It’s strange. I always thought that New Zealand has a pretty progressive tax system – that the richer people get taxed more than the poorer, and that we have a share the spoils system that helps make NZ a great egalitarian society..
Meanwhile the USA is meant to be a dog eat dog place run by rabid Republicans that only care about reducing the tax burden for the incredibly wealthy at the expense of the downtrodden poor.
At least relatively. It is actually far far better (taxwise) to be poor in the USA, UK or Australia. Conversely, and somewhat unbelievably , it is far better to have a high income in NZ than those countries.
I’ve done some rough numbers – comparing NZ’s tax on “taxable income” with Australia (Federal plus NSW state), USA (Federal plus New York State and City) and UK (Blessedly simple). There are a bunch of caveats, so many that I’ve put Ten Caveats at the bottom of the post, after the fold.
Here is the basic result, where you can see how much tax you would pay if you earned a certain amount of US Dollars, and lived in the four different areas:
The shape of the curves is interesting – New Zealand starts very high, while the other countries give the poorer folk a break.
At USD $15,000 (NZ $21,500) low income Kiwis are getting a raw deal versus the rest. These charts show how much someone earning a certain level pays in total tax:
Everything is about even at $20,000 and $50,000 (see bottom of post), but at USD $100,000 (NZD $143,000) Australia is the place that is looking pretty sour. “Everyone” seems to say that tax is cheaper “over there” – but this is manifestly untrue for NSW professionals.
At USD $200,000 you would actually pay least tax if you lived in New York – which incidentally is one of (if not the) most expensive State/City tax combos in the USA. Australia is definitely not the place to be, with Aussies paying a crazy 9% more than taxpayers in USA & NZ, and 8% more than those in the UK. (That 9% is worth $18,000). Ouch.
There are a bunch more charts after the fold:
Here’s the USD $400,000 chart, which must make well paid Aussies feel a little ill. Those USD $400,000 income Aussies are paying about USD $47,000 MORE in tax than their NZ counterparts. Double ouch.
Let’s look at the really high income folk. You can see the Australia line just goes high and stays high, while the NZ line is underneath all three other jurisdictions from USD $206,000. I’m not saying where I am on the curve (I’d have to ask my mother…) , but moving to Australia permanently does not appeal on a tax basis.
Here is some other data (Orange charts), pulled from an excellent, if short, Australian Government briefing paper. It is a bit dated, and again there are plently of caeveats about the data not really being comparible, but gee, look at the charts. These are in Australian dollar (2o05) terms:
New Zealand taxes the poor much more heavily than the rest for the lower income groups, then eases off for the higher income folk:
So there you have it. NZ has a relatively regressive tax system, taxing the poor more than the USA does, and letting the higher income people pay less tax. Of course we have a social welfare system that tops up those lower incomes, and all sort of other things are going on, so let’s look at the caveats:
1: The tax rates are on “taxable income”, which can be very different across jurisdictions. In some places you are able to claim a ridiculous amount of exemptions and so forth, while in others there is little to do. Mortgages are a big example here.
2: It assumes that people declare their tax, and don’t use a foreign tax haven or dodgy tax avoidance/evason system. (I don’t have tme for these as judgment day will always come)
3: The NSW rates are higher than QLD, Vic and WA. I picked NSW as Sydney is a favored destination for Kiwis.
4: Similarly as mentioned NYC is not the cheapest tax rate in the USA – indeed there are zero taxes in Texas. However, given that New York City is a far more fun place for Kiwis than Dallas, I plumbed for Manhattan.
5: This assumes that you are paying for the same services, which is patently not true. In the US, for example, you have to pay (well you should pay) for health insurance in order to get at least a basic level of care. YOu can also get sued of you crash into someone, while in NZ injured parties are covered by ACC. Meanwhile in New Zealand you won’t have the same level of infrastructure or propensity to fight wars than the US.
6: This only looks at income tax, not at sales (GST) taxes, rates and duties. In NZ, for example, you’ll pay virtually no duties (aside from GST) on almost all goods, and ther eare very few artificial trade barriers. This means that motor vehicles are far cheaper in NZ than in Australia.
7: Cost of living varies wildly between different places, so actual disposable income will vary more.
8: I have not taken any superannuation into account – either it was embedded in the tax rate or not. I did include NZ’s ACC 1.3% allowance, and Australia’s health care premium.
9: You generally get paid more in the USA, UK and Australia (in that order) than in NZ. Who cares about a lousy 9% extra tax if you are earning double what you were paid downunder?
10: I did not take into account any social welfare payments made to, say, lower income groups. This could have a dramatic effect on those lower effective tax rates especially.
11: (bonus) I’m assuming I didn’t make any rookie mistakes in the calculations.
To do this properly needs a thesis. Perhaps there is one out there.
And to close, for completeness, here are some more charts:
At US $20,000 things are pretty equal, as they are at $50,000.
Finally the raw tax rates in local currency: