OnPoint: Sneaky brackets
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__Re the payroll tax, I agree it should be considered when calculating total tax take, but it's paid by employers, not employees,__
So is PAYE.
I'm no expert on taxes, but isn't PAYE paid by employees, but collected by law by employers?
I know that when I look at my payslip, it says gross income, which is what my work pays me, and then shows all the things it takes out of it, including PAYE.
If my employer pays PAYE, then they're also paying for my child support and student loan repayments. Which is nice of them, but they'll be pissed when they find out.
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So is PAYE. Sorry, I don't buy your argument. It's a tax directly related to income.
Don't want to split hairs Don, but PAYE is paid by employers on-behalf of employees as a percentage of their gross salary. Payroll tax is not. It's an amount calculated on the total cost of all salary, wage and related benefits incurred by the organisation inclusive of the PAYE component they've paid for their employees. It's not quite the same as PAYE but that's not to say it's not relevant to the equation, just that it's a slightly different category to PAYE.
So this idiot kiwi's not fallen for it...
The main concern for folks in Aussie right now is that large swathes of youngsters are leaving school with next to no education to go and work in the mines and earn a truckload of money.
This is a little overstated. I was over in WA a couple of months back and there is a real issue with school leavers however, the demand is strongest for trade-qualified people, even if they're not all the way through their apprenticeship. There's lots of non-completions which are increasingly attributed to the wage-pull of the mines.
I agree however that there's a risk in the medium-term and other areas of the Australian economy are not developing as quickly as it should (dutch disease anyone). The Western Australians are already thinking about this, less so the Queenslanders.
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while I agree that it's nominally a tax on the employer think of it this way - if you quit your job at employer A and are not replaced and take up a job at employer B at the same salary - employer A will pay an amount less proportional to your salary and employer B will pay an equal amount more - in that sense it works the same as normal income tax - it's just calculated BEFORE your gross income rather than after so that it looks on your pay stub like you're paying less tax
It's also a flat tax so it's regressive in that sense - but then the Aussie base rate is lower so they make it up a bit there - you end up with a higher lowest tax rate ~17.5% compared to the NZ 15% and a top tax rate of ~50% compared to the NZ 39% - I bet there's an industry somewhere there converting executive perks into stuff that isn't 'payroll'
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I think we're getting stuck in the weeds here, my point was just to say that treating state-based payroll tax the same as federal income taxes may not be the optimal representation. The point made in the original piece stands.
I bet there's an industry somewhere there converting executive perks into stuff that isn't 'payroll'
You're almost certainly correct. I had a friend who was a high-end recruiter who knew chapter and verse how to maximise individual benefits while minimising employer tax profile... some of it was pretty disturbing stuff actually.
One of the benefits we don't often talk about in NZ is the relative simplicity of the NZ system - simple enough that many don't even have to file a return - no such opportunity exists here; everyone must and does file a return and tax agents are popular folk (as Don alluded to earlier, there's thousands and thousands of exemptions and benefits for which a claim must be made).
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I'm going to make the quibble that around 24% of taxpayers (or 33% of Keith's 71%) pay most of their tax on their benefits or their super, so I always find that "who pays tax" table quite misleading.
Of that 24%, the beneficiaries get no benefit from the tax cuts, and the superannuitants only get a benefit to the extent that the tax rate on the average wage falls (not the tax rate on their benefit). By 2011 the average wage will be well over 47k, so that puts superannuitants squarely back in the category of those who are effectively no better or worse off from a tax-perspective (except that Winston got their payout rate bumped up a percentage point).
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while I agree that it's nominally a tax on the employer think of it this way - if you quit your job at employer A and are not replaced and take up a job at employer B at the same salary - employer A will pay an amount less proportional to your salary and employer B will pay an equal amount more - in that sense it works the same as normal income tax - it's just calculated BEFORE your gross income rather than after so that it looks on your pay stub like you're paying less tax
That's true, but irrelevant; if anything, it makes New Zealand look worse, since that payroll tax should be depressing Aussie incomes - yet they're still, on the whole, higher than New Zealand ones.
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well that I agree with - it does depress reported gross incomes (but not net if the Aussie tax rates end up being slightly higher - and from my cack of the envelope analysis today I think they slightly are - and certainly will be after Labour's [or the Nat's] taxes kick in) - but these are different things - governments have direct control of tax rates - they can't legislate incomes (well Muldoon tried - we all remember how that turned out) - mind you we've had as close to full employment for a couple of years now and incomes haven't risen - mostly because the reserved bank has kept a lid on it - rising incomes and inflation go hand in hand unless you change how or what you work at
Seems to me Oz has 2 big things going for it: natural resources (a desert full of usefull stuff in a place where no one, mostly, minds if they dig it up) and a pool of money they've been forcing their citizens to save that's available to invest in their economy (we're late to that game - hopefully Kiwisaver will put us in play too - but it will take a while for that to bloom)
If we want to genuinely raise our incomes we need to change what we do - farming isn't going to become 10 times more profitable - even the current dairy boom wont last (in fact I bet we see a sheep meat/wool shortage as greed makes people go too far) - we need to be building different stuff - seems to me we make companies and send them overseas really well, but I suspect that's not really a sustainable business plan
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and a pool of money they've been forcing their citizens to save that's available to invest in their economy (we're late to that game - hopefully Kiwisaver will put us in play too - but it will take a while for that to bloom)
I hope those whingeing about KiwiSaver for what it is will eventually realise Dancing Cossacks are so 1975.
Also, when DFC went bankrupt it left a major vacuum of risk capital that angel investors and Tradenz have not been able to fill ever since. Its basic business model was sound - it ultimately came to grief because it strayed outside of its core compentency during the mid-1980s irrational exuberance.
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I first heard about fiscal drag in the early 1970s in Canada. It isn't an ideological issue. Every government either allows it to happen or plans on it. The answer would be to index tax brackets based on some independent assessment of wage rises over time. Can't use price inflation as wages may not be keeping up.
Does anyone know any a government anywhere, of any political stripe that DOES automatically adjust income tax rates?
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I believe the US adjusts tax thresholds for inflation automatically.
New Zealand, and I suspect most countries, makes long-term fiscal projections on the assumption that the tax-to-gdp ratio will remain constant, which implies threshold adjustments or tax cuts at some point. If we value fiscal transparency, there is no reason not to inflation-adjust the brackets annually, rather than just assume they will be adjusted at some future date.
Contra the previous post, wage growth is usually stronger than inflation so adjusting the thresholds for inflation alone wouldn't stop the tax-to-gdp ratio rising over time.
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Contra the previous post, wage growth is usually stronger than inflation so adjusting the thresholds for inflation alone wouldn't stop the tax-to-gdp ratio rising over time.
While it wouldn't be perfect, it'd be a lot better than the silly system we have now.
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