Can Automatic Tax Increases Pay for the Public Spending Effects of Population Ageing in New Zealand?
This paper examines the extent to which projected aggregate tax revenue changes, association with population ageing over the next 50 years, can be expected to finance expected increases in social welfare expenditures. Projections from two separate models, dealing with social expenditures and income tax and GST revenue, are used. The results suggest that the modest projected required increase in the overall average tax rate over the next 50 years can be achieved automatically by adjusting income tax thresholds using an index of prices rather than wages. Based on evidence about the New Zealand tax system over the last 50 years, comparisons of average and marginal tax rates suggest that such an increase may be feasible and affordable. The paper discusses the range of considerations involved in deciding if this automatic increase in the aggregate average tax rate, via real fiscal drag of personal income taxes, is desirable compared with alternative fiscal policy changes.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: School of Accounting & Commercial Law, Victoria University of Wellington, PO Box 600, Wellington, New Zealand|
Phone: +64 (4) 463 5775
Fax: +64 (4) 463 5076
Web page: http://www.victoria.ac.nz/sacl/about/chair-in-public-finance
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bandyopadhyay, Debasis & Barro, Robert & Couchman, Jeremy & Gemmell, Norman & Liao, Gordon & McAlister, Fiona, 2012. "Average Marginal Income Tax Rates in New Zealand, 1907-2009," Working Paper Series 2423, Victoria University of Wellington, Chair in Public Finance.
- John Creedy & Grant M Scobie, 2002. "Population Ageing and Social Expenditure in New Zealand: Stochastic Projections," Treasury Working Paper Series 02/28, New Zealand Treasury.
- Simon Loretz, 2008.
"Corporate taxation in the OECD in a wider context,"
Oxford Review of Economic Policy,
Oxford University Press, vol. 24(4), pages 639-660, winter.
- John Creedy & Grant M. Scobie, 2005. "Population Ageing and Social Expenditure in New Zealand," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 38(1), pages 19-39, 03.
- Matthew Bell & Gary Blick & Oscar Parkyn & Paul Rodway & Polly Vowles, 2010. "Challenges and Choices: Modelling New Zealand’s Long-term Fiscal Position," Treasury Working Paper Series 10/01, New Zealand Treasury.
When requesting a correction, please mention this item's handle: RePEc:vuw:vuwcpf:2820. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Library Technology Services)
If references are entirely missing, you can add them using this form.