example, the US ends on the 99th day (which obviously is the average, the tax burden of a Californian or New Yorker would be much higher when factoring in state taxes), but you don't get health care in that sum. For an average family, the cost of health care is at least a few hundred dollars a month (that's probably conservative, I've heard of much higher premiums), whereas in NZ, health care IS included.

Also, I kind of wonder where that 39% figure comes from in the table for NZ.

-B

[Ngeru]

We've kind of been here before recently with the taxation discussion and I can't see what this latest OECD report slicing and dicing of the numbers actually proves

NZ looks 'good' if they say the tax wedge is only 18.4%, then I would suggest that is purely a reflection of the the lower avearge earnings here, rather than lower levels of taxation. Then being second only to Mexico makes more sense.

Earnings up to $14,000 are taxed at 12.50% = $1,750.00 (Excluding ACC 2%)
From $14,001 to $48,000 is taxed at 21% = $7,140.00
Total Tax Paid on $48k = $ 8,890.00 or 18.5%

[Kanga]

I agree Ngeru- it's figure fiddling at its best. Generally it costs a lot to live here and the tax burden, when all the giving it with one hand and taking it with the other sums are done, the tax burden feels higher than the UK or Oz.

[chocolate cake]

The tax freedom day concept is pretty interesting, but it doesn't seem that useful as a comparison between different countries. In addition to the collection of data issue as pointed out by the Wikipedia article ("Many other organizations in countries throughout the world now produce their own "Tax Freedom Day" analysis. According to the Tax Foundation, Tax Freedom Day reports are currently being published in eight countries. Due to the different ways that nations collect and categorize public finance data, however, Tax Freedom Days are not comparable from one country to another."), the other problem is that different services are provided via taxation among different countries. For example, the US ends on the 99th day (which obviously is the average, the tax burden of a Californian or New Yorker would be much higher when factoring in state taxes), but you don't get health care in that sum. For an average family, the cost of health care is at least a few hundred dollars a month (that's probably conservative, I've heard of much higher premiums), whereas in NZ, health care IS included.

Also, I kind of wonder where that 39% figure comes from in the table for NZ.

-B

Certainly the tax burden here in NZ feels greater than the UK, GST excepted though of course in NZ GST is on everything and the rate set to increase in the forthcomming budget.

Correction on the above, in NZ health care is not free at the point of entry unlike the UK.

[Kiwi Mac]

I have to agree with those who have said it is meaningless.

The relatively low standard of living for "ordinary kiwis" so beloved of politicians is something I find very hard to relate to - I have no idea why they are all so apparently happy to accept it.

Looking at the standard of living is a better measure; it matters not what your top rate of tax is when hardly anyone pays it.