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Wednesday, August 24, 2005

Are they cuts for the rich?

Ever since National's tax cuts were announced, I've seen silly little graphs around showing the savings per week based on income. The thing is, all these graphs show the savings per week going up and up, because, well, savings from the tax cuts are proportional to the level of income. Face it - those graphs don't communicate anything interesting about the cuts.

What we really need to look at to get a true picture of the proposed cuts, is the savings as a percentage of income.

So, what does this tell us? Well, those that get the most benefit from the tax cuts, are the individuals with income between 50-100k - as shown by the multiple peaks in the graph. Sure enough, the richer you get, the less overall savings you make as a proportion of income, as the line trailing off to the right shows.

Now, the 0-50k bracket is interesting. It shows that as a proportion of income, that bracket doesn't benefit as much as the 50-100k bracket. This is a bit sad, and is where I would support something like a zero tax threshold for the first few thousand dollars to provide more savings to those in this bracket. At the same time however, it is also this bracket that likely receives many more benefits from the public purse than those receiving more than $40kpa.

Note: The data I used was for an individual because of simplicity - the family and student loans are more complex models with more independent variables. The figures were those obtained from taxcuts.co.nz, and the figures used were those for April 2007.

Posted by Bernard Woolley | 8/24/2005 02:13:00 AM


Blogger Berend de Boer said...

Boy, where's my comment? Am I censured??? :-)

I said a very useful piece of work, thanks!

8/24/2005 10:05:00 AM  

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