(Continued from previous message)

got special tax treatment on the capital gains tax side.

LM> That effect is very real, and not recoverable.

Nope, thats mostly myth too. The super stuff is very long term stuff
and the introduction of the GST doesnt have that effect basically.

LM> The income tax benefits apply more to those on higher incomes
LM> (>$80,000) while the low and middle income get screwed.

Thats wrong too. The income tax benefits apply to anyone who sees
any of the marginal tax rates change, or the tax free threshold
change. You can do whatever you like as you adjust the relative
tax in income tax and GST type taxes. If you say hike the tax free
threshold, you dont even get the effect you are talking about at
all, every one who is paying any gets the same benefit.

RS> Turns out a fantastic percentage of his income goes on very heavily
RS> taxes stuff, grog and smokes, and he would be better off with the GST.

LM> [Pensioner's income...] Hopefully atypical.

I doubt it is actually. And with any welfare scheme, its quite trivial
to adjust the welfare payment to ensure that they arent worse off with
a GST. And relatively easy to calculate too coz you know the same rate
applys to all the things they spend their money on OTW. With the current
system its much harder to see that some people like that are paying very
high sales type taxes when they happen to spend most of their income on
the stuff which is heavily taxed. You dont get that severe penalty with
a GST for particular spending patterns. Its much easier to work out what
is an equitable welfare payment coz you know say 15% goes on GST type
taxes whatever their spending patterns.

In fact that gross distortion of the tax system is much more drastic
for those welfare recipients in the current system. They arent normally
paying any income tax, what you collect from them is almost all indirect
taxes, its outrageous to be ripping so much back off some of them because
their particular spending patterns get caught in a very warped indirect
tax system. Atleast with the wealthy its not the end of the world if they
say pay lots of tax on fancy grog. They are likely rorting other parts of
the tax system anyway. The pension normally cant do stuff like that. He
has been comprehensively screwed by the tax system.

LM> There are many young families who are stretched to the limit
LM> and not spending on booze and smokes.

You would be surprised if you looked at it carefully. In fact smoking is
far far more common at that end of society. Ditto the heavy expenditure
on say beer. Its even quite amazing what those people can spend on some
of the so called luxury items, particularly fast food and soft drinks and
sweets. Most of which have luxury tax levels in various ways.

RS> Yes, but you have to explain why its almost universal in the
RS> first world countrys now. Clearly it cant be such an open and
RS> shut case that its bad. NZ doesnt even talk about it much now
RS> the introduction was so undramatic.

LM> It's compulsory for all OECD countries.

Nope.

LM> In NZ in 1988 there were 300,000 registered collectors.

And the system works and they dont seem to find any real problem.

--- PQWK202