Are Kiwi millionaires still considered rich?
There’s nothing like talk of a new tax to focus people’s attention on how well-off (or otherwise) they are really feeling.
But when the Green Party unveiled its proposals at the weekend, it made some people wonder – what does ‘‘wealth’’ really mean in New Zealand these days?
The Greens proposed a guaranteed income of $325 a week for those not in full-time work, paid for by a 1 per cent annual tax on net individual wealth of more than $1 million, and 2 per cent over $2m.
The party also wants two higher income tax brackets, for those earning over $100,000 and $150,000.
But is that really ‘‘wealthy’’? We set out to find out.
Without delving into individuals’ circumstances to work out what bills they’re paying with their six-figure income – or how many kids they have living in their mortgagefree $1m house – the best way to determine who’s ‘‘well-of f’’ is probably to look at wealth levels in comparison to the rest of New Zealand.
SIX-FIGURE INCOMES
You’ve probably heard that the median wage for New Zealanders is about $52,000 a year. But that hides a lot of variation.
There were about 71,500 people being paid the minimum wage (which has now risen to $18.90 an hour) in 2018 – disproportionately young people and those working part-time.
At the other end of the scale, Inland Revenue data shows that in the year to March 2019 – the last year for which there is complete data – 203,121 people paid tax on annual income of between $100,000 and $150,000.
Another 55,108 earned between $150,000 and $200,000, while 44,419 pulled in more than $200,000.
This does not include the very high-net-wealth individuals with assets of more than $50m who get their own department at Inland Revenue.
While this tally of six-figure earners adds up to more than 300,000 people, it’s not a large proportion of the roughly
2.6 million people in the labour force.
The bulk of New Zealanders earn between $40,000 and $80,000. So income of $100,000 probably does meet the requirement for ‘‘welloff’’, even though you may be servicing a large mortgage or trying to support a family on that. (Data shows that even households earning $100,000 still get some Government support.)
NET WEALTH
Do you know your own net wealth? You can calculate your net wealth, or net worth, by adding up the value of all your assets (house, car, flour and toilet paper collections) and then subtracting what you owe.
Stats NZ data shows that the median individual net worth for Pa¯ keha¯ /Europeans is $138,000 and $29,000 for Ma¯ ori – although this figure excludes assets in Ma¯ ori land and trusts.
There are 305,000 New Zealand individuals worth more than a net $1m. Of those, 175,000 are worth more than $1.5m.
That’s a healthy number of millionaires.
But by comparison, in 2018 there were 32,000 people who were in the red by more than $100,000 and 1.51 million people worth between nothing and $100,000. By that measure, if you’re worth more than $200,000 you’re
doing better than most.
WHAT’S THE 1%?
People often use the phrase the ‘‘1 per cent’’ as shorthand for the uber-wealthy in the world. Stats NZ data shows that to be in the top 1 per cent on an individual level in New Zealand, you need to have assets of $3.89m.
To be in the top 5 per cent, you need to clear $1.4m.
On a household level, you get to 1 per cent with combined assets of $7.8m. A top 5 per cent household needs $2.83m.
SHOULD WE TAX THE RICH?
While there has been more discussion of wealth taxes recently, economist Gareth Kiernan, of Infometrics, said it was not a mainstream idea yet.
He said many Scandinavian countries applied heavier taxes to higher earners than New Zealand did but there was a value judgment to make in how much redistribution New Zealanders wanted the tax system to achieve.
Researcher Jess BerentsonShaw, of think tank The Workshop, said a wealth tax would need to be set based on relative measures.
‘‘If a person has wealth at an amount that only 5 per cent of other people in New Zealand held and that group as a whole held, say, 35 per cent to 40 per cent of the total wealth in New Zealand statistics, it would be sensible to say they are rich,’’ she said.
‘‘And you could say ‘This is what we consider rich based on relative wealth in New Zealand’ and see how it went.
‘‘You would adjust it based on data over the years and public acceptability as well.
‘‘Basically, wealth – and poverty – is generally better conceptualised in a country like New Zealand as relative, so it makes sense to start a wealth tax in the context of that relative data.’’