Written By: - Date published: 3:34 pm, May 13th, 2008 - 139 comments
Categories: act, tax -
Tags: act, Rodney Hide, tax, tax cuts
Rodney Hide is calling for the Budget’s tax cuts to take the form of raising the thresholds to account for inflation since 1999, removing of the 39 cent bracket, and a $10,000 tax-free bracket.
What would ACT’s tax cuts entail for New Zealanders? Hide says the average cut would be $50 a week, so we would need to find $8 billion out of the Budget for that – $5 billion more than most commentators say is available for cuts. That means the first implication of such massive cuts is slashed social services less money for hospitals and teachers.
But they’ve got $50 a week to make up for it eh? Well, no. That’s the average cut but most of it goes to the wealthy. If, like 50% of people, your income is less than $27,000, ACT you’ll get less than $33 a week (which will disappear on more expensive doctor’s visits, school fees, private ACC levies). If, like 1% of people, your income is more than $150,000, your tax cut would be more than $145 a week.
(data points are for middle of each band, assume average income $250,000 for $150,000+ bracket)
Well, you can’t accuse them of being populist.
[PS. have a peek at the press release. At the end, Roger Douglas says we should have a tax system as flat as possible, like Russia and China. Ah, imitating the dictatorships with massive disparities between rich and poor, that's the way to go.]
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I will keep attacking envy where I see it.
vto – I thought we’d got past this stuff. OK OK, I will keep attacking greed where I see it.
vto, Billy and Mike Collins all need to some reading on what poverty is and how it is defined. This is not a bad starting place:
http://en.wikipedia.org/wiki/Measuring_poverty
http://en.wikipedia.org/wiki/Poverty
http://en.wikipedia.org/wiki/Economic_inequality#Effects_of_inequality
Poverty can be defined in either absolute or relative terms. Most “first world”countries define it in relative terms, for reasons that I would have thought were blindingly obvious. You can meet the standards for absolute poverty with tent cities and soup kitchens. Is that good enough for New Zealand? No!
Billy From where does this right to be no worse off than everyone else come?
Where does this right to have personal private property come from Billy? Who creates or grants “rights”?
Mike Collins: It is precisely because of the reason of increasing marginal returns that economic growth is generated by tax cuts.
Could we see the long term large scale data that supports this claim please? In the American context at least it seems to be untrue:
http://www.cbpp.org/9-27-06tax.htm
“Where does this right to have personal private property come from Billy? Who creates or grants “rights’?”
Apparently, anyone can create or grant rights. People do it all the time. You’ve just done it.
rOb
Attached some long term data on tax cuts
http://www.house.gov/jec/fiscal/tx-grwth/reagtxct/reagtxct.htm
And rather than engaging in a I’ll trump you with this data can we agree that cutting or increasing taxes and their associated effects is dependent on the country and the relative state of the local and world economy at the time of the cut and evolving external conditions.
…although my property rights have a somewhat better pedigree than your right not be too much worse off than everyone else.
r0b:
There are some very interesting graphs at the end of this paper:
http://www.princeton.edu/~bartels/income.pdf
errr: warning!! above link is a PDF. Sorry.
Billy: Apparently, anyone can create or grant rights. People do it all the time. You’ve just done it.
Ummmm – what?
PB: There are some very interesting graphs at the end of this paper
Ta, I’ll take a look…
HS: Attached some long term data on tax cuts
The link you cite is short term data. It’s mainly about tax avoidance behaviour of the rich, but it does make this claim about growth “The Reagan tax cuts … showed that reducing excessive tax rates stimulates growth”. It shows nothing of the sort, because the authors are apparently do not take account of the fact that the economy grows anyway. There is nothing to identify the specific impact of tax cuts.
In order to sort this stuff out you need examine trends over decades (within a single country), and / or compare different countries. See for example: http://www.huppi.com/kangaroo/L-taxgrowth.htm
can we agree that cutting or increasing taxes and their associated effects is dependent on the country and the relative state of the local and world economy at the time of the cut and evolving external conditions.
Yes, we can certainly agree on that. In the NZ context I think tax levels have 3/5ths of bugger all impact on growth. Considering growth in our economy over 9 years of the previous National government vs 9 years of Labour (higher taxes!) it’s impossible to make an argument that lower taxes were better for growth: http://www.rbnz.govt.nz/keygraphs/Fig2.html
r0b – I’m not asking for anyone to take my word that tax cuts lead to enhanced economic growth. I’m realistic in that they won’t. However it can’t be avoided that Treasury costed ACT’s tax policy at the last election. They found that not only could it be implemented without spending cuts, but it would add an extra 100 basis points to economic growth on average each year.
These are economic experts making the claim, not a group of people huddled around a computer arguing with one another.
“Considering growth in our economy over 9 years of the previous National government vs 9 years of Labour (higher taxes!) it’s impossible to make an argument that lower taxes were better for growth”
No it’s not. Comparisons need to be made not with different time periods but what outcomes would have been in the same time periods under different conditions. Tax rates are but just one condition affecting economic growth levels.
Treasury also recently lost – and then found again – $600 Million:
http://www.nzherald.co.nz/section/1/story.cfm?c_id=1&objectid=10501759
Their projections of surpluses and deficits are regularly off by billions of dollars. I’m not blaming the poor dears, it’s just that economics (over the short term) is not an exact “science”.
In other words, I’m not particularly interested in or impressed by Treasury’s assessment to three decimal places of any particular budget. If I want to know how factors affect economies I will look to long term historical trends and / or international comparisons.
but rOb yesterday you were using short term data to justify the claim of a growing gap between rich and poor
Indeed I was, different question, different data. Income gaps are easy to calculate for any given point in time. The effect of tax cuts on growth is horrendously ill defined in comparison.
rOb today you acknowledged you “look to long term historical trends”
and yesterday when I said “The ‘growing gap’ is one of the biggest myths around. It is just bollocks. The poor are better off and frankly the rich are not as rich.”
You said “In long term historical terms you are correct”
It seems you actually agree with me then on the myth of ‘the growing gap’ then.
first off lets make this clear…there are very few rich people in new zealand…some people are well off and maybe they have two of everything and enough left over to a) bribe the grandkds into kissing their bums or b) terrifying their bank manager by threatening to remove their deposits…yep…that about covers it!
Randal
first off lets make this clear there are very few poor people in new zealand some people are not so well off and maybe they only have one of everything and not enough to a) bribe the grandkds into kissing their bums or b) terrify their bank manager by threatening to remove their deposits yep that about covers it!
whatever your post was about
vto: You said “In long term historical terms you are correct’
It seems you actually agree with me then on the myth of ‘the growing gap’ then.
vto – you have already noticed that there is a different debating style he versus KiwiBlog. One of the things that we frown on here is quoting people out of context in order to try and make some twisted point. What I said was: “In long term historical terms you are correct and irrelevant (just as medieval health practices are irrelevant to a discussion of today’s health system)”.
For some questions it is relevant to examine historical trends. For other questions it is not. Not that difficult really.
ok ok I knew that, naughty naughty.
It is however entirely relevant “to examine historical trends” when it comes to the state of the gap between rich and poor, otherwise all context is lost and there is nothing to compare it with. Fail to see how the long term closing of the gap between rich and poor has suddenly turned around to widening.
Or in other words how can you know the gap is growing if you aren’t aware of the historic trends?
captcha: Mr generosity !!
Someone may well have made this point already — haven’t got time to read all 125 comments — but one of the reasons larger tax cuts for the wealthy is a good idea is because they are the ones who can use that extra money to invest in their small businesses and employ more people, which in the long run is a great thing for the nation’s economy.
Ahh Scribe, good old “trickle down” economics. Doesn’t work.
http://en.wikipedia.org/wiki/Trickle-down_economics
Exactly Mr Scribe.
Business people who get an extra dollar from wherever (here tax cuts, hopefully) in my experience invest it directly back into the local economy. (it certainly doesnt get spent on junky imported crap like tvs and whatever the assumed consumer spend of the moment is). That dollar then gets ‘worked’ extremely efficiently for maximum benefit to flow from that dollar.
And that benefits all of that local community.
It seems the only people that dont understand this simple truism are those who have never been in business themselves.
rOb, I think you need to get out more (said with a smile).
It does work. I have seen it and done it myself. Invest in the local economy myself over the last few years and that resulted in the direct employment of approx. 100 people and indirectly about the same number again. If I had not made that investment those people would not have been employed.
I just dont understand what is so difficult to understand about that.
I suspect you may bury yourself in too many reports and can’t see the woods for the trees
rOb, I think you need to get out more (said with a smile).
That’s entirely possible.
It does work. I have seen it and done it myself. Invest in the local economy myself over the last few years and that resulted in the direct employment of approx. 100 people and indirectly about the same number again. If I had not made that investment those people would not have been employed.
Good for you! Did a tax cut make you do that? No. You just did it.
Or in other words, yes some people invest productively in the economy. And no, tax cuts don’t seem to make them do it significantly / reliably more (which is the claim made by trickle down economics).
I just dont understand what is so difficult to understand about that.
So now you do.
Not quite right rOb. Recall I earlier explained how I am not as active as I could be? I said one of the main reasons for that was the ‘invisible hammer-shmacking partner’ called the IRD, who after all of my investment, risk, work, grey hair, stomach ulcers and heart attacks gets first dibs at the profit to the tune of 40% for doing absolutely zip.
So you ask “Did a tax cut make you do that? “. Answer is no – but the state of the tax system stops me from doing more. Now I stop. This is true.
But further, scribe’s point was about what business people do when they get extra dollars (or any dollars at all). And what they do is invest it and drive far more benefit out of it than any govt action ever could with that same dollar.
Now I stop. This is true.
Now you stop, and you’re blaming taxes, but that could just be that you’re getting old and lazy (said with a smile).
Even if it was true that you are stopping purely because you feel aggrieved at the tax system, It is only true of you individually, it is not true collectively and over time for the economy.
If it was true, if it was that simple, trickle-down economics would work, and it doesn’t. There would be a strong positive correlation between tax rates and growth, and there isn’t.
vto much as we all like to think but we are the centre of the universe, our individual experiences are not necessarily reliable predictors of social or economic trends.
But further, scribe’s point was about what business people do when they get extra dollars (or any dollars at all). And what they do is invest it and drive far more benefit out of it than any govt action ever could with that same dollar.
Oh yes – proof please?
Governments build roads and power stations and schools, getting incredible economic leverage out of money spent.
ha ha, you’re a tough cookie.
I just said it was one of the reasons, not the sole reason. Rest assured I am not alone.
Later
Well I just cannot believe it. Cullen still insists on maintaining the govts riches at the expense of the people.
He cannot bear the thought of the govt struggling a little financially but does not give one hoot about the people struggling out here a lot. He is absolutely adament that the govt must not suffer – what f*%##@g planet is he on?
I have said it before and I say it again – he has his philosophy all backwards. The people come first.
But the good thing to come out of it – he is signing this govts death warrant. He is so out of touch he does not seem to realise this. Or perhaps he is more concerned about his legacy as mcscrooge.
The people are not silly. The people see him and walk away.
Its all over. At the expense of the people.
I so wish I could use more colourful language on this site.
What’s the problem vto – are you talking about this?
http://www.nzherald.co.nz/section/1/story.cfm?c_id=1&objectid=10510487
Tax cuts and more money for health and education, is that the problem?
(I’ve got to be out and about for a few hours, but I’m sure I’ll find you here when I get back!)
oh rOb, no no no no no….,
You miss my whole point.
anyways I am off fr the weekend so unfortunately I wont be here for a few daze. Fish, surf, relax, yarn, mmmmmmm. Actually off to labour heartland, where it all started. The labour movement that is.
And you should see and hear what they think of this govt there. Try piccies of Clark festooned with hitler mo’s and comments on the local pub noticeboard!
Over and out
Crikey you two are determined not to let the other have the last say why not just agree to disagree.
Rob Tax cuts and more money for health and education is a great thing bit is completely dependent on the size of the tax cut and where the money for health and education is targeted.
vto, enjoy your break, hope you find it very calming!
HS: Crikey you two are determined not to let the other have the last say why not just agree to disagree.
I’ve tried to stop many a time, and then it heads off on new tangents again! Never mind, all good clean fun.
Rob Tax cuts and more money for health and education is a great thing bit is completely dependent on the size of the tax cut and where the money for health and education is targeted.
HS, I couldn’t agree more.