Gordon Campbell | Parliament TV | Parliament Today | Video | Questions Of the Day | Search

 


Significant income redistribution after tax reforms

Hon Bill English

Minister of Finance


28 May 2014

Media Statement
Significant income redistribution after tax reforms

New data indicates New Zealand’s income tax and support system continues to provide significant income redistribution, with households earning more than $150,000 a year forecast to pay 74 per cent of net income tax in 2014/15, compared with 58 per cent in 2008/09.

“Four years after the Government’s comprehensive tax reforms, latest data confirms that New Zealand’s income tax and support system significantly redistribute incomes to households in need,” Finance Minister Bill English says.

“It is now clear that higher income households are paying a larger share of income tax than they were in 2008.”

“As I’ve said previously, the Government has maintained a redistributive income tax and income support system that supports low and middle income families and helps New Zealanders through times of need. So at any particular time, a large number of households effectively don’t pay income tax,” Mr English says.

“The amount these households pay in income tax is exceeded by the amount they receive from welfare benefits, Working for Families, paid parental leave and accommodation subsidies. That’s entirely appropriate for those families genuinely in need.”

Using data from the Household Economic Survey, Treasury has updated information provided last year to include forecasts for the 2014/15 tax year.

The Treasury estimates that this year households earning over $150,000 a year – the top 15 per cent of households by income – will pay 49 per cent of income tax.

But when benefit payments, Working for Families, paid parental leave and accommodation support are taken into account, these 15 per cent of households are expected to pay 74 per cent of the net income tax. And that is before New Zealand Superannuation payments are counted.

It also excludes the impact of other aspects of the tax changes in 2010, including tightening property tax rules and compliance, and increasing GST.

By contrast, households earning under $60,000 a year – which is just under half of all households – are expected to pay 9 per cent of income tax.

“When we take income support payments into account, as a group they will actually pay no net income tax at all,” Mr English says.

“That’s because the $2.5 billion of income tax they are expected to pay will be more than offset by the $7.3 billion they will receive in income support.

“It’s appropriate to maintain a tax and income support system that helps low and middle income households when they most need it.

“But people who call for even greater transfers to low income families, or who call for the top tax rate to be raised, need to be aware of how redistributive the tax and income support system already is,” Mr English says.

“This also highlights the importance of Government policies to support people out of welfare and into work.”

Note: These figures focus on income tax and some of the main government cash transfers. The latest detailed study of Government taxation and expenditure up to 2010 shows even greater amounts of redistribution and can be found at:

http://igps.victoria.ac.nz/publications/files/2d6039de603.pdf



Click for big version.

© Scoop Media

 
 
 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

 

PARLIAMENT TODAY:

Arming Police: Frontline Police To Routinely Carry Tasers

"In making the decision, the Police executive has considered almost five years worth of 'use of force' data… It consistently shows that the Taser is one of the least injury-causing tactical options available when compared with other options, with a subject injury rate of just over one per cent for all deployments." More>>

ALSO:

Gordon Campbell: On D-Day For Dairy At The TPP

While New Zealand may feel flattered at being called “the Saudi Arabia of milk” it would be more accurate to regard us as the suicide bombers of free trade. More>>

ALSO:

Leaked Letter: Severe Restrictions on State Owned Enterprises

Even an SOE that exists to fulfil a public function neglected by the market or which is a natural monopoly would nevertheless be forced to act "on the basis of commercial considerations" and would be prohibited from discriminating in favour of local businesses in purchases and sales. Foreign companies would be given standing to sue SOEs in domestic courts for perceived departures from the strictures of the TPP... More>>

ALSO:

"Gutted" Safety Bill: Time To Listen To Workplace Victims’ Families

Labour has listened to the families of whose loved ones have been killed at work and calls on other political parties to back its proposals to make workplaces safer and prevent unnecessary deaths on the job. More>>

ALSO:

Regulators: Govt To ‘Crowd-Source’ Regulatory Advice

A wide-ranging set of reforms is to be implemented to shake up the way New Zealand government agencies develop, write and implement regulations. More>>

ALSO:

Board Appointments: Some Minister Appoint Less The 3 In 10 Women

“It’s 2015 not 1915: Ministers who appoint less than 3 in 10 women to their boards must do better, they have no excuse but to do better,” said Dr Blue. More>>

Gordon Campbell: On The 1990s Retro Proposals For Our Health System

As we learned yesterday, the reviews propose that the democratically elected representation on DHBs should be reduced, such that community wishes will be able to be over-ridden by political appointees. In today’s revelations, the reviews also propose a return to the destructive competitive health model of the 1990s. More>>

ALSO:

Get More From Scoop

 

LATEST HEADLINES

 
 
 
 
 
 
 
 
 
Parliament
Search Scoop  
 
 
Powered by Vodafone
NZ independent news