Christopher Ball

Population ageing and the growth of income and consumption tax revenue

This paper investigates the implications of population ageing and changes in labour force participation rates for projections of revenue obtained from personal income taxation and a consumption tax (in the form of a broad-based goods and services tax). A projection model is presented, involving changing age–income profiles over time for males and females. The model is estimated and applied to New Zealand over the period 2011–2062.

Tax Policy with Uncertain Future Costs: Some Simple Models

This paper considers the extent to which the standard argument, that the disproportionate excess burden of taxation suggests the use of tax smoothing in the face of future cost increases, is modified by uncertainty regarding the future. The role of uncertainty and risk aversion is examined using several highly simplified models involving a possible future contingency requiring an increase in tax-financed expenditure.

Food Expenditure and GST in New Zealand

This paper investigates the welfare effects on New Zealand households of zero-rating food in a goods and services tax (GST). The detailed effects, for a range of household types, are investigated using Household Economic Survey data. Demand responses to consumer price changes are estimated and welfare changes, in terms of equivalent variations, are obtained. Comparisons are also made across clusters, consisting of groups of households with similar characteristics. A tax change is found to produce a very small amount of progressivity in the GST. Redistribution is from households without children and with high total expenditure to households with children and low total expenditure, and towards older households.

New Zealand Households and the 2008/09 Recession

This paper quantifies how the welfare of different types of household changed between 2006/07 and 2009/10; a period which included the 2008/09 recession. We use three measures of household welfare: income, expenditure and the EV metric. Using household-level data from the Household Economic Survey (HES), we allocate households into groups, first based on one dimension (e.g. age) and then clusters. The clusters, groups of households that are similar on a number of dimensions, lead to inferences beyond what is available from our one-dimensional groups. Households in low-income groups, with children and/or who rent were particularly impacted by the recession in terms of welfare losses owing to price changes. However, we find that those in low-income groups had strong increases in expenditure; furthermore, the welfare gains from this increased expenditure more than offset the welfare losses from the price changes.

Inequality in New Zealand 1983/84 to 2013/14

ABSTRACT This paper provides an empirical analysis of annual income and expenditure inequality in New Zealand over a 30-year period from the early 1980s. The extent of redistribution through the tax and benefit system is also explored. Household Economic Survey data are used for each year from 1983/84 to 1997/98 inclusive, 2000/01 and 2003/04, and for each year from 2006/07.Survey calibration methods are used to examine inequality on the assumption that a range of (approximately 50) population characteristics remain constant over the period. Furthermore, decomposition methods are used to examine the separate contributions to changing inequality of population ageing, changes in labour force participation and household structure.

The distributional impact of population ageing in New Zealand

This paper examines the potential distributional impacts of demographic change, particularly population ageing, and changes to labour force participation that are projected to arise over the next 50 years. The approach involves calibration weighting of the Treasurys microsimulation model, Taxwell, based on the New Zealand Household Economic Survey. The weights are adjusted for each projection year to ensure that a range of population aggregates (by age and gender) match the projected values provided by Statistics New Zealand. Measures of income inequality and poverty, along with the incidence of income tax, goods and services tax and a number of components of government spending (namely health and education) across age groups, are obtained. The results suggest that population ageing and expected changes in labour force participation, in isolation, do not have a significant impact on population-level measures of income inequality.

Modelling retirement income in New Zealand

A microsimulation model is presented to project the fiscal impacts of retirement income policy in New Zealand, while extending the range of policies that can be evaluated. Socio-economic variables, such as income and education, are projected along with demographic variables, such as labour force participation and mortality, to provide a more comprehensive analysis of the impacts of pension reform in New Zealand. Mortality differentials are constructed based on socio-economic and demographic variables, and are used to derive future fiscal costs. The fiscal impact of four types of pension reform is presented. The reforms include an increase in the age of eligibility, a change in the annual adjustment process, a move to communal prefunding and a move to compulsory private savings with abatement.

The Timing of Income Tax Changes in the Face of Projected Debt Increases: Income Tax Changes and Projected Debt Increases

This article examines the time path of the income tax rate chosen by a hypothetical policy‐maker, in a model where an increasing ratio of government debt to GDP is projected in the absence of policy changes. The policy‐maker is assumed to maximise an objective function expressed in terms of a number of aggregate variables, including the excess burden of taxation and a desired debt ratio. Tax policy changes have feedback effects, as a result of incentives and other endogenous influences that impose constraints on the efficacy of those policies. Emphasis is given to the importance of uncertainty in devising an optimal policy and the consequent value of waiting instead of imposing a sharp initial increase in anticipation of otherwise higher future debt.