Let's talk numbers (I use too many parentheses)
Beating on about the Budget, I know - skip past if you don't care.
It's the coverage that's interesting me right now. On the news, they say that for some the changes to Kiwisaver will make them better off. This is completely true.
For those not up with the nuts and bolts of Kiwisaver, as well as what you put in yourself, the government pays $20 every week, and your employer pays 2% of what you earn every week. Under the Budget, these numbers will be changed to $10 from the government and 3% from the employer. You can already see the problem - one has halved and the other gone up by 50%. Because they're in different formats, this means different things at different income levels. The point at which you break even is obviously when 1%=$10, ie when you earn $1000 a week.
Except, not. You see, they've also made employer contributions taxable. If you're earning a grand a week, you're going to be in the 30% tax bracket, so for 1% to still be $10, you have to earn $1000 a week after tax - $1428 before. (Taking 1k, dividing by 7 and x 10.) So to make a profit, you need to be earning upwards of about $1450.
Just for fun? The latest figures, from June 2010, list the average weekly income as $529. To improve the returns on your Kiwisaver under this budget, you need to be earning nearly three times the average weekly income.
Which brings me to something else. The newscasts also dwelled a little on the fact that the employer's contribution is, in fact, now taxed. They had done the maths themselves to show us how much tax was being paid on that 3% at various income levels - $50,000 and $70,000, and I think $90,000 as well.
If you're not that good at maths, the average weekly income of $529 multiplied by 52 weeks in the year is $27,508. You have to be earning twice the average wage (based on weekly income) before the news channel I was watching (I'm not sure which it was, but I suspect One) will show you a simulation of how the changes will affect you. (For the record, the annual income at which Kiwisaver becomes an improvement is $74,256.)
I know why the Budget is how it is. I hardly expected anything better. But it absolutely baffles me that the news coverage is focusing so much on the affects on high earners - or, I suppose, combined incomes in a multiple-breadwinner household of an undetermined number.
I tried to find a nice graph of income distribution in NZ, but the first decent thing I found was this article and decile listing. It's from 2008, unfortunately, but still gives us some interesting information:
"So, the median income is around the decile 5 boundary of $23,000 a year. But the median income for wage and salary earners for that year was $729 a week, or $37,908 a year, putting a median wage earner squarely in decile 7."
(this is due to not working consistently throughout the year, presumably, such as people who can only find temporary jobs or those with health problems or lifestyle issues that need working around like children)
78% of us don't even pay the middle tax rate, and the top tax rate is utterly irrelevant to 91% of the population. Remember that next time the government or the media talk about "middle-income" tax cuts - they're not talking about you, or most of New Zealand. Instead, they're only talking about themselves.
And those figures are per household, as backed up by 2007-8 figures here, admittedly on Wikipedia.
This entry was originally posted at http://keieeeye.dreamwidth.org/178967.html. Feel free to comment there instead because LJ is a poo.
It's the coverage that's interesting me right now. On the news, they say that for some the changes to Kiwisaver will make them better off. This is completely true.
For those not up with the nuts and bolts of Kiwisaver, as well as what you put in yourself, the government pays $20 every week, and your employer pays 2% of what you earn every week. Under the Budget, these numbers will be changed to $10 from the government and 3% from the employer. You can already see the problem - one has halved and the other gone up by 50%. Because they're in different formats, this means different things at different income levels. The point at which you break even is obviously when 1%=$10, ie when you earn $1000 a week.
Except, not. You see, they've also made employer contributions taxable. If you're earning a grand a week, you're going to be in the 30% tax bracket, so for 1% to still be $10, you have to earn $1000 a week after tax - $1428 before. (Taking 1k, dividing by 7 and x 10.) So to make a profit, you need to be earning upwards of about $1450.
Just for fun? The latest figures, from June 2010, list the average weekly income as $529. To improve the returns on your Kiwisaver under this budget, you need to be earning nearly three times the average weekly income.
Which brings me to something else. The newscasts also dwelled a little on the fact that the employer's contribution is, in fact, now taxed. They had done the maths themselves to show us how much tax was being paid on that 3% at various income levels - $50,000 and $70,000, and I think $90,000 as well.
If you're not that good at maths, the average weekly income of $529 multiplied by 52 weeks in the year is $27,508. You have to be earning twice the average wage (based on weekly income) before the news channel I was watching (I'm not sure which it was, but I suspect One) will show you a simulation of how the changes will affect you. (For the record, the annual income at which Kiwisaver becomes an improvement is $74,256.)
I know why the Budget is how it is. I hardly expected anything better. But it absolutely baffles me that the news coverage is focusing so much on the affects on high earners - or, I suppose, combined incomes in a multiple-breadwinner household of an undetermined number.
I tried to find a nice graph of income distribution in NZ, but the first decent thing I found was this article and decile listing. It's from 2008, unfortunately, but still gives us some interesting information:
"So, the median income is around the decile 5 boundary of $23,000 a year. But the median income for wage and salary earners for that year was $729 a week, or $37,908 a year, putting a median wage earner squarely in decile 7."
(this is due to not working consistently throughout the year, presumably, such as people who can only find temporary jobs or those with health problems or lifestyle issues that need working around like children)
78% of us don't even pay the middle tax rate, and the top tax rate is utterly irrelevant to 91% of the population. Remember that next time the government or the media talk about "middle-income" tax cuts - they're not talking about you, or most of New Zealand. Instead, they're only talking about themselves.
And those figures are per household, as backed up by 2007-8 figures here, admittedly on Wikipedia.
This entry was originally posted at http://keieeeye.dreamwidth.org/178967.html. Feel free to comment there instead because LJ is a poo.