Rowan published a New Zealand tax statement of how the government might spend the tax collected from the average household income ($67,973 NZD).
Fascinating!1 After seeing this I wanted to know how New Zealand compared to the United States. For example, how would the same salary be taxed in Illinois and how would those taxes be spent?
Based on the United States federal budget of 20082 and the net pay calculator for the state of Illinois during the 2008 tax year, here’s the American tax statement:3
| Taxable Income in Illinois | $67,973.00 | |
| USA Federal Tax Paid | $18,017 | 26.51%4 |
| Social Security | 3,774 | 21.0% |
| D.O. Defense | 2,988 | 16.6% |
| Medicare | 2,396 | 13.3% |
| Unemployment/Welfare/Other mandatory spending | 2,011 | 11.2% |
| Interest on National Debt | 1,620 | 9.0% |
| Medicaid and State Children’s Health Insurance Program (SCHIP) | 1,297 | 7.2% |
| War on Terror | 901 | 5.0% |
| Health & Human Services | 430 | 2.4% |
| D.O. Education | 347 | 1.9% |
| Other On-budget Discretionary Spending | 321 | 1.8% |
| D.O. Veterans Affairs | 244 | 1.4% |
| Other Off-budget Discretionary Spending | 242 | 1.3% |
| D.O. Housing & Urban Development | 218 | 1.2% |
| State and Other International Programs | 217 | 1.2% |
| D.O. Homeland Security | 212 | 1.2% |
| D.O. Energy | 150 | 0.8% |
| D.O. Justice | 125 | 0.7% |
| D.O. Agriculture | 125 | 0.7% |
| National Aeronautics & Space Administration | 107 | 0.6% |
| D.O. Transportation | 75 | 0.4% |
| D.O. Treasury | 75 | 0.4% |
| D.O. the Interior | 65 | 0.4% |
| D.O. Labor | 65 | 0.4% |
Let’s compare any amount over $500 between America and New Zealand:
| Taxable Income | $67,973.00 | |
| USA Federal Tax Paid | $18,017 | 26.51%4 |
| Social Security | 3,774 | 21.0% |
| D.O. Defense | 2,988 | 16.6% |
| Medicare | 2,396 | 13.3% |
| Unemployment/Welfare/Other mandatory spending | 2,011 | 11.2% |
| Interest on National Debt | 1,620 | 9.0% |
| Medicaid and State Children’s Health Insurance Program (SCHIP) | 1,297 | 7.2% |
| War on Terror | 901 | 5.0% |
| New Zealand Tax Paid | $17,779 | 26.16% |
| Ministry of Transport | 4,393 | 24.7% |
| Ministry of Social Development | 3,414 | 19.2% |
| Ministry of Health | 2,317 | 13.0% |
| Ministry of Education | 2,040 | 11.4% |
| Inland Revenue Department (IRD) | 1,331 | 7.4% |
| The Treasury | 1,238 | 6.9% |
| New Zealand Defence Force | 499 | 2.8% |
So what sticks out? America: social security, defense, unemployment, debt and war. New Zealand: transport, social development, health, education and defense.
That’s a cynical and dangerous look at the tax breakdowns, but even so, the War on Terror would proportionately receive almost twice as much tax as the Ministry of Defence.5
And what’s that? Interest on National Debt?
Is New Zealand even in debt?
Surprisingly, I would pay more tax in Illinois than in New Zealand (over $2,000 more). And Americans don’t even have the same benefits as Kiwis, like public health care or financial support for accidental injuries. Plus, I don’t need to file a tax return in New Zealand (which is a service I would pay for, and apparently do). Why does the IRD receive so much money?
Which makes me wonder, if you could allocate your tax dollars to specific departments, would you? For example if you don’t want to finance “proactive war,” would you give that money to your favorite department, like the National Aeronautics & Space Administration?6
Decades ago this wouldn’t have been possible (logistical nightmare) but this type of government seems feasible today.
Although, it scares me to think about the nutters who would give their tax to the Department of Defense.
But it could be a way to clearly see where the people want their money spent.
1. This year I started tracking my personal finances. I concluded after two months I am an alcoholic, and if I didn’t drink my wages I would be a millionaire.
2. The budgets from 1996 to 2009 are available online. View the budgets here.
3. The calculated proportions of the budget does not distinguish between income tax, payroll taxes, corporate tax, excise tax, customs, estate and gift taxes. It’s all lumped together, so the figures are at best estimates of how the government spends income tax.
4. Illinois state tax is an additional 3 percent, totalling $2039.16. This brings the total taxed to 29.51%.
5. Spelling defense with a “c,” blasphemy!
6. I did go to space camp, after all.
I recently came accross your blog and have been reading along. I thought I would leave my first comment. I dont know what to say except that I have enjoyed reading. Nice blog.
Tim Ramsey
I must say this is a great article i enjoyed reading it keep the good work
Thanks Tim and Mike, much appreciated…
yeah, great post Jeff - why does the IRD get so much money?!
I haven’t a clue! I think the figures are an indication of the proportion of tax payed to each department, but the IRD received 7.5% of the total budget. Weird, eh?
Wouldn’t you need to take into account the currency exchange rate somewhere in there?
That 67,000USD would convert into about 98,312NZD, which would increase your taxes by quite a bit in NZD.
Yup I could, but it gets tricky. From which day should I use the currency exchange rate? The one from last year or the one from today? The NZD was very strong just a few months ago, nearly 82 cents to the dollar. But with the sub-prime mortgage debacle, last week it was around 65. That makes a big difference…
Even though the total value of the money might be different, I was more interested in the proportion of tax that each government spends.
Jeffery.
This is cool.
Yu r sum(awe).
IRD has working with families and child support agency to contend with so is partly social development.