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.]
Facebook
Twitter
Scoopit!
r)b: so are you saying that the Labour government agenda is to discourage hard work by enforcing uniformity and mediocrity through income transfer?
No.
Can you name one country that this socialist agenda has worked?
As that isn’t the socialist agenda the question is moot. But I can tell you one country with a good progressive tax system that is doing just fine: Sweden. In fact I can tell you a bunch of countries, the Scandinavian model / Nordic model in general.
“In fact I can tell you a bunch of countries, the Scandinavian model / Nordic model in general.”
I’ve heard good things about their voucher system for education.
vto:
1. It is not greed to expect to keep what you work for.
Indeed, just as it is not envy to expect society to take care of the disadvantaged. I hate the hole discourse of “politics of envy”, so lately I have taken to confronting it equally bluntly with “the politics of greed”. Both are equally stupid.
2. No assumptions re your own situation – your words merely reflected the envy I see apparent in so much of the ‘rich prick’ commentary from the left today.
You haven’t yet articulated how my words indicate envy.
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.
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). In the medium terms of life and politics today you are wrong wrong wrong. Did you read this link at all vto?
http://www.socialreport.msd.govt.nz/economic-standard-living/income-inequality.html
3. I don’t agree that govts will have limited budgets (been the other way last 9 years) and less to spend. Cut the tax rates and watch the tax take rise as people get active again. Has been proved to happen in other nations.
Documented examples please?
Here you go vto, a little something to get you started:
http://www.cbpp.org/9-27-06tax.htm
rOb, this has to be my last post, gotta fly..
1. re greed/envy when this labour govt came in in 1999 the first thing it did was to put the top tax rate up to 39%. That had nothing to do with needing to raise revenue – it was clear at the time that tax revenue was on the up. It was to satisfy those people that quite frankly hate the rich and who voted for the likes of Anderton. That was my assessment of the mood at the time and I stand by it.
It continues today.. whenever tax cuts for higher income earners comes up people cry out “oh its not fair that rich prick is going to get $100 per week and I’m only getting $10. wah wah wah”. It is sickening to me. That attitude stems from envy.
2. re ‘growing gap’ my assessment is both long and shorter term. 50 years ago is not that long. Assessments over the sort of term your link shows are too short to really be worthwhile in assessing which way society is heading. That link starts 1988 – sheesh, people having been talking blah blah growing gap since I can remember. Since times when the poor had much less than today – 80s 70s 60s 50s.
3. Documented examples. Too much effort. Ireland for one.
I note you had no comment re my wee parable about the invisible hammer-shmacking business partner. Too true for comment eh?
Talking of ‘moods at the time’ I penned some verse at the time labour won in 1999, which expressed what I saw in the country… it goes like… next post..
rOb, verse referred to (remember Nandor dope, ciggie tax up, ECA, kiwibank anderton, 39% tax, chch youth thieves, steven wallace gunned down, etc). To be read almost spitting the words out.
Fascists in Helengrad, born to be bad,
encourage the dope and put up the fags,
Get the bosses, and the bankers,
and especially all those fucking rich wankers,
Just do everything, stick ya nose in,
tear their guts out, give us more gin,
Stick a sticker on yer car, get the young thieves,
maori in Waitara,
big, black and tats,
shut up now please.
mag:
It is always nice to see someone comparing apples with oranges. I’m short of time at present, but track the reduction in interest payments by the government as a percentage of government revenue over the last 9 years. In 2007 we finally managed to get rid of the debt from te 1970′s and 80′s.
There has been an active policy of dropping the government debt, thereby reducing the interest payments, down to a reasonable level. How many billions has that ‘saved’? Effectively, aussie has been heading down the same path, and that is where most of those ‘savings’ have been going.
Well vto, you are clearly a person of many hidden talents. I hope the capacity to adapt your views based on factual evidence is one of them.
1. re greed/envy when this labour govt came in in 1999 the first thing it did was to put the top tax rate up to 39%. That had nothing to do with needing to raise revenue – it was clear at the time that tax revenue was on the up. It was to satisfy those people that quite frankly hate the rich and who voted for the likes of Anderton. That was my assessment of the mood at the time and I stand by it.
That is a very biased and bitter view of the world vto. Labour campaigned on the platfrom of increasing taxes and was duly elected. The Treasury briefing to the incomming government in 1999 proposed, among many other things, considering raising taxes soon to address long term demographic issues (see quotes below). Your insistance on seeing all this and framing all this in the language of envy is, ok I deleted my original comment here, let’s just say that it is very much your own personal issue.
I note you had no comment re my wee parable about the invisible hammer-shmacking business partner. Too true for comment eh?
Personal anecdotes have their place vto, but when it comes to the shape of the economy and our society, I’d rather work with facts thanks.
From the 1999 Treasury briefing (which you can download here):
http://www.treasury.govt.nz/publications/briefings
rOb … Just got back froma an onerous afternoon dealing with this economic mini-meltdown and its effects on our family… but thats another story
You said “Labour campaigned on the platfrom of increasing taxes and was duly elected.”. I agree, but that does not explain the reasons for that vote I referred to. You say they voted for that and give no reasn, whereas I was saying they voted for that and envy was one of the main reasons.
Look, I come across it all the time. A die-hard labour voter, and it soon comes out that they will never vote anything else and boy oh boy do they resent the richer, the yuppie, the ‘rich prick’, the guy with the flashy car towing the jetski. Don’t deny it because I simply wont believe you – I have seen it with my own one eye (he he). Seen it countless times. I see it and hear it in some of own family, die-hard unionists P&T and wharfie men. It has consistently been expressed to me over many years. There is a hatred and envy in a sizeable core of the left wing vote.
Now that is not to say there are not equally unpleasant, if different, traits in other types of voters.
You also said “Personal anecdotes have their place vto, but when it comes to the shape of the economy and our society, I’d rather work with facts thanks.”
That was fact rOb. The economy and our society are not made of mystical unknown subjects who need to be disected, studied and analysed before we know what is going on. Our society is made up of thousands of people who are on the whole pretty much exactly like us and the people around us. So whatever is going on with yourself and the people around you is generally what is going on everywhere. It aint rocket science.
This is actually where I think a lot of left wing voters (the urban liberal types) start to muddle things up. Instead of basing their voting patterns on what they see around them and what is affecting them, they seem to base it on what people otherthan themselves supposedly want or ‘need’ or get etc. i.e. ‘the poor people need help’, ‘the rich have got enough’, etc etc. Imho it is a fundamental flaw in their approach – if you try to work out someone else’s position there is a good chance you will get it wrong, whereas if you simply rely on your own position you will get it right. And the entire vote would more accurately reflect the lay of the land.
Re the treasury briefing thing – they clearly had it wrong because there has been an obscene over-taxing since. Which actually backs up what I was saying – that it was clear there was enough revenue coming in and rising. Anyway, the people require good financial health first, not the govt – its backwards again.
Adapting your views yet? he he. I may come across sometimes as bitter – but some things do make me bitter and slaving my arse off and putting my family’s livelihood at risk only to have (insert various posts above here) does make my blood start to boil.
fyi I have no problem with a tax system and a safety net. Happy to help those that can’t help themselves. It is essential and humane.
You said “Labour campaigned on the platfrom of increasing taxes and was duly elected.’. I agree, but that does not explain the reasons for that vote I referred to. You say they voted for that and give no reasn, whereas I was saying they voted for that and envy was one of the main reasons.
Well of course Labour weren’t elected for no reason. Nor were they elected by a tidal wave of envy as your particularly bitter take on the world supposes. They were elected because the National government of the day was a total shambles. They were elected because of their promises of a strong social programme, including a pledge to restore the aged pension to 65% of the average wage, which was to be funded by raising taxes.
Look, I come across it all the time.
Of course you do. And I come across the equivalent stereotyped greedy tory. Odd that, isn’t it.
There is a hatred and envy in a sizeable core of the left wing vote.
There is a greed and indifference in a sizeable core of the right wing vote. This gets us nowhere! Don’t focus on the stereotypes, focus on the facts of what works.
So whatever is going on with yourself and the people around you is generally what is going on everywhere. It aint rocket science.
It ain’t rocket science and it ain’t true. If you think about the life of a South Otago farmer and a South Auckland labourer have anything much in common, well – you need to visit planet Earth some time. The life and times of this country are much richer and more varied than your or my personal experience.
Re the treasury briefing thing – they clearly had it wrong because there has been an obscene over-taxing since.
Did they indeed? I’d say they were far too timid, so much of the issue of our aging population remains to be addressed. And we are by no means overtaxed. New Zealand has the third lowest rate of personal taxation in the OECD.
fyi I have no problem with a tax system and a safety net. Happy to help those that can’t help themselves. It is essential and humane.
I am very pleased to hear it. I’m a little puzzled though, as your only reaction so far to supporters of this system has been to accuse them of envy and hatred.
Vto, personal justifications in politics are completely unimportant. John Key could really believe in climate change, or could simply know he’s got to be seen doing something about it to win the next election. As long as he’s got enough reason to follow through, his personal beliefs are irrelevent.
Likewise for whether Labour acted out of envy or out of fiscal prudence- regardless of what drove it, it was a good policy and there isn’t really any objective reason to get rid of it. Affluent kiwis are well-valued and are not feeling the pinch of food prices as significantly as the less wealthy.
You have done nothing to justify your claims that we’re being overtaxed, Vto- as has been pointed out before, we are pretty much in the middle of the OECD in regards to taxation figures. Saying something repeatedly doesn’t make it any more true
I’ll say. Last I heard, the forward estimates on our super coverage were that the ‘Cullen’ fund would only cover about a third of the expected shortfall in superannuation for the baby boomers. In other words, the baby boomers aren’t paying their way for their superannuation by either forking out cash while they are taxpayers, or by generating future taxpayers.
Kiwisaver is theoretically just a top-up above super. Must be about time to start increasing the input into the Cullen fund.
Interesting to note that with all of the beneficiary bashing, there has been a careful avoidance of the supernatant bashing. They are of course the biggest group of recipients by orders of magnitude.
I think its aout time we stopped – my bwain hurts..
But first a couple of points of course;
1. rOb said “the equivalent stereotyped greedy tory.” I acknowledged that. They exist, just as the envious anderton voter exists. That was one of my points, which leads to..
2. Don’t take my points as covering everyone. The envy voter is of course just one part of that constituency, just as the … is of the right.
3. The rocket science we disagree mildly on. My point was that people should vote according to their own situation, not according to what they think someone else’s situation is.
4. I don;t really care what the rest of the OECD is taxed at.. I am over-taxed for the effort and risk outlaid. As I have explained. That is a real example of a real person. Don’t see many real examples of real people to support what you contend, just bureacratic report after bureaucratic report..
5. rOb said “your only reaction so far to supporters of this system has been to accuse them of envy and hatred.” No, just some. They annoy me. I outlined my position at the end of my last post re a taxation system to help those that can’t help themselves.
6. I should visit planet earth? I think you need to get out of Wellington. But lets avoid digs.
Look, appreciate the time put into swapping posts but I don’;t think we have got far. Why can’t we have lower taxes for higher incomes and still keep the social guff you think we need?
Time for tea. Peace.
Ummm I just had a think about the baby-boomers ages now. They’re probably getting a bit past it for generating kids. Need more immigrants – they tend to out-perform the local population in birthrates.
captcha: rabid agency – The DPF coalition against free speech?
I think its aout time we stopped – my bwain hurts..
Mine too.
4. I don;t really care what the rest of the OECD is taxed at.. I am over-taxed for the effort and risk outlaid. As I have explained. That is a real example of a real person. Don’t see many real examples of real people to support what you contend, just bureacratic report after bureaucratic report..
Well, I’m a real person too, and my interpretation / personal experience is the opposite of yours, so that doesn’t get us very far.
I think you need to get out of Wellington.
I’ve not said where I live and I don’t intend to.
Look, appreciate the time put into swapping posts but I don’;t think we have got far. Why can’t we have lower taxes for higher incomes and still keep the social guff you think we need?
Because the sums don’t add up.
Time for tea. Peace.
Agreed!
Must be about time to start increasing the input into the Cullen fund.
Hear hear!
Yummy tea just had, mmm full belly and sleepy.
rOb, enjoy the Standard standard of debate. Quite different from Kiwiblog. No less relevant etc but different. More sedate. Gotta keep biting the tongue..
Just one last point, which may well go right to the very heart of resolution to this conundrum.
If we could have lower taxes for the higher incomed and keep the social stuff then that would solve it yes? We bizzo types could go about our bizzo unmolested and generate all sorts of goodies for NZ, and you could tend to those that require it – all and sundry would sleep like the goodnight kiwi ya?
Well, I do not accept that is not possible. I believe the sums could add up. Don’t ask me how – I have a full belly and sleepiness. But I have an inkling. And an instinctuality. Let’s not sell ourselves short.
Jolly good vto, nothing wrong with optimism.
“If we could have lower taxes for the higher incomed and keep the social stuff then that would solve it yes?”
If I could hazard a guess I would say that the typical commenter/poster here would disagree with that statement. r0b says the “sums don’t add up” as a justification for why this wouldn’t work. I tend to believe that a lot of lefties have an agenda they would like to see fulfilled and more state spending. What this means from their perspective is that if the sums do add up – it’s best to use the money to fund other social projects rather than return it to taxpayers. So while they may not all be envious of higher earners, the priority for tax cuts for this group is just not high up on their agenda.
I support tax cuts (for everyone not just those on lower incomes) for two reasons. The first reason is moral, I think people should be allowed to keep more of what they earn. To me peoples incomes for the work they do are not primarily there for lefties to enact their social agendas. Safety net yes – socialist agendas no. The second and more fundamental reason is the impact on the economy and our futures. Economic growth is vital to enhancing our standard of living. Tax cuts will deliver economic growth better than government spending ever could. In fact in the last Parliament the other parties thought it would be a good idea to have Treasury cost ACT’s tax policy (believing the sums wouldn’t add up). Much to their surprise not only did the sums add up (spending didn’t need to be cut to enact the policy), but the policy would add an extra 1% to economic growth each year. That is a huge difference. In fact if Mexico had grown an extra 1% per year in the last 100 odd years they would be as wealthy as America.
Tax cuts are vital for our economy and futures. They should be supported for that reason, not because it is electorally necessary.
Mike Collins;
I don’t have time for a proper response, but I have a thought or two I’d like your take on. You say:
I think people should be allowed to keep more of what they earn.”
“Tax cuts are vital for our economy and futures.”
So where does one start, and stop? If the tax thresholds were changed today as ACT has suggested, be honest with me: tomorrow you’d be asking for another tax cut. You’d still be saying ‘people should keep more of what they earn’.
More.
It wouldn’t stop, and I find it vaguely duplicitous to see people arguing for tax cuts as if they would be a one-off thig that would aid all ills: Tax cuts are vital for our economy and futures.
Tax cuts would make some more wealthy (it would definitely increase the wealth of those who’ve already amassed it); however, when you talk of a ‘socialist agenda’ all I see is a desire to keep the gap between rich and poor to a minimum. I see no evidence of this thinking in your position. Dismissing it as some evil-sounding agenda doesn’t help.
And so I get to this statement: “Tax cuts will deliver economic growth better than government spending ever could.”
I think that’s blatantly false. Faster maybe, but better growth is achieved when it’s shared by all. Faster and better for some with your tax cuts, but you’re talking about a minority. Tax cuts won’t help people who get an extra $30 a week and have to fork out for some form of user pays that would inevitably follow.
Matthew,
Thank you for your points. On point one – yes I agree. I would like to see an ongoing programme of tax cuts. However I do believe that these need to be affordable to give in the first place. I don’t believe in deficit budgeting, however do believe in holding government spending steady. I also believe it would be more efficient to fund certain capital expenditure through debt such as roading.
I believe the argument that we need to manage the gap between those at the bottom and those at the top is a dangerous one. It serves no purpose to minimise this gap save for making people feel good. The real goal should be to raise everyone’s standard of living in real terms – not just relative to others. On this point we will have to disagree as to the effect of tax cuts on growth. Like you I am a bit busy today so will have to get involved in this debate some other time with you. I’m looking forward to it.
Deborah has written about Act’s policy, and in particular how it would exacerbate the pay gap between men and women, at The Hand Mirror:
http://thehandmirror.blogspot.com/2008/05/how-not-to-get-womens-votes-1.html
Tell me, are Australian Labour evil right wingers for doing virtually the same thing?
MikeE. Go have a look at what the Labor Budget actually did. It targeted cuts at the poor and removed some benefits from the rich.
Ignorance ain’t a virtue bro.
mr pilott you said “when you talk of a ‘socialist agenda’ all I see is a desire to keep the gap between rich and poor to a minimum.”
Why? Why do you want to make sure everyone is keeping up with the Joneses? Sounds very materialistic among other things ..
Surely the important thing is to ensure everyone can access the basics of life – a decent roof over their heads, food for their bellys and a few others such as access to health services and some education. After that, why should people want (and get) what other people have?
Sounds an awful lot that old bugbear envy, yet again. It keeps cropping up on this site.
vto – keeping up with the Jonses doesn’t apply when your entire neighbourhood is a ghetto. This is not about materialism, it’s more about poverty, being able to feed/clothe/educate your children and so on.
Inequality in society doesn’t help anyone (some argue this actually, but I’m not one of them, for the most part), and it’s not about keeping the wealthy down either. It’s about preventing a Latin-American style of living where the wealthy are in luxurious communities, that have to be gated because of the extreme poverty (almost) on their doorstep.
In this sense I agree with Mike Collins’ point “The real goal should be to raise everyone’s standard of living in real terms – not just relative to others.” – but I can’t see it beneficial to have miniscule advances for most, and huge increases in wealth for a select few.
Call it envy if you wish, but that is an ugly and cynical view – wanting everyone to do well doen’t mean you are jealous of those who already have.
You can aspire to something without despising those who already have it – that’s what you are accusing the left of doing, whether you realise it or not.
When you say you want to “keep the gap between rich and poor to a minimum” it means the measure is relative. What you have just posted is quite different from your post about “keeping the gap to a minimum”.
I have no problem whatsoever with dealing with poverty and feed/clothe/educate, as I explained previously. But that is NOT a relative measure, as your “minimum” post earlier is.
Dealing with poverty and keeping the gap between rich and poor to a minimum are two different things.
After that, why should people want (and get) what other people have?
Political stability, in the broadest sense, would be my answer.
History tells us that if the gap gets too big, or too static with little movement between groups both up and down, the have nots revolt. It’s usually pretty unpleasant and involves the haves and their families not being alive anymore.
Extreme? yes. But not hyperbole and not any sort of threat. I’m not saying that anyone should storm your house and steal your stuff, vto. I’m just saying that if you have a system that encourages wealth to accumulate over long periods of time in a small group of hands, you get predictable results.
The history of the west in the last hundred or so years is the history of the growth of the mixed economy as a model, which includes as a major part, wealth transfers. It works well and we are enjoying remarkble peace and prosperity as a result, when compared to any other era you care to name.
Progressive taxation is a pragmatic thing in my view, not a normative one. We could talk about marginal utility value of the next dollar earned as well. For someone earning 200,000 the next 10,000 simply isn’t worth as much as it would be to someone on 20,000. So, pragmatically it’s better to tax them higher on it.
Honestly, envy is not the major factor for most proponents, and attacking what you claim are peoples motives is a bit lame in any case.
And am I right in thinking there has been a shift? Originally welfare was to save people from living in dire poverty. Now it is to make sure they are not too much worse off than everyone else. Even the measure of poverty is not an absolute, but is relative to what evryone else has. From where does this right to be no worse off than everyone else come?
Pascals bookie – I am aware of your first few paragraphs re political stability. Just didn’t bother commenting as is obvious. Re ‘envy’ I know I do keep harping on with it. It drives some left voting without doubt. It is not lame to attack it – it is a bad trait. I hate it. It is a reality, as bad as greed, and all the other hell pizzas.
Billy’s got my drift.
I will keep attacking envy where I see it.
“From where does this right to be no worse off than everyone else come?”
If we are to believe Pascal’s Bookie this “right” stems from wanting to appease people enough to stop them looting and killing those that have some wealth. ‘Here have some of the money I earned, please don’t kill me (cowers).’
I agree with Billy. Welfare was instituted as a safety net in my opinion. Today’s leftists tend to believe it is a device for moving toward equality of outcome. There seems to be many motivations for this – including what PB alludes to which is preventing revolt.
He also talks about diminishing marginal utility as being a justification for progressive taxation. Yet he neglects to mention dimishing marginal returns from progressive tax rates. Obviously his viewpoint is based upon an assuption that it is correct to move towards equality of outcome.
It is precisely because of the reason of increasing marginal returns that economic growth is generated by tax cuts.
Mike C – just as you’d like rolling tax cuts to minimise government influence and maximise private potential, I’m happy to see government intervention increase to not simply making sure people don’t die, but can be happy and have the chance for success.
Our world has changed a helluvalot in the last fifty-odd years. I don’t think you’ve got that much of a chance to better yourself and contribute to society if you start out with nothing and get simple assistance, to stop you from dying, from the Government. That’s what a safety net is, nothing more – keep you off the streets and keep you alive.
That’s not much to work with, and I don’t see how society benefits by not helping people further.
Take an example – job seeking. If I were to go to an agency, I’d have to pay thousands to get a nice CV drafted up, and to practice my interview skills, and do all those other things needed to get a good job.
The government provides this service for free to those on benefits. This makes economic sense – reduced social welfare payments. Would you, billy & vto agrue against this? I would ask why stop there…
So no, I don’t think it’s bad for the government to stop people from being too much worse off than everyone else – as long as everyone is doing better.
E.G What’s JK’s broadband plan for? Apart from focus groups telling the NP it will make him look hip – do you fundamentally object to it? Rich folks can afford good broadband right? That’s all that’s needed, wouldn’t you say?
” Obviously his viewpoint is based upon an assuption that it is correct to move towards equality of outcome.”
If that was obvious I must have wrote it wrong, because it is not what I believe. I have no problem with gaps per se. I just think that that you have to be careful not to let them get too big, or too entrenched if you care about political stability. Disagree?
The way the west has done this is through progressive taxation, inheritence taxes and wealth transfers. It has worked very well so far and it would be reckless to throw it away. It astounds me that modern conservatives in the US are doing so. I predict trouble in a few years if they don’t change track.
Again, I’m not talking about normative issues of fairness or whathaveyou here, but pragmatism. That’s another discussion.
Any way back to work for me.
vto – most people on the left who are politically active believe (with a passion) that their view can help society as a whole. Whether that is correct or not is beside the point.
Go and attack some envy-voter on the street if you see one, but I think you can safely leave it at the door here.