4.3.3  Health

Health benefits, like cash benefits, were more concentrated amongst lower-income households in 1997/98 than in 1987/88 (Figure 9). In particular, younger households with children (who tend to be located in the lower income deciles) appear to have markedly increased their receipt of health benefits over this decade, while households without children have in some cases reduced their average receipt of health benefits (Appendix Tables 24 and 30). In part, this trend is a result of differences in methodology between the current study, which allocates maternity expenditure to infants, and the Department of Statistics (1990) study, which allocated maternity expenditure to women of child-bearing age. This is unlikely to explain all of the differences between 1987/88 and 1997/98, however, since maternity expenditure is only a small part of total health expenditure.

Increased targeting of some health expenditures may have contributed to the trend shown in Figure 9. Government funding for general practitioner visits, pharmaceuticals, and some other health services became more targeted over the late 1980s and early 1990s through the use of the Community Services Card, held by low-income families and individuals. Population ageing may also have contributed, since elderly people attract much higher rates of health expenditure than younger people and are also concentrated in the lower half of the income distribution.

Figure 9 – Average receipt of health benefits, by income decile, 1987/88 and 1997/98

4.3.4  Total government benefits

Adding together cash benefits (Figure 6), education benefits (Figure 7) and health benefits (Figure 9) gives total government benefits by decile, which are shown in Figure 10. Average receipt of government benefits increased in the bottom five deciles and decreased in the top five deciles (Figure 10, I). The greatest percentage increase was in decile 3 (a 24% increase) and the greatest percentage decrease was in decile 10 (a 29% decrease). The bottom five deciles also increased their share of total social policy expenditure between 1987/88 and 1997/98 (Figure 10, II).

Figure 10 – Receipt of government benefits, by income decile, 1987/88 and 1997/98

I.  Average receipt of government benefits ($)

II.  Share of total government benefits (%)

4.4  Taxation

4.4.1  Income tax

Changes in tax payments result from changes in income and changes in tax rates. Figure 11 shows that in all deciles, with the exception of decile 10, average income tax payments were lower in 1997/98 than they were a decade earlier. This reflects a series of reductions in income tax rates, and changes in thresholds, over the period covered by the study. Table 1 shows the income tax rates and thresholds in 1986/87 and in 1997/98. Despite reductions in the top income tax rate, households in decile 10 paid more income tax in 1997/98 because they received considerably more gross (taxable) income in this year than comparable households did in 1987/88 (see Appendix Figure 1).

Figure 11 – Average income tax payments, by income decile, 1987/88 and 1997/98

Sources: Department of Statistics (1987) and Statistics New Zealand (1998b). Income thresholds have been adjusted for inflation. Tax rates are for the full year.

4.4.2  Consumption tax

In all deciles, with the exception of decile 2, average consumption tax payments were higher in 1997/98 than they were a decade earlier (Figure 12). This reflects an increase in GST from 10% to 12.5% in 1989 and, to a lesser degree, increases in tobacco, alcohol and petrol excises. The increase in consumption tax payments was highest in decile 10 because disposable income in this decile was much greater in 1997/98 than it was in 1987/88, and households therefore had more money to spend on goods and services (see Appendix Figure 2). Conversely, disposable income in decile 2 was lower in 1997/98 than it was in 1987/8, and the average consumption tax payment was about the same in both years.

Figure 12 – Average consumption tax payments, by income decile, 1987/88 and 1997/98

4.4.3  Tax payments in total

Adding together income tax payments (Figure 11) and consumption tax payments (Figure 12) gives total tax payments by decile, which are shown in Figure 13. In deciles 1 to 9, households paid less tax in 1997/98 than comparable households did a decade earlier. In decile 10, tax payments increased (Figure 13, I). Changes in the share of tax follows a similar pattern, with households in the top decile paying 30% of total taxes in 1997/98 compared to 24% in 1987/88 (Figure 13, II).

Figure 13 – Tax payments, by income decile, 1987/88 and 1997/98

I. Average tax payments ($)

II. Share of total tax payments (%)