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Thread: Raise GST to boost living standards

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    MotherBear's Avatar
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    Unhappy Raise GST to boost living standards

    Raise GST to boost living standards - report
    9:15AM Tuesday April 24, 2007

    An international report on the New Zealand economy has called for a major overhaul of the taxation system, including cutting income tax but raising GST.

    The Government quickly dismissed the OECD proposals, saying they read like a "National Party manifesto".

    The report, released publicly this morning, said New Zealand's economy faced an uncertain future, with low household savings and strong inflationary pressure.

    It said living standards were lagging behind other developed countries and an improved tax scheme was needed, to guard against an increasingly mobile workforce and international flow of money.

    Options included lowering the top tax rates and increasing GST to compensate.

    More here .

    Living standards are slipping .
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    The report also suggests raising the age of eligibility for universal superannuation and reducing its value in real terms over time. ... Creating a more favourable environment for savings and investment will also require a well-designed tax system consistent with the objective of raising living standards.

    The OECD is a funny organization, hated at times by both the right and the left. I think the above recommendations are telling, however. They seem to go hand-in-hand to push people into private retirement schemes, like the IRA's and 401(k)'s that we have here in the US. There's nothing wrong with those programs, but they do pre-suppose that people have extra money to stash away in the first place.

    I think the gov't is right to reject the recommendation that income tax rates be cut and GST be raised. All this does is shift the tax burden from those who can afford it to those who cannot afford it. A better choice would probably be to create a third tax bracket (perhaps at 40% on $100K and above) and reducing what would be the two lower brackets.

    I'm not sure what advantage would be gained by having a capital gains tax. I don't follow the logic on how that would create more investment. Wouldn't stocks, too, be subject to capital gains taxes?
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