Thursday, January 02, 2014

Who pays the lion's share of income tax?

A reader sent me the following:
Could these comments apply to NZ and Australia ? The top 1 percent of U.S. earners pay nearly 40 percent of U.S. income taxes. The top 10 percent pay 70 percent. The top 50 percent pay more than 97 percent of income taxes. The poor pay nothing. 
Absolutely the comments can apply to NZ. The numbers change only slightly. From Treasury:

Who pays income tax... and how much?
Annual individual taxable income ($) Number of people (000) Number of people % Tax paid ($m) Tax paid %
Zero 260 8 0 0
1 - 10,000 374 11 171 1
10,001 - 20,000 704 21 1,234 5
20,001 - 30,000 469 14 1,539 6
30,001 - 40,000 341 10 1,756 7
40,001 - 50,000 293 9 2,001 8
50,001 - 60,000 234 7 2,232 8
60,001 - 70,000 188 6 2,340 9
70,001 - 80,000 138 4 2,138 8
80,001 - 90,000 95 3 1,791 7
90,001 - 100,000 65 2 1,427 5
100,001 - 125,000 99 3 2,689 10
125,001 - 150,000 42 1 1,488 6
150,001+ 75 2 5,590 21
All 3,375 100 26,397 100

The trouble is these figures don't include tax credits, benefits, and other cash tansfers. When they are taken into account:
... Treasury earlier this year [2013] estimated that this year households earning over $150,000 a year – the top 12 per cent of households by income – will pay 46 per cent of income tax.

But when benefit payments, Working for Families, paid parental leave and accommodation support are taken into account, these 12 per cent of households are expected to pay 76 per cent of the net income tax. And that is before New Zealand Superannuation payments are counted.

By contrast, households earning under $60,000 a year – which is half of all households – are expected to pay 11 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 $2.7 billion of income tax they are expected to pay will be more than offset by the $8.1 billion they will receive in income support.

 So, "12 per cent of households are expected to pay 76 per cent of the net income tax" is pretty much the same as the US figure of, "The top 10 percent pay 70 percent". Notwithstanding I don't know whether the US figure applies to households or individuals.


Odakyu-sen said...

Wow!Socialism and capitalism, with the egalitarian principle of democracy! We must have the perfect model of society here in New Zealand.

ZenTiger said...

It makes it harder for a high earning single income family. For example, one person earning $150K for a household will pay more tax than two people on $75K each.

Even so, middle class incomes are also hit by the fact that with assets (mostly mortgaged) they also pay full insurances - I spend over $700/month on insurance and car registration, another $200/month on rates.

The essential problem is that tax dollars have to come from somewhere, and moving the thresholds higher but taxing from different sources would help the middle class get ahead.

Mark Hubbard said...

Correct, Lindsay. And why I get so angry when this 12% are vilified by the Left politick, and largely in the MSM, as greedy 'rich pricks'.

That term of Cullen's, when compared to the reality of the tax take, encapsulates everything wrong with the West.

Judge Holden said...

All that shows is that high income earners swallow an inordinately large share of the pie, upon which they pay a small proportion of their income in tax.

"It makes it harder for a high earning single income family."

The poor babies, needing to get by on two grand a week! How do they do it? And your insurance company is ripping you off.

Psycho Milt said...

What it tells us is that wage and salary earners are carrying the weight of income tax. Those whose wealth doesn't come from wages and salaries have ways of ensuring that their "income" doesn't put them any higher up the tax scale than they find convenient. I've no problem with my taxes going to help people on low incomes who spend and pay GST on everything they get, but it pisses me off no end to be subsidising the people with clever accountants.

ZenTiger said...

Aye Milt.