Tax - What is it for?

[Baa_Baa]

Not a diversion at all Baa Baa. As I said when I started this thread, the fundamental question of what tax is for is overlooked. Once a clear reason for gathering tax is established it becomes justifiable. If the expenditure extends beyond those reasons it becomes unjustifiable. Where are the limits? What is tax for?

I've said my piece. I'm one of those funding the largese who don't know whether it's being reasonably spent.

What are your thoughts on your questions.

[jonu]

Put yourself in the shoes of the legislature, you need money, income, so who do you go after? Those that have money. Doh. It's 101 money grabbing.

The NZ tax system is fundamentally biased toward penalising those that have, while justifying it against those that have not.

It is not a long bow to draw to suggest every person in NZ has a responsibility to pay a fair tax, but it is not imo fair to suggest that responsibility is aligned to how much they earn.

A simple flat tax rate on all income, by anyone, under any circumstances, would be be fair and reasonable.

Correct me if I am wrong, but I take that to mean you are saying the NZ tax system leans heavily to the redistribution of wealth model. If that's the case it seems it does it very inefficiently. You also imply that the legislature is in the business of keeping itself employed (not something I entirely disagree with).

Do we need to get back to basics? How do we do that?

[fungus pudding]

I like GST since it is mostly unavoidable and is proportional to the amount you consume as apposed to the amount you earn. Given the choice to significantly slash income tax for higher GST, I think I would prefer that.

Bang on! It's hardly good for the economy to clobber anyone for being productive - or to dicourage them from earning. Far better to clip the ticket when they spend it. The only way to avoid gst is to not spend, IOW encourage savings, and that is good for the individual as well as the country.

[Baa_Baa]

I like GST since it is mostly unavoidable and is proportional to the amount you consume as apposed to the amount you earn. Given the choice to significantly slash income tax for higher GST, I think I would prefer that.

Some will argue that GST is an awful tax, as it's regressive and disproportionately affects people relative to their incomes, especially tax on essential items like food, as opposed to discretionary items and services. It is easily proven that a flat % consumption tax takes a greater % of a lower income than it does of a higher income.

[ValueNZ]

Some will argue that GST is an awful tax, as it's regressive and disproportionately affects people relative to their incomes, especially tax on essential items like food, as opposed to discretionary items and services. It is easily proven that a flat % consumption tax takes a greater % of a lower income than it does of a higher income.

It's proportionate to your consumption by definition. If you are on a low income you are more likely to spend a larger percentage of your income than someone on a high income which gives the appearance of disproportionately impacting low income households.

As fungus pudding has stated GST encourages savings. I prefer a society where there exists incentives to build wealth through investment/savings, remembering that cash in the bank is able to be lent out for investment (and sometimes multiple times over). Theoretically if income tax was slashed with GST covering the difference there would be a greater amount of capital allocated towards productive assets rather than non productive consumption which in my opinion should improve GDP growth over time.

[Panda-NZ-]

Let's have a land tax since that is also an efficient tax.

[Panda-NZ-]

As fungus pudding has stated GST encourages savings. I prefer a society where there exists incentives to build wealth through investment/savings, remembering that cash in the bank is able to be lent out for investment (and sometimes multiple times over). Theoretically if income tax was slashed with GST covering the difference there would be a greater amount of capital allocated towards productive assets rather than non productive consumption which in my opinion should improve GDP growth over time.

Consumption is highly productive, without it there is stagnation (see Japan).

Also investment in current property and most share transactions are useless. Have tax exemptions for situations where "new money" is involved like capital raises, ipo's or new property if you want but otherwise it's simply a rort.

[ValueNZ]

Consumption is highly productive, without it there is stagnation (see Japan).

Also investment in current property and most share transactions are useless. Have tax exemptions for situations where "new money" is involved like capital raises, ipo's or new property if you want but otherwise it's simply a rort.

Say I have a hundred thousand dollars, and I have the choice to either start up a business and buy machinery OR buy a ultra luxury vehicle, which choice is better for society? When I say investment I do mean it in the economics definition of the term that is the purchase of productive physical assets.

[Panda-NZ-]

Say I have a hundred thousand dollars, and I have the choice to either start up a business and buy machinery OR buy a ultra luxury vehicle, which choice is better for society? When I say investment I do mean it in the economics definition of the term that is the purchase of productive physical assets.

In practice it's a choice of buying $100k in shares or that luxury vehicle.

In that case it's the Luxury vehicle hands down.

[blackcap]

In practice it's a choice of buying $100k in shares or that luxury vehicle.

In that case it's the Luxury vehicle hands down.

It is far better for society if I invest in a business and make some that is actually of some use, rather than something that provides a service.