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The Herald Attacks the "Rorting" Rich with no Evidence

The Herald is running the headline, "NZ tax system is fairer than you think despite big earners rorting top rate, rejected report finds". The word "rort" is defined by most dictionaries as being a "fraudulent or dishonest practice". The article cites former Revenue Minister David Parker's IRD report on the taxes paid by the wealthiest Kiwis. It found no evidence whatsoever of fraud or dishonesty. Quite the contrary, the wealthiest Kiwis are dutifully paying the top rate of income tax of 39% and also, like wealthy people in nearly every nation, have significant capital gains on their assets. Those gains are not taxed in NZ. There are good economic reasons not to tax capital capital gains, by the way, since doing so can discourage savings and capital accumulation. So where is the "rort", Granny Herald?


The Herald article then goes onto report the graph below, showing that after the top income tax rate increased from 33% to 39% in the 2022 tax year, there was a "spike" in the numbers of taxpayers earning just below that figure. The Herald said "The suspicion is people do this to avoid having much, if any, of their income taxed at the top rate". Well, the bunching could equally be explained by bog-standard economics, namely that when tax rates greatly increase at a certain level, people exert less effort since working to earn more above that level would lead to less money in their pocket. For example, if the top tax rate went to 100% above $180,000 then no-one is going to work at all to earn anything above that threshold - leading to an extreme "spike". Maybe the Herald could have the decency to report this explanation before attacking the rich and labelling them as dishonest and fraudulent folks who "rort" the system, which builds up public animosity to those folks.




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