New paper on fiscal incidence and income inequality by age

The Treasury has published a new Analytical Note by Tod Wright and Hien Nguyen, Fiscal incidence and income inequality by age: Results for New Zealand in tax year 2018/19. 

This paper analyses incomes in New Zealand for 2018/19, extending beyond disposable income to include both government social services and indirect taxes. It shows that income support payments, taxes, and in-kind social services spending result in a profile of final income across an individual’s lifetime that is much flatter than that of their market income. Young and elderly populations benefit most from these policies through education and health services, plus superannuation payments for seniors. Working-age adults are net contributors, paying more in taxes than they receive in benefits. The analysis reveals that while market income inequality increases with age, especially among seniors, government interventions through taxes, support payments, and social services effectively reduce this inequality, particularly in older age groups.

Disclaimer: The views, opinions, findings, and conclusions or recommendations expressed in this paper are strictly those of the authors. They do not necessarily reflect the views of the New Zealand Treasury or the New Zealand Government. The New Zealand Treasury and the New Zealand Government take no responsibility for any errors or omissions in, or for the correctness of, the information contained in papers and articles.