Capital Gains Tax

[Aaron]

[QUOTE=minimoke;351006][QUOTE=Aaron;351001]

GST is commonly considered to be a regressive tax - but only where all things are equal. It is arguable that a person paying $2.80 is simply paying for the milk.They aren't buying a service and perhaps they cant afford a service - but they are buying a good. Where as a person paying $5.50 is paying for the milk and a service. The greater a person's income the greater their opportunity to purchase additional services - consequently the greater their share of the tax burdon.

****I agree, people in general tend to spend more the more they earn and I agree that the wealthy will pay a lot more GST than the not so wealthy. What I am saying is that the not so wealthy will pay more GST as a percentage of their income and they have less choice in reducing how much tax they pay.****

I'd also suggest it isn't regressive because poor people have their income topped up through either government benefits or "working for Families". The "poor" person isn't spending all their income on things that attract tax. They are being subsidised by the government who is funded by the higher income earners who contribute more to the tax take. Consequently the tax burden isn't fully felt by the poor person.

****I don't want to debate how the taxes are spent just that GST is regressive and unfair.****

If we look at my milk analogy, lets say a poor person earns $10. Roughly 5.6% of that person income has gone on the tax. Lets say the rich person earns $20 - he's still paying around 5.6% tax. How is that regressive?

****In your example both people spend roughly the same proportion of their income so pay roughly the same proportion of tax compared to their income although the $20 guy has paid almost twice as much GST. From a previous post you didn't want to debate how much the basic necessities of life are but can you agree that if you don't eat you die and if you don't have clothes and shelter hypothermia could be a problem in winter. Assuming you agree with the preceeding statements you can understand that at a very basic level people will need to spend a certain amount to live its not really a choice. ( option (1) buy food and pay GST or (2) die). Spending and consumption over and above that is discretionery. In your example if the basic necessities in life cost $10 then one guy is going to pay $2 GST. The other guy can spend $20 if he wants to and will pay proportionately the same amount of GST but he can also choose to spend $10 and invest the other $10. Tax paid as a portion of income for Mr $10 is 20% for Mr $20 its 10%. Also Mr $20 may benefit on not having income tax or capital gains on his investments.****

(Oh - and I assume we can take it that a "regressive" tax is seen as a very bad thing because it hurts the poor where as a progressive tax is a very good thing because it hits the rich. Ideals I'm not comfortable with!)

Personally I see a tax that expects those least able to pay actually paying a higher proportion of their income as unfair and bad. Its an ideal I am comfortable with. I also don't think progressive taxes are always better. In fact with a flat capital gains tax rate we could flatten the income tax rates as well and try and make things as fair as possible.
Not sure how to break up your quote so my other responses are between the **** within the quote above.

[minimoke]

[QUOTE=Aaron;351032][QUOTE=minimoke;351006][QUOTE=Aaron;351001]

Personally I see a tax that expects those least able to pay actually paying a higher proportion of their income as unfair and bad. Its an ideal I am comfortable with. I also don't think progressive taxes are always better. In fact with a flat capital gains tax rate we could flatten the income tax rates as well and try and make things as fair as possible.

Well Aaron. there are parts of life that aren't fair. Sh#t happens. You either adapt to your environment, you do something to make the most of it or you do something to better it. The choice is the individuals. Now I figure paying taxes to support some lazy benificairy so they can enjoy a life style of sloth and KFC is unfair. I think its unfair I pay taxes so some fat person can get their obesity can be treated in a public hospital. I don't think it fair that my taxes are paying for the sins of our forefathers. But as I say Sh#t happens, time to move on.

What I am saying is that the not so wealthy will pay more GST as a percentage of their income and they have less choice in reducing how much tax they pay.

So Moses came down and wrote in stone that person should only pay a certain percentage in GST relative to their income. I don't think so. They do have some choice - but not necessarily a lot. They could buy that cheaper bottle of milk, they could go to the second hand shop for brand new clothes or alternatively they could do something to increase their income and hold their expenditure. I'd hazard a guess the low income earners are disproportionate users of government spending. We know for example that low paid Maori have greater numbers in prison than higher paid Asians. If you are a consumer why shouldn't you pay your fair share.

I don't want to debate how the taxes are spent just that GST is regressive and unfair.

As I have already pointed out a consumption tax is not necessarily regressive. That is your view but again something that isn't set in stone. That they are "unfair is certainly worth debate since that is pure opinion and speculation.

If we look at my milk analogy, lets say a poor person earns $10. Roughly 5.6% of that person income has gone on the tax. Lets say the rich person earns $20 - he's still paying around 5.6% tax. How is that regressive?

In your example both people spend roughly the same proportion of their income so pay roughly the same proportion of tax compared to their income although the $20 guy has paid almost twice as much GST. From a previous post you didn't want to debate how much the basic necessities of life are but can you agree that if you don't eat you die and if you don't have clothes and shelter hypothermia could be a problem in winter. Assuming you agree with the preceeding statements you can understand that at a very basic level people will need to spend a certain amount to live its not really a choice. ( option (1) buy food and pay GST or (2) die).

We are fortunate to have a government that will provide a minimum level of income to families, beneficiaries, superanuitants that prevents them from dying. That seems to be fair to me but I can't figure why a person who is unproductive should have the same net income expectations as a productive person. Nor do I see why productive people should subsidise those who want a life style that their income can't support.

Spending and consumption over and above that is discretionery. In your example if the basic necessities in life cost $10 then one guy is going to pay $2 GST. The other guy can spend $20 if he wants to and will pay proportionately the same amount of GST but he can also choose to spend $10 and invest the other $10. Tax paid as a portion of income for Mr $10 is 20% for Mr $20 its 10%. Also Mr $20 may benefit on not having income tax or capital gains on his investments.

The reason being is that Mr$20 has earnt more than Mr $10. Why should he not be entitled to keep the benifits of his labours?