English on 2010 tax switch
Here is Bill English in Parliament yesterday, describing his 2010 tax “switch”:
Hon David Parker: Is John Key the person he said bounces from cloud to cloud; if so, is it time to remind him that 40 percent of his 2010 income tax cuts went to the top 10 percent of income earners, which everyone paid for through an increase in GST?
Hon BILL ENGLISH: Any comment I have made about the Prime Minister is much more flattering and supportive than almost anything the Labour caucus is saying about its leader. I am sure that pattern will persist through to the election. Secondly, the member is simply wrong about the 2010 tax cuts. Analysis produced at the time showed they were distributionally neutral—that is, they had a similar impact on taxpayers of all income levels.
Whatever analysis Eaglish saw was false, and not worth the paper it was printed on.
Keith Ng’s dataset on tax-by-year allows us to see very simply that higher income earners received a greater percentage reduction in their income tax bill than middle or low income earners. So the tax switch was not distributionally neutral. And when you add in the fact – not shown on the chart – that higher income earners have less current year exposure to GST (as a percentage of income) than lower income groups, this disparity becomes worse again.
I covered this in my book about tax in New Zealand. No matter which sensible way you look at it, the 2010 Budget gave high income earners a large handout, while many other income groups barely broke even.