Kiwi Polemicist

August 18, 2008

The rates rape

Would you be a little annoyed if your rates (local body taxes) rose by up to 400%? How about 650%? If so, read on.

According to central governmentRates pay for a huge range of infrastructure and services crucial to the quality of life expected by New Zealanders”. That’s a justification for state-legislated theft, and unfortunately my magic wand is out of order, so rather than halting this rape I intend to show the internal inconsistency in the way in which local bodies calculate how much they’re going to steal.

First, let’s see how rates are calculated. There’s a base tax, and on top of that there is a large portion which is calculated from the property value. Therein is the kicker: although property values do fluctuate, the overall trend is that the value of a property rises over time. So, in calculating taxes this way you’ve got guaranteed tax increases. In the process, more of your power base – money is power – is taken from you by local government.

What is the internal inconsistency in this calculation? It is this: the rates are supposedly going to pay for services that you consume. But the way the tax is calculated has meant that this year people are paying up to 650% more tax. Has their consumption of services risen by 650%? I don’t think so.

Let’s look at a concrete example. The article linked to above mentions FHM Automotive, whose rates have gone from $3189 to $24,054: that’s an icrease of just over 650%. Has the business used an extra $20,865 of services this year? If it has, the owner must have improved the business performance by about 650% and the guy is a genius. Never mind, punitive taxes will help to stifle such a stellar performance.


1 Comment »

  1. […] Rates (local body taxes) are a graduated tax, since they’re based on the government valuation of the property (i.e. the thieves decide how much they’re going to steal). The rates rebate scheme for low income people exaggerates this effect even more. […]

    Pingback by Graduated income tax, rates, and the Communist Manifesto « Kiwi Polemicist — September 10, 2008 @ 6:16 am

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