More than 40% of millionaires paying tax rates lower than the lowest earners, Government data reveals
This is very misleading.David Parker has commissioned research from Treasury estimating how much tax wealthy people pay as a proportion of their ‘economic income’. But treating economic income – which includes unrealised gains in asset values – like taxable income is voodoo economics.Parker’s decision to waste Treasury’s resources on such nonsense research can only be interpreted as a wilfully ignorant attempt to produce a scary headline about wealthy people dodging tax.The concept of ‘economic income’ should not be compared to taxable income. In fact, it’s not income at all. If your house goes up by $50,000 in a year, but you have no intention of selling, that’s not income – it’s just inflation.The same goes for stocks – in fact, stock values can fluctuate widely from year to year. Someone may see a large ‘economic gain’ one year but lose that gain the next. Taxing that original phantom gain would be madness and would make our tax system extremely vulnerable to economic shocks.Taxing economic income would hammer small-time investors, homeowners, and Kiwisaver members. The only tried-and-true way to ensure the wealthy pay their fair share is through low, flat tax rates, without complexities and loopholes that encourage gaming the system.