Dr Don demonstrates 91% marginal tax

Even in my posts I had only complained about 67% marginal tax. But Dr Don demonstrates for a family of 5 living in Auckland the marginal rate is 91%. Get rid of this bunch of socialists. they are killing initiative.  Full text of Dr don on Tax.

It is a set of policies that is taking New Zealand into a world riddled with perverse incentives. It amounts to a declaration to nurses, junior doctors, teachers, builders, plumbers, engineers, the skilled and the energetic, that you will not get ahead in this country no matter how hard you work.

You doubt that? Let me give a simple example.

Suppose you are a principal income earner on $38,000 with a partner and three young children, living in a central Auckland suburb, and eligible for the accommodation supplement. You decide you want to get ahead faster and get better clothes for the kids. You get a new qualification, work longer hours, and take on more responsibility. Your salary eventually rises to $70,000 a year, $32,000 more than before. But your after-tax-and-benefit income rises not by $32,000 but by just $2,856, with the other $29,144 going to the government. Your effective marginal tax rate is 91%. The abatement of the accommodation supplement contributes significantly to this, but even without that the government takes 66% of the increased earnings.

So why would anybody go to all the effort?

Comments

[Scottie]

I remember when I was on a student allowance I got an effective 300% or so tax rate on a bit of extra money my partner earned (the reason for this is there is a cut off rate - above which your assistance drops dramatically).

I have to say, not being stupid and all, we put a stop to that pretty damn quick.

[Ruth]

No-one cares they are killing initiative sage one. Labour will prevail because they survive on beneficiaries and creating dysfunctionality.

[Greyshade]

It's very simple if you tax at 39%, abate Family Support at 30% and Accommodation supplement at 25% - all on the same dollar - you are taking 94%. If the hapless taxee also has a child in tertiary education the parental means test on their student allowance takes it up to 119%, and then there's community service cards. It makes it all a bit meaningless to argue over whether ACC is a tax or a User-pays charge. The only thing that stops this problem being really widespread (apart from the fact that it isn't implemented yet) is that it's quite a performance to get Accommoation Supplement (It's bad enough just trying to find out how it works.) BTW I've just updated my paper on Basic Income/UMR to a 2008 base. I'll EMail you a copy.