Income Tax Increase Not The Way Forward

German tax rate on corporate income 1995-2008

German tax rate on corporate income 1995-2008 (Photo credit: Wikipedia)

A recent Treasury report http://www.treasury.govt.nz/publications/research-policy/wp/2012/12-03/twp12-03.pdf   shows that after the top tax rate was increased the number of people paying the top rate actually fell. Interestingly the number of people earning just below the amount required to pay the top tax rate grew.  One way high income earners achieve this is simply reduce their salaries to just under whatever the tax rate is and leave more money in the companies they own.  If you’re concerned to ensure that the wealthy don’t have an unfair advantage then you may want to think twice about raising income tax rates. Raising taxes on alcohol and tobacco would make more sense.

Another useful initiative would be to require systematic analyses of the government social spending to make sure that the various programs really release recipients from poverty.

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