Tax Cuts

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Forums › Finance and wealth management › Tax Cuts

tdgeek

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#214735 25-May-2017 20:25

No thread yet.

Tax cuts are awesome. Govt taxes us at the set rates. So on day 1, our tax for the average wage averages out at x%, taking into account the rates for each wage level.

As income rises, and inflation rises, your tax rises, as you creep into a higher rated marginal tax. Yet, your average wage has had an average wage increase via CPI + or -. so in effect, your earning status may well be flat lined, yet your tax rate has creeped up.

So, the Govt captilaises on this. Taking more tax than is really due. Then after a while, they steady the ship, by increasing the marginal tax levels. To take effect in a year.

If the average wage is $X, and the inflation rate is x%, then the marginal tax thresholds should be lifted each year.

Im not a Greenie or a Labourite, but this issue happens every year, its continual, until every few years it gets some treatment. And that treatment, like tonight's budget is probably seen as mana from heaven, when in actual fact its partly giving back whats been ripped off for the last many years.

/rantover

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#1788382 25-May-2017 21:01

Since this is the budget thread it seems, I'd like to have my little rant.

And it's about the focus on the "winners" in the media out of this budget, toeing the party line of "everybody is better off" by "an average of $20 a week" or words to that similar effect. Well that's nonsense.

Why is it nonsense? The removal of the Independent Earner Tax Credit that's why, and the Joyce'ism that it's not a problem since the threshold adjustment will "fully compensate" for it and only 30% of eligible earners claimed the credit anyway. He says it, and the media seems to eat it, like this makes it a non-event, that they are still winning like everybody else, that when Little did his $1 bit for the 33000 earner that it was an "outlier".

Rubbish. Absolute rubbish.

The simple fact is that by my reckoning anybody who receives the full IETC now, will be "better off" by 77c a week with these tax changes, 24,000 or 44,000 income (above 44000 the IETC is decreased and you will start to get a bit more... so the more you make, the more of a tax bonus you get now, makes sense doesn't it), doesn't matter, 77c is what you'll be better off by each week. And let me remind that the entire purpose of the IETC (at least in my opinion) was to recognise that LOW INCOME independent earners who had no other benefits should get some of that income redistribution from the upper echelons just like people with children, or other benefits do.

Joyce's claim that the threshold adjustments "fully compensate" for the removal of this is shady logic at best, the reality is that if you claim that the threshold adjustments "replace" or "compensate for" the IETC that means that EVERYBODY, poor, rich, big family, small family, single, or elderly, now gets the "IETC" since it's been "rolled into" the thresholds.

It effectively means that with this budget there is once again no recognition of the reason that the IETC was seen as necessary.

That people, for whatever reason, didn't claim, or know that they should claim, or could claim, the IETC in the past doesn't magically make it a "bonus" that they will now (assuming National retains power and doesn't change their mind before April) get it, because EVERYBODY will now get it.

I'm not sure if these people who didn't claim it (by a special tax code, or ticking the box on their IR3) can go back and claim it retrospectively, but if so, they damned well should.

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Aredwood

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#1788390 25-May-2017 21:17

My rant - Debt repayments should be the main focus on how to spend the surplus. As the housing and construction boom won't go on forever. And when it does stop the economy will stall and unemployment will spike. So the government will need the ability to easily start a big spending program to help support the economy.

And while the economy is going good we definitely don't need corporate welfare in the form of Callahan grants and tax breaks for Hollywood films. And when house prices were previously increasing at crazy speeds. That was the time when the government should have been doing structural reforms around the councils stupid land use policies.

DjShadow

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#1788391 25-May-2017 21:23

How to buy an election on budget day.

pom532

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#1788418 25-May-2017 21:31

sleemanj:

Since this is the budget thread it seems, I'd like to have my little rant.

And it's about the focus on the "winners" in the media out of this budget, toeing the party line of "everybody is better off" by "an average of $20 a week" or words to that similar effect. Well that's nonsense.

Why is it nonsense? The removal of the Independent Earner Tax Credit that's why, and the Joyce'ism that it's not a problem since the threshold adjustment will "fully compensate" for it and only 30% of eligible earners claimed the credit anyway. He says it, and the media seems to eat it, like this makes it a non-event, that they are still winning like everybody else, that when Little did his $1 bit for the 33000 earner that it was an "outlier".

Rubbish. Absolute rubbish.

The simple fact is that by my reckoning anybody who receives the full IETC now, will be "better off" by 77c a week with these tax changes, 24,000 or 44,000 income (above 44000 the IETC is decreased and you will start to get a bit more... so the more you make, the more of a tax bonus you get now, makes sense doesn't it), doesn't matter, 77c is what you'll be better off by each week. And let me remind that the entire purpose of the IETC (at least in my opinion) was to recognise that LOW INCOME independent earners who had no other benefits should get some of that income redistribution from the upper echelons just like people with children, or other benefits do.

Joyce's claim that the threshold adjustments "fully compensate" for the removal of this is shady logic at best, the reality is that if you claim that the threshold adjustments "replace" or "compensate for" the IETC that means that EVERYBODY, poor, rich, big family, small family, single, or elderly, now gets the "IETC" since it's been "rolled into" the thresholds.

It effectively means that with this budget there is once again no recognition of the reason that the IETC was seen as necessary.

That people, for whatever reason, didn't claim, or know that they should claim, or could claim, the IETC in the past doesn't magically make it a "bonus" that they will now (assuming National retains power and doesn't change their mind before April) get it, because EVERYBODY will now get it.

I'm not sure if these people who didn't claim it (by a special tax code, or ticking the box on their IR3) can go back and claim it retrospectively, but if so, they damned well should.

exactly my feeling too. While those earning over $50,000 get an extra $1060 per year, those currently getting the IETC will only be better off by $40 per year (loss of the $520 IETC)

Geektastic

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#1788424 25-May-2017 21:52

$20 a week? I won't even notice.

A tax cut of $20,000 a year would be worth talking about. This? Not so much.

scuwp

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#1788425 25-May-2017 21:55

They always give with one hand and sneakily take away with the other. Net result is that most people won't notice any difference when the sun goes down each day.

Lazy is such an ugly word, I prefer to call it selective participation

Geektastic

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#1788429 25-May-2017 22:04

scuwp: They always give with one hand and sneakily take away with the other. Net result is that most people won't notice any difference when the sun goes down each day.

Not when the cuts are so minuscule, I agree.

A 5% cut in the top rate would have been helpful, as would a cut in fuel duty.

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Inphinity

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#1788432 25-May-2017 22:09

Seems to me the upper tax bracket threshold needs to go up, too. The brackets are now met at 22k, 52k, and 70k. Would've liked to see 25k, 60k, 100k or something.

sleemanj

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#1788435 25-May-2017 22:18

I done made this thing...

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alasta

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#1788438 25-May-2017 22:42

Dropping the IETC worries me too. With the current housing situation, along with social trends, there must be an increasing number of people over 40 with a modest income and no partner or children who are having trouble finding suitable housing. If you're not earning enough to live alone, too old to go flatting, and don't have a partner to share the rental cost then where are you supposed to live?

I know that people in this situation probably still get the accommodation supplement, but with sky rocketing rents it's probably not enough.

mattwnz

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#1788455 26-May-2017 00:09

The thing is they are apparently increasing the population artificially by about 100 thousand people a year, via immigration. Currently it is at record numbers. But they aren't building enough new 'houses', or even shoebox apartments, to cope with this rapid growth. The net result is that supply and demand causes house prices to rocket, and rent follows this. The number one problem in NZ at the moment is housing.

Giving people a tax cut, has the potential to increase housing even more, as it means they have more income to service a mortgage with.

Increasing interest rates though, basically nullifies any tax cut.

I agree with Acrewood, and that NZ should be paying down dept with our surplus. Problem is that our private debt is huge too, as we have been buying overpriced houses, and many potentially have overpaid for that house.

So many have the potential to be in negative equity. Some who has purchased in the last year in Auckland may already be in negative equity if they had to sell, when you take into consideration agents fees, moving costs etc

Also if NZ had been putting money into the Super Fund over these last 8 years, NZ would have a huge amount in that super fund, as the sharemarket has performed very well over these last 8 or so years.

tdgeek

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#1788467 26-May-2017 06:46

Yes, pay down debt. Add infrastructure as in housing, Govt should build a few large housing projects. Put funds aside to assist low to medium income first home buyers. Measures to restrict home sales, i.e. immigrants can only build in first 5 years. And these falsely reported tax cuts should have the thresholds inflation adjusted annually, so that repaying back artificially high tax takes as the average wage creeps over a threshold does not happen. You have been robbed for 8 years, now some is being paid back, in the 9th year, thats not a tax cut.

dickytim

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#1788499 26-May-2017 07:19

This $20 a week should be used for schools and hospitals.

Surely this would be of better benefit to everyone?

2,000,000 x 20 x 52 = 2,080,000,000

Geektastic

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#1788510 26-May-2017 08:36

Inphinity:
Seems to me the upper tax bracket threshold needs to go up, too. The brackets are now met at 22k, 52k, and 70k. Would've liked to see 25k, 60k, 100k or something.

Agreed although I'd shift the upper one to $200k

Fred99

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#1788511 26-May-2017 08:37

tdgeek:

As income rises, and inflation rises, your tax rises, as you creep into a higher rated marginal tax. Yet, your average wage has had an average wage increase via CPI + or -. so in effect, your earning status may well be flat lined, yet your tax rate has creeped up.

That "bracket creep" is not much of an issue IMO these days as CPI and wage inflation has been very low since brackets and rates were last adjusted.

Income tax rates and brackets are very low for high earners in NZ - the maximum rate may kick in at a lower threshold - but the maximum rate is very low for a social democracy - especially when some of the major expenses are drawn from general tax revenue - not funded by separate levy (ie separate healthcare levy etc). Net result of this is that high income earners should probably STFU about supposed high income tax in NZ.

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