Seen National's Tax Policy!?

[Hitcher]

It may be efficient, but it hits the poor hardest.

Could you please explain your logic on this?

[Lou Girardin]

Could you please explain your logic on this?

A greater proportion of their income is spent on necessities, so they pay more tax in proportion.
This is the reason that other countries have less efficient but more enlightened added value taxes.

[Hitcher]

A greater proportion of their income is spent on necessities, so they pay more tax in proportion.
This is the reason that other countries have less efficient but more enlightened added value taxes.

Hmmmm. GST isn't an added value tax, nor does it pretend to be. It is a consumption tax based on the purchase price of a good or service. If you don't spend any money (apart from on financial transactions and on the purchase of your primary residence) you spend no GST. I think arguments based on what money is spent (such as "necessities") are irrelevant. Agreed, that people who earn more probably spend more, but so what? An issue is what other forms of taxation exist and how "efficiently" these are applied.

Any attempts to dick around with consumption taxes create looholes that can be exploited. Look no further than Australia. There, GST applies to rakes but not to brooms. To cooked chicken but not to raw chicken. To bread cooked to an "approved" recipe but not other breads. Ridiculous.

[MikeL]

Hmmmm. GST isn't an added value tax

What's an added-value tax??

As I understand it, value-added tax is a tax that is applied at any point where a product or a service has value added to it and is sold. Therefore GST is a value-added tax, isn't it?

[Lou Girardin]

GST was based on the UK's VAT - Value Added Tax.
You may consider taxing necessities irrelevant, but it is very relevant if you're raising a family on low wages.
And then we have the issue of GST being an end tax. In many cases, a tax on a tax.

[bane]

GST was based on the UK's VAT - Value Added Tax.
You may consider taxing necessities irrelevant, but it is very relevant if you're raising a family on low wages.
And then we have the issue of GST being an end tax. In many cases, a tax on a tax.

My point was that compared to income tax, NZ's GST is very efficient - a small increase in GST can offset much larger amounts of income tax. In my utopia, the effect of higher GST on lower income earners would be more than offset by the fact the first $20K was tax free - unfortunately you cant convince people of this fact... ACT's original flatform (1996) was zero income tax based on the efficiency of GST - however, even they appeared to give up trying to convince people.

[Biff]

GST was based on the UK's VAT - Value Added Tax.

Which currently stands at 17.5%, considerably more than our current GST level, and the UK's highest earnings linked tax rate runs at 39%, and then there's National Insurance (for the health care service and social welfare), high fuel tax, stamp duty (when you sell a house) etc etc. So I guess we do alright in the grand scheme of things. Then again we don't have to pay for costly wars, or decent armed forces for that matter.

I'm with Mr H, I don't agree with those that earn more paying a higher tax %. It's not as if we (higher tax payers) get a better service. Although I must admit to thinking that it was a good idea when I wasn't in the top tax bracket, but once your there, with a family, it feels so very unjust, and it sickens you to see all those $$$$ going to the tax man every month. I guess that's why people generaly turn to the right wing political groups as they get older?

Then again I 'fiddle' (legally) my tax to a degree, in that I declare that a significant percentage of my salary is diverted to a flexible super annuation scheme ( seperate form my 'normal' pension scheme) for my aunt Bertha in Bermuda...

[Lou Girardin]

As long as you're prepared to bear the cost of a monetarist approach to taxation, that's fine.
But then you can't complain about rising crime, drug use, child abuse etc ad infinitum.
The results of the 80's and 90's reforms were bad enough, if Douglas had his way with the flat tax policy, those that could afford it would be living in fortresses now.

[Ramius]

Any attempts to dick around with consumption taxes create looholes that can be exploited. Look no further than Australia. There, GST applies to rakes but not to brooms. To cooked chicken but not to raw chicken. To bread cooked to an "approved" recipe but not other breads. Ridiculous.

Damn Looholes! And I had thought that they had been made extinct around NZ because of the pure stink of it all...

[WRT]

My point was that compared to income tax, NZ's GST is very efficient - a small increase in GST can offset much larger amounts of income tax. In my utopia, the effect of higher GST on lower income earners would be more than offset by the fact the first $20K was tax free - unfortunately you cant convince people of this fact... ACT's original flatform (1996) was zero income tax based on the efficiency of GST - however, even they appeared to give up trying to convince people.

You see a lot of ACT's policies getting recirculated round. Nationals orewa speach and tax cuts, labours "full and final" treaty settlements . . .

Is there an echo in here?

[TonyB]

Could you please explain your logic on this?

Say you have two families, each with 2 kids. They both spend $200 a week on groceries. Family A has a household income of $100K, family B has a household income of $30K. The $22.22 of GST family A spends each week on groceries is only 1.15% of their weekly income, but for family B it's 3.85%. Family B finds it much harder to afford to pay GST on basic necessities.

[MikeL]

Then again I 'fiddle' (legally) my tax to a degree

... which naturally raises the question of exactly how much of their nominal tax obligation those wealthy enough to have clever accountants actually pay...

... and whether it isn't these same people who complain the loudest about the unfairness of the system...

[Hitcher]

Say you have two families, each with 2 kids. They both spend $200 a week on groceries. Family A has a household income of $100K, family B has a household income of $30K. The $22.22 of GST family A spends each week on groceries is only 1.15% of their weekly income, but for family B it's 3.85%. Family B finds it much harder to afford to pay GST on basic necessities.

The way this argument is heading, next thing you'll be advocating that there be laws passed so that if families spend more than 20% of their weekly take-home pay on groceries, the taxpayer funds the balance. Just like the nutty state housing policy.

[TonyB]

The way this argument is heading, next thing you'll be advocating that there be laws passed so that if families spend more than 20% of their weekly take-home pay on groceries, the taxpayer funds the balance. Just like the nutty state housing policy.

NOOOOooooo, not I. I was just pointing out that GST is harder for person/ family on a low income to afford.