Key: Pathological liar about tax

Key: Pathological liar about tax

Here's Key on Radio New Zealand last evening:

But Prime Minister John Key said he categorically denied his Government was interested only in helping the rich, saying the Budget aimed to help a wide range of New Zealand families.

"I utterly reject those propositions. Twelve percent of households pay 76 percent of all net tax in New Zealand," he said.

Get that: "all net tax in New Zealand."

That claim is a complete lie.

The calculations Key is relying on exclude the over $15 billion that New Zealanders pay in GST, which is around 40% of the total tax taken from individuals in New Zealand. As I've said before:

Doing net tax calculations while excluding GST is like doing calorie counts while excluding nibbles, dessert, and drinks.

And, as I have noted both here at Polity and over at Pundit the other times National has tried to peddle this lie, GST is much more heavily loaded on lower income families, compared to income tax. That means including GST will markedly change how much "net tax" is estimated to come from various groups.

The Treasury has even warned English about the misleading effects of not including GST, and still the fibs keep showing up in National press releases.

When I did the correct calculations for National in 2011 - accounting for GST - I found that the top ~10% of households actually pay around 43% of the total net tax on individuals. They also earn around 30% of the income and have over 50% of the wealth.

That is a far cry from Key's dishonest dog-whistle.

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Comments

Key added a key word or two to that claim in his budget debate speech in Parliament on Thursday.

"It shows this—that the top 2 percent of taxpayers in New Zealand pay 22 percent of all personal tax in this country. The top 12 percent of households in this country pay 76 percent of all net income tax before you even account for New Zealand superannuation."

Do Radio NZ report that accurately? Your link quotes in text but I can't find any audio of it.If the RNZ quote is accurate then Key is either deliberately misleading or being unacceptably sloppy.

Sam says:

Even if he's just talking about income tax that's a pretty remarkable figure. 12% taking 76% of the tax bourdon seems like a pretty unfair deal haha. There is a lot of envy in NZ, often by people that have not worked hard to put themselves in a good financial position then wonder why those that took the initiative are doing better than them and expect the govt to give them handouts or tax the rich to death to even out things. By the way I'm not rich, I'm on about 40k and quite happy. If you tax the crap out of successful people they will leave the country and the economy will tank. Also I'm kinda thinking the wealthy would pay more gst than anyone else too, given they have more expendable income to throw around.

Nick Taylor says:

The majority of people who are rich, are not rich because they worked hard, but because they have rich parents.

Back in the 19th C inherited wealth was about 90%. In the mid 20thC, it was about 50%, now it's back to 70%. The idea that people are rich because they "work hard" is a fallacy.

Something you might have noticed (or not) is that incomes have flat-lined since the 1980s, while living costs have skyrocketed... most of this being as a result of a land-price bubble (something the wealthy gain from, and most people do not).

The top 10% own as much as 50% of the rest of us - the rich have basically taken all the productivity gains of the last 40 years - and trust me, they did not do all the work. We should be doing whatever it is we need to do to restore some balance of economic equality - probably the best way of doing this (according to such radicals as Milton Friedman, Winston Churchill) is by way of a Land Value Tax.

That's one way - or we could just let things slide the way they're going, and redistribute via guillotine when things become simply too much to bear.

We have 285,000 kids living below the poverty line. Over 1/2 of us now rent... slaves, essentially. GST is a tax on people who spend money... the poor spend ALL of theirs, then rich don't. 40% of taxes on individuals comes from GST. John Key has just spend 1.2 billion $ on tax-cuts for the rich, which he financed by selling our assets to people who are already rich, so they can make money off the rest of us without having to do any work.

I could go on.

For the majority of people, it's not about envy, it's about being trapped. It's about being desperate.

We need to change this. Radically.

Danmansonman says:

That is just utter rubbish. Most rich people? Do you live in a cave? What you're doing is spilling your opinion how "you" see things, you don't actually know facts. I know literally dozens of individuals and couples who are quite wealthy thanks to building up their businesses from the ground. I've seen the hard work start, and progress, and now they reap the rewards of sweat and tears. My own father became wealthy by loaning $10,000 to start a food business and is now very successful 20 years later running the same business, his parents were poor as hell, and we all put in our work to help along the way.

Rob Salmond says:

@Sam: "12% taking 76% of the tax bourdon seems like a pretty unfair deal haha." is exactly what Key wants you to believe, which is why he is feeding you misleading figures. Also, nobody is talking about "taxing the rich to death." In fact, high income people in New Zealand face one of the lowest overall tax rates anywhere in the developed world.

Marcus says:

Rob - highlighting the exclusion of GST is an important point. But to address Sam's point it is worth looking at what proportion of the income that attaches to the "12%". About 5 years ago Keith Ng produced something on this which showed that the proportions of tax actually paid in NZ correspond to the amount of income earned. This is not surprising given the relatively flat rates of taxation (compare top rate in NZ of 33% with 49% in Australia if Abbott's tax increases pass the Senate).
Key's statement would be stripped of most of its rhetorical power if it was restated as:
"Those who earn 75% of the income pay 76% of the income tax"

Ash says:

"Those who earn 75% of the income pay 76% of the income tax"

Exactly!

Hmmm, it's a fine line by keeping the wealthy taxed as much as possible without them taking business elsewhere. As it has been correctly pointed out, statistics can prove anything you want them to.

Greg Sheen says:

""Twelve percent of households pay 76 percent of all net tax in New Zealand." With that information I am now thinking the plan is to tax the rich to death. By the way, NZ tax rates are competitively lower (check out the rates in place like US, UK or even AUS), giving the rich enough room to live a carefree life :)

Jack Hudson says:

I agree. Saying that "back in the 19th C inherited wealth was about 90%" can't be compared with today's woes and economic troubles.. Yes facts and figures show that in the mid 20thC, it was about 50%, now it's back to 70%. People are more prone to saving money today than working hard. Yes, current economic conditions have forced people to pay more attention to making ends meet.

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