Archive for the 'tax' Category

Right plans give away to rich at your expense

Published
by
Steve Pierson
on November 18, 2008
in national/act government and tax
. 69 Comments

Part of the National/ACT government’s agreement is that a top tax rate of 30% will be the target for the ‘medium term’. Such a cut would cost about $2 billion a year.

Now, I have nothing in principle against reducing tax (and nothing in principle against increasing it, for that matter). It’s a question of trade-offs, which is greater benefit: the services the tax could pay for or the tax cuts, and who gets those benefits? $2 billion a year, that’s a lot of hip operations, so it’s worth asking who would benefit from replacing Labour’s legislated tax cuts with National’s current programme and a 30% top rate added to it (ie. 30% top rate kicks in at $50,000).

Hmm, maybe it will look less like pillaging ordinary Kiwis’ social wage to give the rich a bonanza if we do it in graphical form.

Maybe not.

Now, I can already hear our righties with better ideology than maths saying ‘yeah but when you cut taxes you have to give more to the rich’. That’s not true, of course, the current tax cuts cap out at $55 a week for anyone earning $80K or more. Anyway, the Right’s tax cuts don’t just give more to the rich, they give more to the rich as a percentage of their incomes.

$2 billion a year either coming out of public services or paid for by more debt to pay for massive tax cuts to the already very well-off. It would be ordinary Kiwis who would ultimately pay for this extravagant gift to the rich. Doesn’t seem to me that Mr Moderate has the mandate for that.

The Standard line: Tax cuts

Published
by
Steve Pierson
on October 30, 2008
in The Standard line, election 2008, labour, national and tax
. 23 Comments

[update: download this (tax-and-kiwisaver-calculator) simple excel table that will calculate tax cut and Kiwisaver losses under Labour and National, and the difference, for you and your family. No other calculator has included Kiwisaver losses]

So, you’re talking with someone about politics and they say something really dumb and wrong and you know it’s wrong but you don’t have the arguments and facts at your fingertips to make a decisive point. That’s where our election series, The Standard line, comes in. The info you need in bite-size form. Today: tax cuts

Points:
- tax cuts are not the only thing you should judge a party on. Tax is used to provide public services - there is a trade-off between tax cuts and better public services
- don’t just consider your personal situation. Just because one party offers you a bigger tax cut is it worthwhile if others you care about lose out?
- If you, like 1 million people, earn less than $14,000 the tax cuts from both parties are the same
- If you, like around 500,000 people, earn $14,000 to $24,000 you get more from Labour’s tax cuts
- If you, like around 500,000 people, get Working for Families, Super, or a benefit and your income is less than $44,000 your tax cut is larger under Labour because you wouldn’t get National’s ‘independent earner’ rebate
- if you, like 850,000 people, are in Kiwisaver you will be better off with Labour because National would cut Kiwisaver to pay for its tax cuts.
- Most of the money in Labour’s cuts will go to low and middle incomes, most of the money in National’s cuts would go to the wealthy. Just 10% of people get 40% of the money in National’s cuts.
- A family with children, each parent earning $35,000 and in Kiwisaver would be $52 a week worse off under National compared to Labour’s cuts. John Key would be $87 a week better off.
- National’s next round of tax cuts would come in 2009, a year before Labour’s next round, but there is nothing in that second round for anyone earning less than $48,000 and most of the money would go to people earning more than $70,000.
- Labour’s tax cuts are already passed into law. Labour has said they will not be cancelling their next rounds of cuts

The Standard line: Kiwisaver

Published
by
Steve Pierson
on October 24, 2008
in The Standard line, economy, election 2008, kiwisaver, national and tax
. 26 Comments

So, you’re talking with someone about politics and they say something really dumb and wrong and you know it’s wrong but you don’t have the arguments and facts at your fingertips to make a decisive point. That’s where our election series, The Standard line, comes in. The info you need in bite-size form. Today: Kiwisaver

Points
-National says 4% is too much to save and more people would join their 2% scheme but sign-up to Kiwsaver at 4% savings has been twice what was expected, 830,000, and people on middle incomes, $20,000-$40,000, are actually over-represented among Kiwisavers.
-The huge numbers of Kiwisavers is not just the rich signing up their kids. 55% of Kiwisavers only have income from wages or salary. Another 31% earn part of their income from wages and salary.
- Under National’s plan, Kiwisavers would lose 2-4% of their gross income in lost contributions from their employer and the Government.
- Every Kiwisaver, no matter their income, would lose more money from lost Kiwisaver contributions than they would get from larger tax cuts from National.
-A typical family on an income of $65,000 with both parents in Kiwisaver stands to lose $50 a week from National’s tax and Kiwisaver policy.
- National’s plan would halve the size of your Kiwisaver nestegg. It adds up to hundreds of thousands of dollars for young people.
- The money National would save by slashing Kiwisaver would be spent on giving tax cuts for the rich. Slashing Kiwisaver would save $3 billion, National’s tax cut plan would cost about $4 billion more than Labour’s, about half that money would go to people on incomes over $80,000. That constitutes a big shift in wealth from ordinary Kiwis to the rich.
- As a country, we need to save more, otherwise we have to borrow from overseas to grow our economy. So, far Kiwisaver has created a $1 billion savings pool, and that is growing exponentially. Rather than saving for growth, National would slash savings and give the money to the most wealthy to spend. In the long-run, that’s bad news for New Zealand.

Wrong time for short-term thinking

Published
by
Steve Pierson
on October 14, 2008
in climate change, economy, election 2008, environment, families, greens, health, housing, national and tax
. 89 Comments

National’s Nick Smith has announced that they would cancel the $1 billion fund to insulate New Zealand houses, which the Greens won as part of the Emissions Trading Scheme. This massive programme would improve energy efficiency, create warmer, healthier homes and would provide useful employment during the downturn. A study, ironically carried out under National and mentioned to me by Nick Smith, showed that insulating a State house saves $2 in health costs per $1 of insulation - it actually saves the Government money to invest in insulation. But National would cancel the plan. Their priority is tax cuts right now, not a myriad of benefits in the future. I suspect for Nick Smith, personally, this is another ‘dead fish’ he has to swallow to get back into power.

This is part of a disappointing trend from National. Under the Tories, we would see Kiwisaver gutted, R&D credits gone, and no money for insulating homes. These are all programmes that are a long-term investment in creating a wealthy, more high-tech, healthier, more efficient New Zealand but National would rather use the money for tax cuts for the rich (something like 80% of the extra money in National’s tax cuts goes to people on incomes over $100K). It’s this short-term thinking that got us into trouble in the 1990s. They attacked our public services, education, health, benefits and cut taxes for the wealthy. The effects are still being felt now as the children of the Mother of All Budgets reach adulthood.

Now, more than ever, I don’t think New Zealand can afford to be run by a party that refuses to make long-term investments in the future.

Trickle-down

Published
by
Steve Pierson
on October 12, 2008
in assets, bill english, economy, election 2008, families, kiwisaver, media, national, public services, slippery, spin, tax and workers' rights
. 10 Comments

A few thoughts from today’s Agenda:

Questioned about why National would introduce another tax rebate, having endlessly criticised Working for Families because of its complexity, English says ‘we do, in the long term, want a simpler tax system’. So, be on notice, Working for Families is under threat from National - they would ‘eventualy, but not yet’ replace these targeted tax rebates with tax cuts (for the wealthy, naturally)

English deseperately trying to defend trickle-down economics without naming it was a little sad. He must miss the 1990s, when he could just say what he believes.

He says National would stand behind the vulnerable. The most vulnerable workers (people on incomes from $14K to $24K, working families where the parents each earn less than $44K, and anyone on Kiwisaver) would be worse off under National. Meanwhile, the most wealthy New Zealanders would get higher tax cuts the higher their income. National would stand behind the vulnerable alright, as they pushed them over the cliff.

Rawdon, ‘the top 20 countries getting together and coming up with a unilateral solution’. Saying unilateral rather than universial or multilateral once sounds like a slip up. Doing it twice in a row suggests you don’t know what you are talking about.

I’ve read everything David Skilling’s New Zealand Institute has published. Universally, the work is poorly researched and provides threadbare arguments, usually lacking any empirical evidence, that lead to a radical, neo-liberal pro-rich ’solution’. Look at his ’solutions’ to the credit crisis - tax cuts for business, selling off public assets, tax cuts for rich expats coming back. Basically, tax cuts for the rich masked as an economic package. No evidence that these would do anything for growth and nothing for most Kiwis. But ‘radical economic package’ sounds impressive, eh?

John’s cheese

Published
by
IrishBill
on October 12, 2008
in john key and tax
. 16 Comments

For the many of you who won’t know, Tory boys David Farrar and Cameron Slater have been driving around the country interviewing MPs and youtubing the results. They did John Key in Rotorua the other day and the result is telling:

What particularly interested me was Key’s response to DPF’s question (at 1′45″) about what he’s done with Labour’s tax cut.

His answer was he’s bought a block of cheese.

Funny thing is, when you run Key’s opposition leader’s salary through the tax cut calculator you find out he gets $28 extra a week running up to $55 extra a week in 2011. Even with today’s inflated dairy costs, that’s a hell of a big block of cheese.

But I guess he’s talking in comparison to his tax plan which would see him get an extra $65 a week above Labour’s package (to a total of nearly $120). In fact seeing as he’d be the PM under that circumstance his total tax cut would be more like $166.

By comparison a couple on a single wage of $40,000 per year with two young kids (and there’s a lot of Kiwi’s that fall into that group) would, under National, be paying an extra $5 a week in 2011 than they would under Labour. Presumably the tax hike for all those low income workers and their families would be to pay the difference for Key’s tax cut and the tax cuts of anyone else who is lucky enough to be in the top 1% of New Zealand’s earners.

I’m sure all those low income earners and their kids would appreciate the block of cheese John so hilariously claims is rotting in his fridge.

And to think National are claiming it’s Labour that are arrogant and out of touch.

[Update: A friend of mine who works in Parnell says Key was in the shop a week or so ago and bought one of these. AYB]

Costs of the Nats tax cuts - commentators’ views

Published
by
Dancer
on October 9, 2008
in articles, same old national, tax and uncategorized
. 4 Comments

Here’s a smattering of what some of the commentators are saying:

Gordon Campbell: Putting tax cuts ahead of science and research neatly underlines the lack of vision, or sensible strategy for growth in the National package … The cutbacks on science and research will only send more scientists and high tech jobs offshore and rob New Zealand of the ways and means to add value to our exports. Ditto for the savings that would have helped to reduce debt, promote productive investment, help people to afford for their first homes, or plan for their retirement.

John Armstrong: If the election is about economic credibility, then the rescue plan will have to consist of more than amending the Resource Management Act or Key calling in public service chief executives for a stern chat.

Brian Fallow: … even from the standpoint of fiscal prudence, never mind aspirations to higher living standards, the crucial yardstick against which to measure economic policy is whether it will contribute to lifting that productivity number. National’s tax package, which also includes scrapping the R&D tax credit - admittedly only one plank of its economic policy - does not score highly by that measure.

Jenni McManus: Voters awaiting National’s grand plan for managing the effects of the global financial crisis will be disappointed in the tax and economic package released today by opposition leader John Key and finance spokesman Bill English.

And from the same article:

Jo Doolan: a tax partner at Ernst & Young, says she is “gutted” at Key’s overall package, saying she’s hoping it’s a policy of political expediency to get National elected, rather than what it might actually do in office. “The whole thing is hurried and ill-conceived,” Doolan says. “Top earners don’t need tax cuts when people are struggling and times are tough. When you introduce a big change like Kiwisaver, you don’t tamper with it. We need to develop a savings culture and this sort of thing doesn’t help. People need certainty.”

Doolan says she suspects behind the package is political one-upmanship - that Key and English were determined to outdo Cullen by producing a self-funding tax cut package, no matter what damage might be done in the process.

The R & D cut is another sore point.

“People do spend on R & D,” Doolan says. “The whole aim is to focus on R & D and improve productivity. What little growth we’ve had in the past few years has come from growth in the labour market. If we’re going to grow and improve, the only way is by improving manufacturing processes, better software development, being environmentally friendly - things like that. That’s where anyone with any vision would want to go.”

She says Key has missed a golden opportunity to show New Zealand some leadership. As she sees it, he just blew it.

“Either we’re part of the global world or we’re not.”

I’d second that!

Reviews of Nats’ tax cut/Kiwisaver cut/R&D cut policy

Published
by
Steve Pierson
on October 8, 2008
in election 2008, kiwisaver, national and tax
. 37 Comments

Just a quick note at the start for our press gallery friends who live in central Wellington on high incomes. 50% of New Zealanders have an income below $27,000 and 50% of workers earn less than $37,000 a year (all of which is heaps higher than it was under National). The point is this: National’s tax cuts are smaller for those people on middle incomes ($20,000-$40,000) than Labour’s are; $47,000 plus is not middle income.

The political actors weigh in on National’s tax cuts:

ACT: Not enough cut
Greens: More debt and poverty for those on middle incomes (20-40K)
NZF: What are tax cuts when your work rights are lost?
UF: Nats ignore low incomes, UF proposes income splitting (which benefits well-off)
Labour: Gutting Kiwisaver and R&D stupid, families get bigger cuts with Labour
NDU: Workers forgotten by National
EPMU: Top earners win, workers lose
PSA: Job cut fears
SFWU: Nats punish low income workers
NZEI: No service cuts but where’s the commitment to improving education?
CTU: Slashing Kiwisaver, no cuts for low incomes, bad for workers 
Business NZ: Small steps in the right direction
Employers’ and Manufacturers’ Association: Tax cuts good, R&D credit cuts bad, Kiwisaver cuts good
Manufacturing and Exporters’ Association: Bad call to cut R&D credit and Kiwisaver

Hardly glowing.

No tax cut for most from Nats

Published
by
Steve Pierson
on October 8, 2008
in national and tax
. 86 Comments

As predicted on The Standard, National has announced it would abolish the increases in the bottom threshold to pay for tax cuts for the rich. Here’s a break down of what would happen:

April 1 2009: Lift 33 cent thresold from $40K to $48K, reduce 39 cent rate to 38 cents.
April 1 2010: Lift 33 cent threshold from $48K to $50K, reduce 38 cent rate to 37 cents.
April 1 2011: Reduce 21 cent rate to 20 cents.

What wouldn’t happen - the parts of Labour’s tax cuts that would be replaced:

April 1 2010: Lift 21 cent threshold from $14K to $17.5K, lift 39 cent threshold from $70K to $75K. cancelled.
April 1 2011: Lift 21 cent threshold from $17.5K to $20K, lift 39 cent threshold from $75K to $80K.

So, where does this leave you? Here’s the difference in National and Labour’s tax cuts across income levels (above 100K, National’s cuts keep rising, Labour’s plateau at 80K):

That’s right. Most people would recieve a smaller tax cut under National than they would under Labour. Because the bottom threshold would not be increased by National, Kiwis earning up to $44K, some 2.4 million people, would get the same or larger cut from Labour. But the ultra rich would recieve much more from National. Someone on $250K a year (a Leader of the Opposition, say) will get an additional tax cut of $3750 a year from National by 2011.

Now, National has announced a tax rebate - the Independent Earner Rebate - of $10 a week, rising to $15, for people earning between $24,000 and $50,000 who aren’t getting Working for Families, a benefit or Super. Take a look at the graph and you’ll see that will make up for the abolishment of the bottom threshold increases for those people but it will leave anyone on $14,000-$24,000 and anyone getting WfF, a benefit, or Super worse off.

So, tax cuts for the rich, nothing for most of us. Who could have seen that coming?

[in coming posts, we'll look at the fiscal consequences and how National would fund their cuts - as we predicted, it's by slashing Kiwisaver]

Tax cuts for the rich

Published
by
Tane
on October 8, 2008
in election 2008, national and tax
. 29 Comments

National has released its tax policy. At first glance it appears the top rate will be reduced to 37% by 2011, giving the rich thousands of dollars in tax cuts. People earning $24-50k who aren’t getting Working for Families will get $15 a week rebate by 2011. Working families will basically get nothing, except for a 1% tax cut in three years’ time.

The package will be paid for by gutting Kiwisaver - the employer contribution will be essentially scrapped as Key halves the minimum contribution and forces workers to pay for it out of their own wages anyway. This will obviously have a huge impact on the savings rate and the future domestic capital base New Zealand businesses need to grow and pay higher wages. Stunningly, the research and development tax credit will also be scrapped.

Medium-term, Key says he wants to reduce the top tax rate to 33c for people earning $50,000 or more. This will lead to a massive growth in inequality in a country already marked by obscene disparities of wealth.

I honestly can’t believe this policy. I knew National were right-wing, but I thought they had more political sense than this. With today’s tax announcement, the ’sensible centrist’ facade is over.

The test

Published
by
Steve Pierson
on October 8, 2008
in election 2008, labour, national and tax
. 83 Comments

After building a political career that has consisted of little more than calling for tax cuts and attacking those that were delivered, John Key will finally present his party’s tax cut package today. Already, they have had to reduce its size but they will still make it the central part of their mystical economic platform that is meant to stop emigration, lift us out of recession, prevent junior doctors’ strikes, and make our whites whiter. The supposed transformative powers of larger tax cuts underpins and defines National’s ‘time for a change’ message. So, they better deliver something that can make a difference

As a guide to what to expect, let’s take one element of National’s promises- reducing emigration via tax cuts. I find it hard to believe that anyone’s decision to emigrate to Australia or not is tipped by less than $2000. So, say, National could reduce emigration significantly by offering tax cuts, I think it’s fair to say that would need to offer more than $40 a week to most Kiwis above Labour’s tax cuts (which National dismissed as the block of cheese tax cuts). If they don’t pony up, their wailing that Kiwis are emigrating because of Labour’s tax policies will be revealed as completely hollow. As will their promise of transformative tax cuts.

Before the announcement, it is opportune to look again at the distribution of income as well who benefits and how much from the Government’s cuts:

[Update: Just saw this in the Herald: "The $50 reduction [for a worker on the average fulltime wage] won’t be reached until until April 2011, and will include the tax cuts Labour introduced on October 1.” Now, Labour’s cuts have already delivered $16 increasing to $32 by 2011 for the average worker. So, National will be offering just $6 a week than Labour each year to 2011. $6? All this over $6?]

Farce

Published
by
IrishBill
on October 7, 2008
in kiwisaver and tax
. 17 Comments

It was with wry amusement I read Bill Ralston’s revisionist history of New Zealand superannuation today. According to Bill it was Muldoon who created an “unsupportable” super scheme as an election bribe in 1975. Of course anyone who remembers the situation (as Bill certainly should) knows full well that the real story was big Norm’s compulsory super scheme and the fact that Muldoon scrapped it in order to push cash into the pockets of voters in the face of what were looking to be, and indeed became, very dark economic times.

Over a year ago AYB discussed that super scheme and the fact that it would have provided for more than $280bn in investment capital for New Zealand today if it had been kept, so I won’t go into great detail about it but Muldoon’s scrapping of it was a truly grand political error that we are still paying the price for.

Bill Ralston may have got his facts wrong but that point in New Zealand’s economic history is one that is particularly pertinent as it is tomorrow that National will announce its tax cuts which are expected to be funded by cuts to the employer contribution to Kiwisaver. That would free up the $20 a week credit the government provides to employers for every worker in the scheme. An opportunist political decision made at our expense as we head into dark economic times. Sound familiar?

As I’ve written before cutting the employer contribution to Kiwisaver would cost an average worker with forty years of work ahead of them up to $190,000.

But the loss won’t just be to New Zealanders in Kiwisaver but to the businesses now and in the future that would have been able to access that capital.

In short it would be a move that sacrificed long-term stability and wealth for short-term political gain. Exactly the mistake Muldoon made over thirty years ago and one that Bryan Gaynor has described as our worst economic decision over the past 40 years.

We know Key has claimed an admiration of Rob Muldoon in the past but I can only hope that doesn’t extend to cutting a hole in New Zealand’s economic future just so he can save face on his over-hyped tax cut promises.

Because despite Marx’s claim history repeats itself first as tragedy and second as farce, I’d prefer if this particular piece of our history didn’t repeat itself at all.

Update: after re-reading this post this morning I’ve tightened the description of the outcome of Muldoon’s cutting of Kirk’s scheme to more accurately reflect its political implications.

Changing the subject

Published
by
Steve Pierson
on October 7, 2008
in election 2008, john key, national, slippery and tax
. 15 Comments

Former National advisor Richard Long has let the cat out of the bag. The day before National’s much-hyped, cure-all tax cut package is to be announced, he is desperately trying to change the subject. National has nothing but tax cuts to offer, it has been their one consistent answer for every problem but, now, tax cuts are a liability. National’s tax package will disappoint on all fronts - it will certainly need more borrowing, it will be too small to affect the economy, and most people will be offered very little, certainly much less than the $50 people have been led to expect. A disaster of unmet expectations looms. So, National is suddenly, for the first time in nine years, keen to talk about something other than tax cuts.

The debates have become absolutely crucial. Long reveals this by making only cursory mention of tax cuts before devoting most of his column to the debates. National is now putting big resources into getting Key ready. Exceeding expectations in the debates will be all important. The Key we see will not be the bumbler - he will appear well-informed and give the impression he has solutions (which will be kept suitably vague). And he will be aggressive. Since he has no answers, he will have to be to shift the focus from whether or not he has anything better to offer to creating dissatisfaction with the incumbent. That is already evident in the wider campaign. Key has stopped even bothering to tell us he is ‘positive and upbeat’. Now, he doesn’t even pretend he is not being uniformly negative as he seeks to blame everything, including the largest meltdown in the international finance system since the 1930s on Labour. The debate will be the same.

The gambler’s great punt on tax cuts will come up a dud tomorrow, so Key will have to put all his remaining chips on outshining, even rattling, Clark during the debates. If he can’t, all bets on a National victory will be off.

Previewing the Prefu

Published
by
Steve Pierson
on October 5, 2008
in economy, election 2008, public services and tax
. 9 Comments

Tomorrow the government’s books will be opened up. It is not expected to be a pretty picture. Oil prices and the credit crunch have forced the economy into recession. The debt to GDP ratio will be higher than was modelled in the Budget for three reasons (at this point, I just want to remind our excitable righties that fiscal modelling is not carried out by Micheal Cullen but by Treasury officials):

1) GDP is lower than expected: the Budget expected the GDP to be $180 billion in the year to June. In fact, it was $179 billion. It may have shrunk by another billion since, whereas the model had it growing by a billion. Even a constant level of debt increases as a % of GDP when GDP shrinks.

2) Tax revenue will be lower than expected: a recession hits corporate tax revenue hard. Employment, while not down, has not grown as modelled, so income tax revenue will also be lower than expected. Lower than expected consumer spending means lower GST revenue. All of which means that even if government spending was at expected levels, more money would need to be borrowed to make up the difference.

3) Spending will be higher than expected: So far, the number of people on the unemployment benefit has not increased so benefit payments have stayed low. However, other government spending has been higher than expected - high oil prices have driven higher than expected inflation, increasing government costs. Add to that the sign-up rate for Kiwisaver has been much higher than modelled. Treasury thought there would be 270,000 members by July 1, today there are over 800,000 - each costs the Government $1000 on sign-up and around $40 a week more. That adds up to around a billion more spent than expected this year. More expenditure means more borrowing.

Add in losses from the Government’s financial assets (the Cullen Fund, the ACC Fund etc) and we are looking at net government debt worsening by several % of GDP more than expected. So, tough times. What should we do? Well, we shouldn’t cut government spending, that would just deepen the recession. Measured increases in government spending (as Australia is undertaking) can prime the economy’s pumps, getting us out of recession quicker. We certainly should not increase debt any more than necessary, especially while international credit markets are in such turmoil; if there was ever a time for borrowing for tax cuts, now is not it.

How the parties react to all this will be an important test of their readiness to govern. Will they react prudentially or will they carry on as if nothing has happened and attempt to win the election at any cost?

How big is big enough?

Published
by
Steve Pierson
on October 3, 2008
in tax
. 21 Comments

The first round of the tax cuts that National derided as the ‘block of cheese’ tax cuts kicked in on Wednesday. Next week, National will show us how they would do better.

How much on top of Labour’s cuts do you expect National to offer?

Given National has guaranteed all major areas of spending except the Cullen Fund and Kiwisaver, and insists that its infrastructure borrowing won’t fund tax cuts, how would you see those cuts funded?

Great expectations

Published
by
Steve Pierson
on October 1, 2008
in election 2008, john key, national, slippery and tax
. 25 Comments

John Key is being pretty evasive on his tax cut plan. He won’t say whether the famous ‘$50 a week for the average worker’ (note that’s not every worker, your income has to be $47K plus) is additional to Labour’s cuts, the first round of which came into effect today. Given the evasiveness, it’s safe to assume that it won’t be. In fact, Key now refuses to even confirm that $50 range.

The other question is how the tax cuts will be funded. There’s little or no money in the kitty, so it’s got to be borrowing or spending cuts. Part will be borrowing. National says it woud borrow for infrastructure but that’s money it doesn’t have to fund through tax, the borrowing allows tax cuts. Cryptically, Key said this morning that National’s tax cuts would be bigger than Labour’s but the same on ‘a net basis’ because they would change ‘two things’.

So, what can these ‘two things’ be? One will be Kiwisaver. It is one of the few large areas of government spending that National has not guaranteed. National clearly intends to slash spending on Kiwisaver, presumably by changing the employer contribution.  The only other large area of government spending that they have not guaranteed is education but they can’t slash that. They need those middle-class mums to get them over the line. No, the second thing will have to be a change to Labour’s tax package. Specifically, they could remove the increases in the 21 cent threshold - currently set to rise from $14K to $20K in 2011. That would free up around a $1billion that coud be re-directed to cuts at higher incomes. Of course, that would mean smaller tax cuts for most people; most of the money would go to the well-off.

Whatever the package turns out to be, it had better be good. National has generated enormous expectations around tax cuts. They have promised a package that will be a panacea, solving everything from the recession, to doctors’ strikes, to emigration, to pain at the petrol pump. National has spent 9 years building expectations of the tax cuts it will offer.  Next week, they will finally have to deliver.

National lies, again

Published
by
Tane
on October 1, 2008
in national and tax
. 68 Comments

National just can’t stop lying. We’ve covered National’s lies on wages and migration in the past and our last two posts have debunked National’s lies on crime, the economy, compliance costs, corruption, press freedom and, well, just about everything.

Now they’ve resorted to repeating David Farrar’s discredited lies by deliberately misquoting Helen Clark on tax. Here’s what David’s mate Bill English claims Helen Clark said about tax:

In 2000 Helen Clark was saying: ‘tax cuts are the promises of a visionless and bankrupt people’.

“It’s hard to believe this is the same Helen Clark who has welcomed tax cuts today.”

The actual quote, as we pointed out almost a year ago, was:

“Tax cuts are a path to inequality and underdevelopment in today’s circumstances. They are the promises of vision-less and intellectually bankrupt people”

The circumstances Helen Clark was talking about were the year 2000, a time when the country was reeling from nine years of right-wing policies that had battered the poor, slashed wages and brought our public service to its knees.

Tax cuts in those circumstances would certainly have been a path to inequality and underdevelopment, and while I’d personally rather see the money spent on social services, the circumstances in 2008 are very different.

As my man a_y_b said at the time, to misquote Clark so deliberately - by removing the three crucial qualifying words - is an absolute disgrace. And it’s a perfect example of the kind of dishonesty National is now engaging in on a daily basis as we head towards the campaign.

Seriously, if you can’t win without lying what does that say about your policies?

Nats: Pay cuts for you, tax cuts for the rich

Published
by
Tane
on September 30, 2008
in education, national, tax and workers' rights
. 15 Comments

Bill English has put out a press release whingeing about Helen Clark’s promise to lift wages for low-paid school support staff, and fearmongering that it might mean Michael Cullen will cancel his tax cuts.

Presumably, English’s statement means National would cancel the planned pay increase to help fund its tax cuts for the rich.

These are people who do things like deal with truancy, handle schools’ information technology and provide teacher aide support for disabled children, and they are paid as little as $12.69 an hour.

Kind of makes a mockery out of all that talk from National about using tax cuts to raise incomes, don’t you think?

What will you do with your tax cut?

Published
by
Steve Pierson
on September 29, 2008
in social issues and tax
. 44 Comments

If your annual income is over $14,000, your tax will decrease by $12 to $28 a week from Wednesday. That’s a reduction of up to 26% on the income tax you pay. By 2011, people will be paying up to 31% less income tax (graphs here). With boosts to Working for Families, many people with children will be paying no net tax (already the average tax paid by a single earner family with two kids is only 2%).

Funny, then that the actual amount of cash seems a little underwhelming to those on comfortable middle-class incomes. Funny because we’ve had nearly a decade of National basing its entire political argument around the need for tax cuts. Yet, now we have tax cuts, no-one seriously thinks they will be the panacea that National has made them out to be. National’s argument, of course, is that we just need to cut more, specifically for the wealthy (they have ruled out cutting the bottom rate any further). But if $1.7 billion worth of tax cuts this year, rising to over $3 billion a year by 2011, isn’t the cure to all our woes why would more make all the difference? It wouldn’t, of course. Tax cuts are not a solution to low wages, they are not the difference between people leaving NZ and staying, they are not compensation for inflation, and they never can be. And every dollar spent on tax cuts is a dollar that can’t go on health or education or, in the case of National’s cuts, a dollar that has to be borrowed on the turbulent international credit market.

So, what will you do with your tax cut? I expect all our friends on the Right who claim we don’t need a public welfare system because that’s the role of private charity will be keen to donate to a worthy cause. The Anglican Church’s quirky ‘give it up’ site has a number of good ideas for organisations you can give your tax cut to. For something less Christian-based, how about an environmental group like Forest and Bird, or a local community organisation, or even a political party, so they don’t have to turn to secretive wealthy donors?

Did you pay the tax, John?

Published
by
Steve Pierson
on September 24, 2008
in corruption, crime, john key and tax
. 34 Comments

Generally, when you buy capital and later sell it, there is no tax payable on any profit. Unless you buy with the propose of selling the capital for a profit. That being the case, your buying and selling of the capital is engaging in an activity to generate income and tax is payable. It is the intention that matters and an evidentiary matter whether or not a capital transaction is made for the purpose of making a profit on the sale of the capital.

So far, so boring. But what this is where it gets interesting: John Key asked a bunch of questions to the Government (the answers to most of which would only have been read by him), he then bought shares in Tranz Rail, met with a prospective buyer, and tried to talk up the share price before selling them just five weeks later. He later stated that he had bought the shares simply to make money. Both the rapidity with which the sale followed the purchase and Key’s statement seem to show that Key bought the shares with the purpose of making a capital profit. That makes it taxable.

So, did he pay the tax?