Thursday, June 30, 2016

Wealth redistribution is fragile

There were two interesting statistics that received some coverage in the New Zealand media this week.

Firstly, it was revealed that 3% of New Zealand households pay 25% of income tax. Most of the media coverage of this was couched as a defence of the Government's income redistribution policies but there was recognition that there was "a risk to our tax base because people are mobile and can move." I think this is the first time I seen this acknowledged in recent years in the mainstream New Zealand media. That statistic actually doesn't reveal the true extent of the issue because almost all (97%) of income tax in New Zealand is paid by 17% of households*. 

The other statistic that received much more attention this week was that 10% of New Zealand households have around half of the wealth. The predominant media narrative was about how unfair this was, but when you delve into the figures a little more you find that around 60% of the assets held by New Zealand households is the family home. It seems to me to be churlish to begrudge people the wealth they have built up by buying the house in which they live.

Looking at these two statistics together gives a more holistic picture than either on its own. A few New Zealanders who work hard pay nearly all the income tax that supports the rest of society, and a few more, particularly those who are able to save enough to buy homes, manage to achieve some level of personal wealth over their lifetimes. This is the edifice on which all left-wing wealth redistribution policies are based. It all seems quite fragile really and a sudden economic shock - another global financial crisis, for example, that resulted in significant job loses and a property market crash here in New Zealand - could see the whole edifice crumble.

The left-wingers who call for ever-more-punitive taxation should bear that in mind.

* This is based on 2011 Budget figures but it won't have changed much since then.

1 comment:

paul scott said...



Back to that thing of believing what we want to believe again.
The info
@ That statistic actually doesn't reveal the true extent of the issue because almost all (97%) of income tax in New Zealand is paid by 17% of households*.
That is staggering, and if I had not heard similar repeated often, I would not easily believe .
Back to repeat repeat til they get it inside brain.
Here is my take on engineered equalitarianism. I wrote it on Peter Cresswell site I think, maybe Farrar. Engineered equalitarianism you can use that expression if you like.

I’m not sure Equality of opportunity exists. You are a child from a poor family, not just the money, your parents are, well, not so bright, maybe Mother only sometimes able to give you time,,your Dad is often away, you can’t understand the chemistry assignment . The kid next door helps you with Chemistry, at school, he goes on great holidays with his rich parents and to boot it all he’s straight out nice, and good looking. By the time you are married with your first kid, your neighbour lives in Brisbane as the CEO of a major company, he’s still nice, and he’s still good looking, and his wife is a knock out. He’s rich too. Massive salary, and his Dad gave him heaps.
You are OK though, you have the brains to see that that is reality, and you are not bad looking yourself. That’s the way it is. You can not manipulate natural things..