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... I think there are two unsurmountable problems:

1. How to calculate what this equal tax should be. Nobody is ever going to agree on this.

2. As long as politicians are permitted to interfere in the economy, they will find a way to manipulate it in exchange for bought votes. "Equal taxation", will not stop them from manipulating the economy.

Your second point is fundamental: it's the spending that matters. As preferable as alternate tax-scheme may be, as political activism, they mostly serve as a distraction.

Once spending is tackled, I think the politically palatable way to handle your second point is this: if there is insurmountable resistance to some "tax-breaks", keep the basic system in place, but reduce the percentages across the board. Cutting the percentages by a certain percent each year, while cutting spending, is the simplest way to make tax-breaks less attractive.

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40% is absurd. You need to do something about that immediately by taking advantage of various tax breaks and loopholes. There is no reason you should be paying this high a percentage, at any income level. The only excuse is that you are inefficient or not properly educated in managing finances.

OK, you know what, this is the second time I've been condescended to on this thread. What's the deal? I forgave sNerd because he didn't necessarily know that I do my own finances. What's your excuse, now that I've made it clear I'm not a financial moron? Don't presume to tell me you don't have a comparable tax burden as well. Apart from your income tax, are you counting your social security and medicare tax, which there is no way to reduce regardless of any loopholes, etc? Are you counting the sales tax you pay? Are you counting your property taxes, which yes, you do pay, even if you rent, through the higher cost of rent your landlord must charge to cover their greater obligations? Are you counting the opportunity cost of decisions you could have made differently were it not for a more favorable tax situation? Because yes, those things do matter. If you really think it over, you will find that you pay far more of your income into taxes, one way or another, than you could have conceived.

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If you really think it over, you will find that you pay far more of your income into taxes, one way or another, than you could have conceived.

Mad, I think that most people would be surprised to find out how much they actually pay. The politicians love hidden taxes and fees. They're also not too shy about jamming those of us who are producers for whatever they think they can get away with.

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40% is absurd. You need to do something about that immediately by taking advantage of various tax breaks and loopholes. There is no reason you should be paying this high a percentage, at any income level. The only excuse is that you are inefficient or not properly educated in managing finances.

Indeed it is bad, but not as bad as the 50.5% I will be paying in taxes, ACC levies, and student loan repayments if I earn more than $60,000 a year under the current system. However, both of the major parties (yes even the left wing one) are proposing personal tax cuts. In fact the left wing party already cut the corporate income tax rate and PIE investment income tax rate by 3% from 33% to 30%, which came into effect a April 1 NZT.

2. As long as politicians are permitted to interfere in the economy, they will find a way to manipulate it in exchange for bought votes. "Equal taxation", will not stop them from manipulating the economy.

She already admitted as much. Her point, which she stated, is that if we are going to have government interference she'd prefer it be a lot smaller via a low flat rate.

Interestingly if you look at nations like Hong Kong that implemented it the government actually ended up with a larger tax revenue than before they done that but that revenue is a lower percentage of GDP and each individual's income due to rapid economic growth that resulted from the low flat tax rate.

Edited by DragonMaci
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Interestingly if you look at nations like Hong Kong that implemented it the government actually ended up with a larger tax revenue than before they done that but that revenue is a lower percentage of GDP and each individual's income due to rapid economic growth that resulted from the low flat tax rate.

That's along the lines of what is predicted by the Laffer Curve. When you reduce rates, this spurs economic activity and ultimately increases tax collections. This works best with higher income people who are better able to change their investing and consumption patterns in response to tax changes.

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OK, you know what, this is the second time I've been condescended to on this thread. What's the deal? I forgave sNerd because he didn't necessarily know that I do my own finances. What's your excuse, now that I've made it clear I'm not a financial moron? Don't presume to tell me you don't have a comparable tax burden as well. Apart from your income tax, are you counting your social security and medicare tax, which there is no way to reduce regardless of any loopholes, etc? Are you counting the sales tax you pay? Are you counting your property taxes, which yes, you do pay, even if you rent, through the higher cost of rent your landlord must charge to cover their greater obligations? Are you counting the opportunity cost of decisions you could have made differently were it not for a more favorable tax situation? Because yes, those things do matter. If you really think it over, you will find that you pay far more of your income into taxes, one way or another, than you could have conceived.

I apologize for sounding condescending. I didn't know that the 40% you quoted including all of the above taxes, as I thought you stated it was on just your income. However, there is a fallacy in your post here. You can avoid paying Social Security tax; the first way is to get paid in cash without claiming the income. The second way is to achieve a significant portion of your income through dividends and capital gains.

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Mad, I think that most people would be surprised to find out how much they actually pay. The politicians love hidden taxes and fees. They're also not too shy about jamming those of us who are producers for whatever they think they can get away with.

They would indeed be surprised. Especially here in NZ where income tax for the employed is done via withholding, meaning few people see how much of their money goes to taxes. Here in NZ we have the following main taxes that everyone pays most of to all of:

- Income tax of 15% on the first $9,500.

- Income tax of 21% on every dollar from $9,501 to $38,000.

- Income tax of 33% on every dollar from $38,001 to $60,000.

- Income tax if 39% on every dollar above $60,000.

- GST of 12.5% of the price of all goods and services (even government ones).

- Many excise taxes on many goods. For example over 50% of the cost of tobacco products is tobacco products excise tax and GST and nearly 50% of fuel prices are petroleum excise taxes and GST (and to make matters worse another 10c in petrol taxes will soon be added and the government is going to implement a $30/tonne tax on carbon emmissions). There is also alcoholic drinks excise tax that, with GST makes over 25% of the price of alcoholic drinks. These figures don't even take into account the 30% corporate tax rate.

- ACC levies of 1.40 for every follar up to about $100,000, rising to $1.50 next year, whith the maximum also rising.

- 10% of every dollar above about $19,000 if you are a student repaying a student loan.

All of this can makes for a rate of about 35% of GDP. However, once you fact in the revenue the government gets from other sources, such as fines, State Owned Enterprises (SOEs), Crown Entities (CE), investments, and more, the government makes up for about close to to just above 50% of GDP. That doesn't factor in local councils. Factor in them and I beleive it comes to about 55% of GDP (that according to a document available to anyone who goes to the Treasury website).

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That's along the lines of what is predicted by the Laffer Curve. When you reduce rates, this spurs economic activity and ultimately increases tax collections. This works best with higher income people who are better able to change their investing and consumption patterns in response to tax changes.

Yes, I am aware of the Laffer Curve. I read a little bit about it. I haven't seen it, so I don't know what it predicts in more exact terms than, "It predicts tax revenue will go up while the tax-to-GDP percentage goes down." I read a comment by someone on another site where the person respinded to a pro-low flat tax article by saying the Laffer Curve is fiction, it doesn't work. Doesn't work? Maybe that person should try looking at countries that implemented such tax systems, like Hong Kong and Ireland. However, strictly speaking no country has yet to implement a true flat tax system. They all include some other tax, such as narrow sales taxes or payroll taxes. I think most if not all eliminated the double (and sometimes triple) taxation of wealth taxes, death taxes, and capital gains taxes though.

Edited by DragonMaci
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I read a comment by someone on another site where the person respinded to a pro-low flat tax article by saying the Laffer Curve is fiction, it doesn't work.

I've met Arthur Laffer a couple of times at different talks he's given. I asked him about these criticisms and he will tell you that there is some validity to the claim that the relationship breaks down for people at lower income levels. In other words, if you only earn enough income to barely save any of it and you essentially have no investments, then changes in taxes don't do much for you beyond freeing up a little more cash to spend and lead a slightly better life. However, for wealthy people who are able to modify their spending and investing patterns to minimize taxes, lower taxes lead to greater activity and higher tax revenue. The best examples of this are cuts in capital gains taxes. Anything that makes capital less expensive is going to spur investment and lead to greater economic activity. When capital gains taxes are raised, people tend to hold on to their investments and not realize the gain so as to delay the tax.

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I've met Arthur Laffer a couple of times at different talks he's given. I asked him about these criticisms and he will tell you that there is some validity to the claim that the relationship breaks down for people at lower income levels. In other words, if you only earn enough income to barely save any of it and you essentially have no investments, then changes in taxes don't do much for you beyond freeing up a little more cash to spend and lead a slightly better life. However, for wealthy people who are able to modify their spending and investing patterns to minimize taxes, lower taxes lead to greater activity and higher tax revenue.

The person I am referring to said it doesn't work at any income level.

The best examples of this are cuts in capital gains taxes. Anything that makes capital less expensive is going to spur investment and lead to greater economic activity. When capital gains taxes are raised, people tend to hold on to their investments and not realize the gain so as to delay the tax.

Another good examples is cuts in sales taxes. According to NZ Treasury statistics cuts to GST actually lower tax revenue more than income tax cuts. But more to the point is the fact that cuts to sales taxes such as NZ's GST result in lower prices in all good, inckuding capital goods, not to mention services the business pay for, thus making the business's costs lower.

Probably doesn't make much difference at 10-20% rates like the lower income brackets here.

There is a 10% bracket in the US? All the more reason to move (as if government spending accounting for 55% of GDP wasn't enough :dough:). The lowest we have here is an effective rate of 15% after a low income rebate on all income less than $9,500.

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The first $7,825 of taxable income is at 10%. (Double that if married filing jointly.) In essence, figure out your total income, subtract deductions (at that income, basically there is a standard exemption per hominid and a standard deduction). That number is your taxable income. You then pay 10% of the first $7,825, 15% after that to 31,850, 25% after that to 77,100, then 28% to 160,850, 33% to 349,700, and 35% after that. The IRS provides tax tables where you can just look up what you owe (up to a certain income level), after that they have you do a simplified version of the calculation. Kane, I'd guess your federal income tax rate would be either 15% or 25% on the last dollar you earn.

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The first $7,825 of taxable income is at 10%. (Double that if married filing jointly.) In essence, figure out your total income, subtract deductions (at that income, basically there is a standard exemption per hominid and a standard deduction). That number is your taxable income. You then pay 10% of the first $7,825, 15% after that to 31,850, 25% after that to 77,100, then 28% to 160,850, 33% to 349,700, and 35% after that. The IRS provides tax tables where you can just look up what you owe (up to a certain income level), after that they have you do a simplified version of the calculation. Kane, I'd guess your federal income tax rate would be either 15% or 25% on the last dollar you earn.

We don't have such deductions here and it is done via withholding rather than yourself.

Those rates are a lot lower than here - even the 35% one - in terms of actual amount paid due to the much higher thresholds. Well actually, the threshold for your second rate is lower, but it is equal to our lowest rate anyway, so the tax on the dollar from $7,826 to $9,500 would be the same, ie, 15% - and every dollar below that is taxed at only 10% not 15%. Due to the larger thresholds I'd be paying 14% less on every dollar from $60,001 to $77,100 and 11% less on every dollard from $77,101 to $160,850 if I was in the US rather than here, though that would drop to 6% less for every dollar from $160,851 to $349,700 4% less on every dollar above $349,700.

We have no such table. Employers have to work it out for themselves - or us if we are self-employed.

Techincally speaking we don't have a federal income tax. The term "federal" isn't used at all for NZ government. And only the national government charges income tax so it is simply called "income tax". Local governments charge "rates" that based on the value of your land and the aminities near you and "water rates" based on the amount of water you use.

As for the percentage, you guess wrong. it is as follows: 15% on every dollar less up to $9,5000, 21% on every dollar from $9,501 to $38,000 to $60,000, and 39% from every dollar above $60,000. But on top of that we have an ACC levy of 1.4% (rising to 1.5% next year) of every dollar up to about $100,000 (actually slightly less, but I don't know the exact figure) and if ypou are a student 10% of every dollar above $19,000 (again slightly less, but again I don't know the exact figure) until you pay off your student loan. That brings the total tax that is income based to 16.4% (16.5% next year) to 50.4% (50.5% next year) depending on income and whether or not you have a student loan.

Note: those figures do not factor in the tax cuts since I don't know how much either party will deliver.

Edited by DragonMaci
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Whoops, I wasn't clear. I was guessing what your situation would be over here.

We do have withholding, but we then have to file a tax form to either get back the overtax (as if it all isn't) or pay even more. We go through a rodeo to figure out what our tax should have been, compare it to withholdings, and pay or request a refund of the difference, depending.

I try to fix it so I "owe" the gov't some piddling amount of money. You don't get interest on your refund so if you get one, you essentially gave your government an interest free loan up until the refund.

Yeah the state and local levels often have income tax (about six states do not tax income, many cities do). States often have a sales tax; local governments tend to do property tax and often do sales tax as well. (You can walk across a street and pay less sales tax, if you happen to be crossing a municipal boundary.)

One thing I forgot to mention: ALL of your wages/salary--from the first cent--are subject to a social security and medicaid/medicare tax which appears to be about 7.5%, which is withheld and for anyone your age, it is doubtful you will ever see it again since these programs are likely to implode before you retire. I say the rate "appears" to be about 7.5% because your employer also pays 7.5% of your salary into this. So of course the real rate is 15% only half of which is visible on your paystub. After about $90,000 they stop withholding this; people who make more than that get an effective pay raise once the government stops ripping 7.5% out of your paycheck. (You don't get another 7.5% matching the part the employer was paying.)

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We do have withholding, but we then have to file a tax form to either get back the overtax (as if it all isn't) or pay even more. We go through a rodeo to figure out what our tax should have been, compare it to withholdings, and pay or request a refund of the difference, depending.

Here, you get a refund only if you are a business (expenses), self-employed (expenses), your tax was overpaid, or you are applicable for a rebate (low income and Working For Families being the main one).

Yeah the state and local levels often have income tax (about six states do not tax income, many cities do). States often have a sales tax; local governments tend to do property tax and often do sales tax as well. (You can walk across a street and pay less sales tax, if you happen to be crossing a municipal boundary.)

Here no regions (our closest equivalent to states) have no income tax or sales tax. Both are only at the national level (12.5% GST and the aforementioned income taxes), so no way to get less tax like that. However, rates vary between regions, so you can move to pay lower rates.

One thing I forgot to mention: ALL of your wages/salary--from the first cent--are subject to a social security and medicaid/medicare tax which appears to be about 7.5%, which is withheld and for anyone your age, it is doubtful you will ever see it again since these programs are likely to implode before you retire. I say the rate "appears" to be about 7.5% because your employer also pays 7.5% of your salary into this. So of course the real rate is 15% only half of which is visible on your paystub. After about $90,000 they stop withholding this; people who make more than that get an effective pay raise once the government stops ripping 7.5% out of your paycheck. (You don't get another 7.5% matching the part the employer was paying.)

Sadly due to the fact that your thresholds are a lot higher high income earner are still better off despite ACC levies being way lower (although not direct equivalents they are the closest we have) and as such the effective rate being up to 50% compared to 40.4%.

I have to ask though, is it a employer contribution of 7.5% or does in actually come out of your wages the way income tax does with a withholding system? Because in the former case you actually only pay 7.5% and your employer pays 7.5% and you gain only 7.5% and your employer gains 7.5% when it abates, while in the former you actually pay 15% and gain 15% when it abates.

Actually, for ex-students paying off student loans the effective tax rate is higher than you 50%. It is 50.4%.

Edited by DragonMaci
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Correction: the 1.5% ACC levy doesn't start until 2010. Next year will still be at the current 1.4% that came into effect a few days ago (the previous rate was 1.3%).

Actually, that depends on Labour getting into power again. If National get in the rate will drop to 0% for some because National want to privatise it, meaning that only those that want to use it will pay for it. Those that don't want to will pay nothing. Since ACC levies are seperate to taxes and go straight to ACC and never touch government coffers, this would drop the effective income tax rate by 1.4% in addition to the income tax cuts national is promising without cutting government spending (bummer :blush:).

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I stated that the employer share was really out of the employee's hide because if the employer didn't pay that money to the government, they would be able to give the employee a raise.

Ah, well then it is an indirect lowering of employee income in the same sense that business taxes and regulations are?

Edited by DragonMaci
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