Well, I didn’t intend two blogs about Bill English in a row, until I saw this press release, where he cynically manipulates statistics to try and show that inequality is equality. English claims the tax system has become “more progressive” since National’s 2010 tax changes, because a higher proportion of income tax revenue is coming from the richest earners.
He’s ignoring one rather important point about income tax: You pay a lot of income tax if you earn a lot of income.
It’s not surprising that the top 12% of households (and 6% of individuals) are paying proportionately more income tax than they were in 2008, because they’re earning proportionally a lot more money. (The above graph shows the top 10%’s incomes rose from about $85,000 to $100,000 from 2008-2011, while the median income stagnated at about $30,000).
Simply put, the rich are contributing a bigger slice of the tax pie because they’re earning a bigger slice of the income cheesecake. This is not something to be happy about, and certainly doesn’t mean taxes are more “progressive.”
Let’s go back to high school for a sec: A progressive tax system partially offsets inequality by taxing higher incomes proportionally more than lower incomes. Income taxes are typically progressive (e.g. Bill English’s $297,400/yr is mostly taxed at 33%, while his toilet cleaner’s $14/hr is mostly taxed at 17.5%). Sales taxes like GST are flat (15% across the board), but in practice regressive, because they take up more of the poor’s incomes than the rich’s.
National’s 2010 tax changes made tax more regressive – the lowest income tax band (under $14,000) dropped 2%, while the top band (over $70,000) dropped 5%. Company and investment tax dropped too, but GST increased. Basically, in a time when tax needs to get more progressive to help combat inequality, National gave tax cuts to the rich instead.