Should GST be raised?

Seems to be a option being considered by our govt

a new flat tax to pay for the tax cuts those on higher incomes gained?

if we're struggling for money wouldn't now be a good time to go back to the days of those on high incomes to pay higher taxes?

economics gurus - is the proposed GST increase a good idea?

What about income tax?

well as you have seen in the papers yesterday there are ways to rort the system so as to appear to be on a lower income tax bracket and the way to line the pockets of many a bentley driving lawyer has historically been high income taxes

consumption tax meanwhile is much harder to avoid and is collected from a much narrower tax base and the rich, who can afford more and spend more, pay more tax

you could argue for a wealth tax on luxury goods to target those on higher incomes and reduce or remove gst on essentials like staple foods that those on lower incomes find burdensome, which is something I favour

Interesting that they are even thinking of this.

I am pretty sure that this will only serve to redistribute the wealth up again.

If you raise GST, that raises the amount of tax paid on all purchases, those at the top have creative ways of getting GST right offs whilst those at bottom end up footing the bill.

We already know that NZ'ers spend outside their means, by lowering income tax, you will effectively help out the top more than you will help out the bottom.

Those at the top will benefit most from income tax breaks whilst those at the bottom on a proportional scale may benefit the same amount however the fact that they will be paying 2.5%-7.5% more on everything they do in their lives will be a substantial problem.

Add to that the fact that people who are struggling to make ends meet are likely to borrow money to survive and have to end up paying more on services, they will end up having a compounded effect whereas those at the the top will be happy

National is known for widening the gap between rich and poor though, so it really comes as no surprise.

Those at the bottom go to loan sharks and Labour just makes everyone poor

I like it actually. Put it up, cut the LOWEST tax rates to match. Aim should be the bottom third earners end up being about the same (lesser income tax offsetting the increase in GST paid).

Tax consumption, not income.

http://www.scoop.co.nz/stories/PA0908/S00251.htm

catholics say no!

I'm into it but at the same time raise the adult minimum wage to $20 an hour so that those that will feel it the hardest are at least provided with some form of relief

increase GST just screws the poor, because they end up paying a higher percentage on their income in tax.

The only way it would even be remotely fair is if food is GST free.

an increase in the minimum wage is exactly what is required to help create a counterbalance so as to ensure that the poor and most vulnerable will in fact be no worse off than they were before

yes if its increased - which in a way gels with me - it should get removed from basics AND from other taxes such as rates and registrations. taxes on taxes piss me off.
otherwise neil is right its onerous on the poor.
high consumption tax encourages savings, and thats what this country does in fact need really badly.

a tax on a tax is a rort alright

so whatcha gonna do about it then Mr Dunne? eh? Mr revenue man and outspoken critic of taxes on taxes

Problem is, we are particularly unproductive as a nation so raising the minimum wage will only have one end result: more people out of work. Companies wont see any more productivity with a raised min wage so will have to make cuts... and staff are the easiest thing to cut usually.

Raising GST discussion should be over by now. When you look at from the average or lower half income and their true earnings-to-buying capacity they get screwed.

the idea behind raising minimum wage isn't to encourage increased productivity, it is to counteract the inflationary effects that raising GST will have

also the movement to a flat tax rate may mean that those on $48k will have less money in the hand each week and these are the type people who live hand to mouth

so the only way such a move will garner my support is if minimum wage is increased to a point that it will negate the effects of any tax reform for those that exist on the lowest rung

by lowest rung do you mean bottom 10%? 20%? 50%?

and raising minimum wage would be inflationary too though?

and what about people who dont earn? a rise in gst will affect a single income 4 child family much more than a single income no child family. but we already have working for families, graduated taxes and a not completely meaningless social welfare system.

I'm not particularly against a small gst increase, a tax on consumption is a good thing - you generally get less of what you tax. The woe for the poor stories that were trotted out when gst was first introduced weren't borne out to the degree foretold by many. In fact some of the most vocal opponents became supporters. I would however like to see the numbers that would be affected and to what degree.

IF making adjustments have a long term benefit then they should still be considered even if they have negatives. There might be better ways than increasing minimum wage to mitigate increases in consumption tax.

Are there other ways to help lower income groups? for instance transport costs are cumulative, particularly on some of the cheaper food groups.

Do we need a kiwishop and kiwifarm for cheap healthy food? On that note i would love to see an effective way to get cheaper staple foods to beneficiaries/ needy though it would possibly be in limited areas.

I'm never going to give you exact specifics because I'm not a treasury analyst but if you want me to give you a number for you to focus on and pick apart let's suppose that income tax gets set at 30 cents in the dollar and GST increases to 20%, just to illustrate

the effect is pretty simple so shouldn't be too hard to follow:

the top two tax brackets come down, the highest earners are better off ($70k+ down from 38 cents, $48k+ down from 33 cents)

the bottom two brackets will go up, the lowest earners are worse off ($14k+ up from 21 cents, $0k+ up from 12.5 cents)

GST increases across the board, everyone loses

those with the highest earning capacity have the effects of increased GST offset by lower income tax

those with the lowest earning capacity get royally screwed with both higher income tax and higher prices

so the idea behind an increased minimum is to improve the earning capacity of those on the lowest tax brackets who will be the ones coughing up the cash so that the well off can become the better off

I didn't realise we are talking about a flat tax rate too.

I know the maths of tax but I am interested why its ok to change tax for richer people but not for poorer?

I'm sure I don't need to point out the more money you earn the more you pay even when there is a flat rate.

All the tax issues aside, raising the minimum wage has an unavoidable effect - it makes companies employ fewer people or lay people off. This creates another problem you have to deal with now and down the track.

The only reasonable way to raise the min wage is if productivity increases. But it generally wont esp in the min wages jobs so they're ones which will be most affected by the cost-staff numbers equation. (hence why the squeezed areas try to outsource to contractors or overseas as much as possible to wash their hands of the problem)

Lowest income rate down ("benefits" everyone); GST up ("detriment" to everyone); Captial Gains Tax on second property and remove LAQCs (removes absurd incentive to property); Compulsory Kiwisaver @4% with ~20% tax rate (provides necessary local capital base and savings incentive); remove middle-class welfare like the upper reaches of WFF and the Independent Earner Credit; shift the whole welfare system towards a simplified "minimum income" style.

Odds of Brash or Whitehead suggesting anything like that?

Yeah, but if you take into account marginal utility....

Seriously? Almost everyone from Adam Smith onwards agrees tax should be progressive. Ability-to-pay, the marginal utility of the tax dollar at higher incomes, and the percentage of disposable income vs necessity all underpin why you can and should pay a greater percentage than proportional at hiogher incomes.

IM NOT ARGUING FOR A FLAT TAX RATE!

All i suggested was that increasing the lowest tax rate/s isnt the end of the world and could be looked at.

Right, so you're arguing for a flattER tax rate then? You'd have to do it through bracket creep (no other way politically) over a decade or so I imagine.

Not exactly, i was arguing against the assertion that whatever is done it shouldnt have a negative affect on lower income groups. Or if so it should be mitigated/offset.

I'm not arguing for an increase in income tax at all.

On principle i think the level of gst should be looked at and adjusted IF it will have an overall benefit.

Brian Fallow: Time to include housing in the tax take

Brian Fallow, Rod Oram, Gareth Morgan, Brian Gaynor... all the media economists have been calling this for ages. I really hope National pull of significant changes, but don't hold my breath.

fuck the middle class will be hammered if mortgages are included in GST

Not if it's used to give it back through lower income taxes at the bottom-to-middle rates like he suggests.
Those people over-consuming need to be hammered anyway

why are these things GST exempt at the moment?

I thought GST was universal

its all rather confusing

Interest (being a mortgage payment) isn't charged GST as a service - I imagine rent was done similarly to avoid distortion.
If you're going to put GST on mortgage interest then it needs to go on all interest - I'm not sure we want to do that at all.

surely only the value of the service provided should be GSTaxable ! namely the interest and the fees but to lump a tax on a debt repayment is just outright theft.
and it seems inequitable to bring something this large in after the deal is done...

i think I allude to the answer to your question bob_d in this post.

peat I have big issues with in on interest payments so yeah don't necessarily agree with what he's suggesting.