Wealth inequality is on the rise – Here are the graphs to show you why

Gareth MorganEconomics, Tax and Welfare8 Comments

Wealth inequality is on the rise; house prices are a major reason the rich are getting richer and the poor are getting poorer


Wealth inequality is on the rise – Here are the graphs to show you why was last modified: June 30th, 2016 by Gareth Morgan
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Gareth Morgan

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Gareth Morgan is a New Zealand economist and commentator on public policy who in previous lives has been in business as an economic consultant, funds manager, and professional company director. He is also a motorcycle adventurer and philanthropist. Gareth and his wife Joanne have a charitable foundation, the Morgan Foundation, which has three main stands of philanthropic endeavour – public interest research, conservation and social investment.

8 Comments on “Wealth inequality is on the rise – Here are the graphs to show you why”

    1. No party is going to bite the bullet and makes superannuation means tested.
      I offer a simpler solution. Make superannuation the primary source of income for tax purposes, no exceptions. ALL other income from whatever source is then taxed as secondary income at secondary rates.
      If this were the situation I would foresee a great many present superannuants renouncing their “pocket money” and many not bothering to apply in future

      1. It is already taxed at “secondary” rates, by definition. So-called secondary tax rates simply reflect the fact that the tax payer has already “used up” all or part of the lower tax brackets with their primary income. There is absolutely no difference to the amount of tax paid at the end of year irrespective of whether secondary rates are used at the time of earning.

    2. is it? I would thought it’s not a surprise that wealth and asset accumulation occurs mostly over the course of the lifetime. I found this the least intuitively useful of the charts above. the others told me a whole lot more.

      1. That’s right, it is natural to expect wealth to accumulate over your lifetime. So why do we then give people in this category – the people with the most opportunity to have taken care of themselves – the most generous benefit? The chart shows they are disproportionately advantaged, so why do we then extend such a generous benefit. That’s all money that could be invested in demographics that have potential to benefit society.

        1. I disagree too. It says “Average Net Worth by Individual Income and Age. Surely it is no surprise that people over 70, with an income of more than $70,000 have the highest level of assets. Thats where they get their income from. There is no indication as to how many there are; its unlikely to be many. Paying them the GRI, and taxing their whole income is likely to be cheaper than setting up a system of individual evaluations and saving ~$17,000 pa from each, especially if it makes them hide their wealth. Maybe a Comprehensive Tax on Capital would be the best idea?

  1. Your title is about wealth inequality but you immediately start referring to income inequality, and in that context you are being rather selective in the quotes you are using from the 2014 Household incomes report. The report’s summary notes that:
    – there was a large and rapid rise in household income inequality from late 1980s
    to early 1990s
    – there is no conclusive evidence yet of a rising or falling long-run trend since the
    mid 1990s ….
    … but another survey with a Gini score at or above the level in the 2014 HES
    will provide evidence of a rise since the mid 2000s
    – the share of pre-tax income received by the top 1% was steady for New Zealand at
    around 8-9% over the 20 years to 2012 (latest figures), a low to middle proportion
    for OECD countries
    – in all OECD countries wealth inequality is higher than income inequality
    – wealth inequality in New Zealand is around the middle for OECD countries

  2. That’s the long, specificexplanation as to why this is happening in NZ at this time. The general explanation is much simpler:
    If yo look at the annual total net worth of all New Zealanders, and calculate its annual growth, and compare this with the annual return on capital, you can see whether differences in wealth are increasing or decreasing.
    If the average rate of return on capital is more than the rate the annual total net worth is rising, inequality is increasing. Its as simple as that. This means that periods of low growth, as we have at present, are periods when rising inequality is most likely, especially when the increase in net worth is unproductive as it is at present.

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