Mike's Minute: How to solve our long-term tax problem

In a world of pressing problems one of the bigger, longer term ones is due a good looking at because if we don’t, when we get there we will want to shoot ourselves.

IRD has been looking at the cost of stuff and where that money comes from.

The trouble, and this is not new, is we have more older people needing more money and fewer younger people to work to raise the money to pay the bills.

This is more than Super. It's health.

It's pretty much everything.

Currently 16% of the population is over 65-years-old. By 2060 it will be a quarter.

The IRD conclusion is that people will likely have to pay more tax.

Really? Is that it?

Well, no.

Somewhere in the advice they mutter something like "we could always cut costs". Bingo! Give those people a prize.

And why that idea is not top of the pile of ideas, I don’t know.

Because here is what I do know.

Most of the money to pay for all this comes from you and me. Personal tax is over 50% of Government income, its 52%.

Companies pay 17%. GST is 25%. A lot of GST is us as well.

In fact our top tax rate is 39cents. Add GST on to that you are at 54%. Add the bits and pieces on top - the ACC, the road user charges - and top income earners will be parting with 56-57% of everything they earn.

And the IRD advice is we will need more please.

So how much more? And at what point does it become ruinous? At what point do the young, bright things move offshore? The ones of course that haven't already.

So let's take stock.

We are highly taxed. Remember at the other end we have no tax free component in income. We are a low wage economy. We have a massive savings issue with KiwiSaver at an average of $30,000-ish and a fiscal cliff in a bunch of years where the main idea is we will bleed you some more.

Spot the red flag. So, what to do? And how urgently do we do it?

Ideas please.  

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Episode Transcript

Speaker 1 (00:00):
In a world of pressing problems, one of the bigger,
longer term ones is due a good looking at because
if we don't, when we get there, we'll want to
shoot ourselves. So IRD have been looking at the cost
of stuff and where that money comes from. Now the trouble,
and this is not new, is we have more older
people needing more money and fewer younger people to work
to raise that money to pay those bills. This is

(00:22):
more than super I'm talking about. It's health, it's pretty
much everything. Currently, sixteen percent of the population is over
sixty five. By twenty sixty that's going to be a quarter.
So it's going from sixteen percent to twenty five percent. Now.
The ird's conclusion people will likely have to pay more
tax really is that it? Well, no, Actually, somewhere in
the advice they mutters something like, we could always cut

(00:44):
costs while bingo there, bingo, bingo, bingo, give the people
a prize. Yes, we could. And why that idea is
not top of the pile of ideas, I don't know.
Because here's what I do know. Most of the money
to pay for all of this comes from you and me.
Personal tax is over fifty percent of government income. In fact,
it's fifty two per Companies pay seventeen percent GSTS twenty
five percent, a lot of GSTS from US as well.

(01:05):
So in fact, look at our top tax rate thirty
nine cents. Add GST on top of that, you're at
fifty four percent. Fifty four cents in every dollar. Add
the bits and pieces on top you know, acc road
user charges. All that top income earners will be parting
with fifty six or fifty seven percent of everything they earn.
And the ird advice is we're going to need more

(01:25):
of that, please, So how much more? And at what
point does it become ruinous? At what point do the
young bright things move off? Sure? I mean those are
the ones that haven't already gone, of course. So let's
take stock here for a moment and see where we're at.
We're highly taxed. Remember at the other end, we don't
have any tax free component in our income tax system.
We are a low wage economy. We have a massive

(01:46):
savings issue with KII saver at an average of thirty
ish thousand dollars in savings, that's all we've got, and
a fiscal cliff in a bunch of years where the
main idea is will bleed you for even more tax
spot The red Flag, So what to do I mean?
And how urgently ideas please. For more from the Mic
Asking Breakfast, listen live to News Talks at B from

(02:08):
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