43. Who are the top 20% who end up paying for restoring fairness, what wealth level do you change from getting to paying?

43. Who are the top 20% who end up paying for restoring fairness, what wealth level do you change from getting to paying?


They will more then likely be the 20% who are the most wealthy, indeed the tax cuts can be designed to ensure that. What wealth level does that cut in at? Who knows, wealth data in New Zealand is pretty sparse to be polite. It doesn’t matter in terms of policy design, you can implement the package so that the 20% point happens no matter what the actual wealth numbers turn out to be. If you think about it logically you could take all the revenue of one person and distribute a fraction of it to each and every other person. We each wouldn’t get much of course. So the question is a bit futile. It does amuse me however when I come across people who love the idea so long as they benefit - tells you a lot doesn’t it? The question is pretty simple with this tax reform - do you want a fairer New Zealand or not? Closing the loophole will achieve that.

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  • Steve Cox
    commented 2016-12-12 19:38:36 +1300
    Lets say it is decided that all people get an Income Tax cut of up to $10,000. On current tax rates that means everyone earning $56,600 or less would pay no Income Tax. Now if the Property Tax (PT) was set at 1% then a $1 million net worth home would incur a tax of $10,000. Break even; woohoo. 

    A single person on National Super living in a mortgage free home earning 20,000 (Super plus some interest) pays $2,520 of Income Tax. If their home is valued at more than $252,000 then they are worse off. You’re one of the 20%. And this is why the elderly have had the offer an IRD mortgage. 

    Anyone with a house net worth greater than $1,000,000 will be worse off at an Income Tax cut of $10,000 and a PT of 1%. Move either the tax cut or the PT and the numbers get to look better or worse for you. 

    About half the houses in NZ are rented. if we say then that about half the population rent their home then all these renters are going to get a tax cut of up to $10,000. Yay, some winners. But your rent may go up as the landlord tries to recover some of his PT. Renters will mostly be winners with a few because of their circumstances who’ll lose. 

    Starting with 100% of people we deduct the 50% renters who are winners. That leaves 30% more who are winners and 20% as losers. Or to put it another way, if you are a property owner there is a 40% chance you’ll be worse off. Better off property owners will mostly be where a working couple each get the tax cut and combined that exceeds the PT.