Chilling_Silence's blogShould you pay more tax when you earn more?
So my last blog post got me thinking:
Why is tax one of the few things where the more you get, the more you pay?
Usually when purchasing things like PC Parts, food (such as meat), or things like Insurance, the more you get, the less it costs you. Quantities of scale.
Tax is different. Not only does somebody earning $100,000 a year pay proportionally more when compared to somebody who earns $32,000 a year, they in fact pay exponentially more due to the increasing tax rates! Yet the Labour party wants to increase that even more?
When I buy a 500g of Mince, it costs me $7 (Or $14 per-KG). When I buy 1KG, it costs me $12.
If I earn $32,000 a year, I’m paying around $5,300 in tax (Roughly, I can’t stand working out PAYE). However if I earn $100,000, then not only do I pay more because I earn more, but I’m being exponentially disadvantaged. I’d be paying around $26,000. That’s 5x more!
Now, granted a lot more of it is probably “surplus” over and above what is required to maintain a reasonable standard of living, but as somebody who has studied hard and worked hard to get to that position, shouldn’t that be my prerogative?
Now I don’t earn $100K, far from it, but it’s something I aspire towards.
But because those earning more money are contributing more anyway, wouldn’t it make sense for them to get a discount? Wouldn’t it be great for the IRD to say:
“Oh, you’ve already paid your dues, paid your fair share, so rather than carrying on at the regular rate, we’re in fact going to discount everything over $50,000 to only 10%, because you’re already bringing in more to the Govt coffers than those who don’t earn as much, we want to encourage you to earn even MORE!”
Food for thought…
Your knowledge of the tax system is clearly lacking, first of all, you pay tax twice (at least) first, you “pay as you earn” (PAYE), I don’t know what the exact tax rates are, but the lowest rate is around 20%, then you pay when you spend/buy goods (GST) which is 15% therefore, if you are on the lowest tax bracket, you are paying 35% for every dollar you make and spend, if you are on a low income it is likely that you have little or no money to save because you spend a greater proportion of your income just to survive.
On the other hand someone making significantly more money is likely to invest or save the additional income and therefore not pay GST on it, and money you spend on “investments” is tax deductible, so for example, if you own an investment property you would receive income from rent, however if you have a mortgage on the investment property the interest on the loan is tax deductible as well as every other expense incurred from the investment.
Long story short, rich people don’t pay as much tax as you think.
That’s true, aside from the fact that richer people also pay a higher amount of PAYE per-dollar, not to mention that the cost of living is significantly higher when you buy things like a flash car with a 4L V8 in it (In which they also pay more for the petrol tax), or you go out to dinner at nice restaurants and spend ~$100 per-head twice a week. Thing is minimizing tax is an option available to everybody, regardless of if you have an investment that is tax deductible. What about those who are well off, but not well off enough to have more than one home? Is that then the ‘ceiling’ of the lower-middle socio-economic class that will be paying more in both PAYE as well as GST and not claiming it back as easily? You still gloss over the fact that ~10% of the nations top earners (Even with all their ability to reduce tax through write-offs etc) pay 70% of the net tax amount. See http://www.kiwiblog.co.nz/2011/07/net_taxpayers.html