Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/205646
Authors: 
Creedy, John
Gemmell, Norman
Year of Publication: 
2013
Series/Report no.: 
New Zealand Treasury Working Paper No. 13/22
Publisher: 
New Zealand Government, The Treasury, Wellington
Abstract: 
This paper examines the extent to which projected aggregate tax revenue changes, in association with population ageing over the next 50 years, can be expected to finance expected increases in social welfare expenditures. It uses projections from two separate models, dealing with social expenditures and income tax and GST revenue. The results suggest that the modest increase required 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.
Subjects: 
Social welfare expenditures
income tax
GST
real fiscal drag
ageing population
JEL: 
E62
H68
ISBN: 
978-0-478-40375-6
Creative Commons License: 
https://creativecommons.org/licenses/by/4.0/
Document Type: 
Working Paper

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