RPRC Quarterly Update, Volume 8 Issue 1, March 2015

 The RPRC Quarterly Update and the Leading Article  by RPRC co-director Susan St John – ‘Improving the Affordability of New Zealand  Superannuation’, and its links got submerged within a previous post (2 New Discussion papers).    The link above and the extract below, allow more consideration of this important article.

“This Working Paper focusses on the degree of targeting, and examines a way the tax system could be used to provide an increased claw-back of some or all of the net cost of NZS from high- income recipients. No one wants to copy the Australians with a full income and asset test.

The innovation in the paper is to offer a much simpler approach through the tax system. The first step is to pay NZS to every 65+ year old as a non-taxable grant or basic income. The paper suggests that the single sharing and married rates of NZS are aligned over time, so everyone gets the same basic amount equal to NZS after tax at the primary rate. This amount is unconditional and does not change. As other income is earned it is taxed on a new scale. The paper suggests 17.5% up to $15,000 and 39% above that will deliver worthwhile savings with very little pain.”

 

3 thoughts on “RPRC Quarterly Update, Volume 8 Issue 1, March 2015

  1. Michael Moynihan

    You are taking the existing formula for deriving the basic pretax married super……. and then you are applying the basic tax (at 10.5% to it) to arrive at your tax free grant. The rates changed on 1 April so it took me a while to catch up. So people who earn more than the minimum rate get the same free grant. Currently my wife and I are taxed at 30 cents in the dollar on our super, this is what we elect to pay. It comes out about right.
    I have done some sums on the population you wish to gain money from.
    I started with a household (of just two people) with income about $120,000
    roughly egually divided………I have done the sums and there is a meagre $4,000 difference in the tax take for our imaginary couple of two between the existing tax system and your system.. There are exactly 280 households who report more than $120.000 a year, So how would you sell this to the politicians and bureaucrats in Wellington? Or indeed to the nation? Look I would have preferred to have this conversation in private but it didn’t happen.

    Reply
  2. sstjohn2014

    The idea is that everyone is paid he same non-taxable grant. The issue was how much should this be? So that those with limited other income are no worse off it must be at the same dollar amount they get now which was $14 677 for each person in a MCouple. This grant would be adjusted so that it was never less than 33% of the net average wage as curently is the case.
    Hope that helps.

    Reply
  3. Michael Moynihan

    Very much agree about pension alignment of people sharing and married couples: in today’s the distinction is surely irrelevant. What puzzles me is the story from there on; you say NZS should be a non-taxable grant; in the next sentence you suggest this should be “the same basic amount equal to NZS after tax at the primary rate”. This does not seem to be referring to the average weekly after tax wage used as the basis of the existing formula for deriving the NZS payments so what can this tax be? What am I missing? It seems such an important part of the proposal.

    Reply

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