Appendix C: Attribution logic for tax and spending incidence analysis
| Category | Attribution Logic | Rationale |
|---|---|---|
| Market income | Attributed entirely to the earner of market income | Individual income reflects skills, experience, etc and personal choices |
| Direct Taxes | Attributed entirely to the person earning/receiving taxable income | An individual-based tax system in NZ; tax liability does not depend on family/household status |
| Working-age benefits | Attributed to the principal earner in a family or divided equally between principal earner and spouse, if applicable |
Benefits are intended to support individuals of working-age (16 - 64) through hardship Assumption is that carers allocate income shares to dependents on the basis of total disposable income |
| Working for Families (WfF) | Attributed to the carer in a family - the spouse if a couple, or the principal |
WfF tax credits provide additional support to families with children Assumption is that parents allocate income shares to children on the basis of total disposable income |
| NZ Super | Amount attributed to individuals by family status as reflected in NZS payment schedule e.g. single, married, NQS etc. |
NZS is a universal payment for individuals ages 65 and over; different amounts are received depending on partnering status If there are dependents, carers allocate income on the basis of total disposable income |
| Housing (AS) | Attributed equally among families within a household, then attributed to the principal earner in a family or divided equally between principal earner and spouse, if applicable. |
AS is intended to support low-income families with their housing costs Assumption is that carers allocate income shares to dependents on the basis of total family disposable income |
| Housing (IRRS) | Attributed equally among families within a household, then equally between principal earners/spouse within each family. |
IRRS supports low-income families with their housing costs Assumption is that carers allocate income shares to dependents on the basis of total disposable income earned by the family |
| Disposable Income |
‘Family disposable income' is shared among members of a family. It is attributed according to an assumption around the ‘need' of each family member. Secondary earners and dependents receive a lower proportion of disposable income than the primary earner. These proportions are based on the consumption weightings of the ‘OECD-modified scale'; the head of the household is assigned a value of 1, each additional member 0.5, and each dependent is assigned 0.3 |
Disposable income is the main mechanism for intra-family sharing. The assumption is that individuals in a household earn market income, pay taxes, and/or receive transfers, and then pool disposable income which is allocated to members of the family based on need. Different individuals are assumed to have different needs (see column attribution logic). |
| Health |
Attribution of health expenditure on an individualised insurance value basis. An individual's characteristics are taken into account to determine the amount of expenditure that should be attributed - these characteristics are: age, gender, ethnicity and deprivation index |
MoH funding of health boards takes into account the demographic and socioeconomic composition of each region. The criteria used in determining the level of funding each DHB receives, takes into account the age, gender and ethnic profile of the region and socioeconomic status of the population. |
| Education |
Attribution of education expenditure on an individualised basis. Use HES data on the reported use of early childhood and tertiary education services. Compulsory education expenditure attributed to those age-eligible. Student allowances are attributed based on self-reports in HES Those attributed allowances are attributed lower student loan write-offs. |
The universal provision of education services means that most education expenditure isn't targeted by income group. Therefore the incidence of this expenditure needs to be determined either by assuming recipients are age-eligible to receive it (compulsory education) or have reported participation in certain types of educational activities or receipts of education subsidies e.g. student allowance, loans etc. |
| GST |
For multi-family households, GST is allocated in proportion to disposable income of each family, unless one of the families earns below subsistence level ($60/week), when it is divided equally among the families. Then GST is attributed according to an assumption of relative needs of each individual. Secondary earners and children, individually, are expected to consume a lower proportion of the household expenditure than the primary earner. These proportions are based on the consumption weights of the OECD-modified scale; the head is assigned 1, each additional adult 0.5, and each child is assigned 0.3 |
GST is a tax on consumption, and the amount each person pays is a factor of how much he/she is expected to consume. It is assumed that individuals in a household have different consumption needs; the share of the total household expenditure that a person gets is the same as the share of the total household disposable income that they have access to. There are very few consumption items that are GST exempt, so it is assumed that each person in a household pays the same share of the total household GST as the share of expenditure they have received. |
| Excises | ||
| Alcohol |
For families that have reported alcohol consumption in HES, excises are attributed equally across all persons of legal age in the family. For multi-family households, allocate initially by proportion of total household disposable income earned by each family. |
In the absence of more granular information on who in the family/household is consuming alcohol, it is assumed that all adults bear the incidence of alcohol excises equally. |
| Tobacco |
For families that have reported tobacco consumption in HES, excises are attributed equally across all persons of legal age in the family. For multi-family households, allocate initially by proportion of total household disposable income earned by each family. |
In the absence of more granular information on who in the family/household is smoking, it is assumed that all adults bear the incidence of tobacco excises equally. |
| Fuel | For households that have reported fuel consumption in HES, excises are attributed equally across all persons of in the household in according to the share of the total household expenditure they are assumed to be receiving. | In the absence of more granular information on who in the household is consuming fuel expenses, it is assumed that all members bear the incidence of fuel excises according to their share of household income and expenditure |
| Final Income | Calculated on an individualised basis as net of income earned/received, tax paid and spending received | Gives a broad indication of the economic resources available to an individual |
