new income tax rate

[OLLIE 26]

not sure how this will help with the country's deficit .... but nonetheless the changes are pretty good.

[westy 614]

An excert from the exchange in parliament yesterday.

Hon BILL ENGLISH (Minister of Finance): Yes, I agree with the statement, and the current system is progressive. The top 10 percent of taxpayers pay 74 percent of net income taxation.

So no exageration.

??? care to elaborate.

Edited May 20, 2010 by westy

[M325is 0]

Start digging those mines already!

I'm happy with Mr. Key's call. Loving the business tax cut!!

And as for why should one tax group pay for beneficiaries? Now its all a little more evenly spread don't yeh think?

[Braeden320 0]

??? care to elaborate.

Its called the 80/20 Rule, You can apply it to all sorts of things.

[pureboiracer 0]

Start digging those mines already!

I'm happy with Mr. Key's call. Loving the business tax cut!!

And as for why should one tax group pay for beneficiaries? Now its all a little more evenly spread don't yeh think?

+1

[cliffdunedin 8]

An excert from the exchange in parliament yesterday.

So no exageration.

Ah very true, I guess that makes sense considering the top 10 percent will mainly be large business owners employing huge numbers of staff ie Tindall etc

Its called the 80/20 Rule, You can apply it to all sorts of things.

How does this have anything to do with an 80/20 rule?

[Guest Simon*]

20% of the people, cough up 80% of the taxes

Tindall's been gone for ages. He's a full time philanthropist and sits on a number of boards IIRC.

There's been a Scot at the helm for a couple of years at least.

[lidistick 70]

Edited May 21, 2010 by lidistick

[Guest Simon*]

Oh bro do I have to???

It was boring enough the first time!!!

[westy 614]

Ah very true, I guess that makes sense considering the top 10 percent will mainly be large business owners employing huge numbers of staff ie Tindall etc

How does this have anything to do with an 80/20 rule?

This from the NZ treasury website.

The top 10% of income earners (those earning more than $70,000) pay more than 40% of all income tax revenues and about 20% of GST revenue.

Hardly the Tindals of this world.

And the 80/20 rule is a general statement that means 80percent of your income comes from 20percent of your customers. The numbers vary but the principal remains.

[39KiwiTouring 2]

Any thoughts on what will happen to residential rents and selling prices?

Edited May 21, 2010 by E39KiwiTouring

[Cale 36]

The person who said this is bad for beneficiaries is wrong, cos they get a 2% increase in their payments to cover the GST increase, just like pensioners. The poor level of equality will still remain the same.

I think overall, this is a good budget. We are in a trough in the business cycle which requires the government to employ expansionary fiscal policies (tax cuts, increased govt. spending) which increases aggregate demand/national income/GDP pulling the country out of the slump.

The target is growth of 3.5%, which I think they will easily achieve at least 3% next year. Just the lag affect of the changes that is concerning, and could cause problems if the government thinks the economy is somewhere where its not right now.

Also above I saw about the budget deficit, who cares. It isn't exactly uncommon for governments to run deficits during recessionary times, in fact, its neccessary for the above reasons. Just like the govt can bring out deflationary policy and run a budget surplus in booms. Smooths out the erratic economic cycle.

Pretty sure GST increase will be impact the rich more than the middle or lower. Price levels are going to increase regardless of tax changes, due to the expansionary fiscal measures, but then increase again with the GST increase on top of that. I still think this will be negligible to the general public.

It will be interesting to see what monetary measures the RBNZ takes.

[OLLIE 26]

this report is worth reading

[39KiwiTouring 2]

Great post Quali, I think the RBNZ will increase rates 0.25% on June 10 and each time thereafter until about 3.5-4.0%

[CamB 48]

Any thoughts on what will happen to residential rents and selling prices?

Rents? My opinion probably nothing much --> surely every landlord sets their rent based on what can be paid rather than how much they need.

Prices? Might depend which end of the market. Its marginally worse for property investors so where the competition for houses is between landlords and owner-occupiers the price might come back a little. At the upper end, a portion of the tax cuts might make their way into housing values (more "affordability" - I use that term loosely as houses are unaffordable in many areas).

Edited May 21, 2010 by CamB

[Docile 64]

heard on the news aswell.. house prices are going to drop due to the new house investment thing they fixed... that would mean sh*t for people already have house(s) and yay for home buyers...

[bravo 34]

What bollocks. The only reason house prices will change is if the media make a song and dance over what are really very minor changes to taxation on rental investments.

Many property investors already choose not to depreciate their buildings and will be unaffected.

Depreciation on buildings in most cases is really only used to improve cashflow. As most property appreciates over time, when you sell it the IRD claws back all of the depreciation. Some people were using it like an interest free loan from the government. This will stop, but it won't make a blind bit of difference for most investors.

Similarly with the changes to LAQC's. This has a slightly greater effect as a highly leveraged investor with no plans to make their investment an income asset (preferring to make use predominantly of capital gains) will not be able to use an LAQC to as great an effect as before. But once again, a large number of investors (the smart ones anyway) derive income from their property investments, and thus the LAQC model is still of use to them.

I have investment property both in a LAQC and outside of one. Some property I depreciate, some I don't. Some paper-napkin maths tells me I will be more or less unaffected by the changes. Only the shifty investors or those in over their head will be affected in the most part.

Basically if the ill-informed media shut their pie-holes, there should be little or no effect on property prices.

[39KiwiTouring 2]

^^ Agreement...

[CamB 48]

Think about it - it depends whether the marginal investor (ie, he or she buying properties in the last few months / year) has been relying on depreciation to make them work. If they drop out (or drop their price), then the new transaction (ie market) price could be lower.

The reliance on properties bought some time ago is irrelevant to this.

As a separate issue, if there are a significant number of properties pushed onto the market as they are no longer sustainable for the owners their could also be downward pressure on prices. Its more questionable whether this will happen (I think not - for the reasons you say).

[bravo 34]

Agreed Cam. The assumption is that these type of investors do not make up the majority. Many of those are likely to have already been ejected through lack of equity and/or loss in income due to a slow rental market and possibly a drop in their main source of income as a result of the recession. Only those that were firmly grounded pre-recession (or are very lucky) would have survived relatively intact.

Also, I have noticed somewhat of a plateau in prices over the past 1-2 months, or perhaps more telling - a drop in number of sales and an increase in median number of days on the market.

I suspect some of this has to do with investors, who may be keen to increase their holdings while prices are fairly low, holding out until the release of the budget.

Now that we see that in the most part, the viability of property as an investment vehicle has not changed, I'm looking forward to seeing a little more action, or at the very least a short-lived boost as those who were waiting, take the plunge.

[stolen 0]

I like how it's not going to work in the favour of people on the dole. extra GST = more money spent, since they don't get taxed really they don't really benefit from the savings.

From NZ Herald:

His wife, Sarah Pathak, 20, is a fulltime nursing student on a student allowance of $150 a week. Her allowance will go up by $3 a week in line with a 2 per cent increase in all benefits to compensate for the GST hike.