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5.2 Non-Taxable Income Profiles
As shown in the previous subsection, it is necessary to consider separately the age-profiles of non-taxable income, including after-tax New Zealand Superannuation and other benefit payments. In this case it was found that a cubic term is not needed to describe the age-income profiles for non-taxable income for women. The estimates of the non-taxable income profiles are shown in Table 3. Here it is not necessary to know the variance of this component of income, although there is a systematic decline in the variance of logarithms with age, associated with the large proportion of the higher-age groups in receipt of benefits and the considerable variability among the lower age groups in additional sources of income. The age-profile of consumption rates are in Table 4, based on Gibson and Scobie (2001). In the projections reported below, it is assumed that the values of b are adjusted in line with wage growth, rather than prices. The use of a lower indexation rate (for example, maintenance of their real value rather than a steady increase) would of course reduce the growth of GST revenue.
Table 3: Age-Income Profiles for Non-Taxable Income
| Coefficient |
Males |
Females |
| α 0 |
8.547 |
8.805 |
| (114.751) |
(124.510) |
| α1 |
-9.168e-03 |
-3.229e-03 |
| (-1.782) |
(-0.646) |
| α2 |
4.353e-04 |
2.567e-04 |
| (5.872) |
(3.506) |
| R2 |
0.8337 |
0.7024 |
Table 4: Consumption Rates by Age
| Age group |
Consumption rate, δ |
| 15-18 | 0.95 |
|---|
| 19-24 | 0.95 |
|---|
| 25-34 | 0.89 |
|---|
| 35-44 | 0.89 |
|---|
| 45-54 | 0.94 |
|---|
| 55-64 | 1.01 |
|---|
| 65-74 | 1.16 |
|---|
| 75+ | 1.16 |
|---|
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