Written By: - Date published: 11:52 am, November 25th, 2008 - 80 comments
Categories: dpf, national, spin, tax, uk politics -
Tags: gordon brown
National’s David Farrar has been running a series for some time trying to paint NZ Labour as out of step with Labour Parties around the world when it comes to their attitude on tax cuts. His intention, of course, is to portray Labour as extreme left and his mates in National as centrist and middle of the road. Problem is, he’s more interested in spruiking for the National Party than he is in getting his facts right.
Yesterday he reported excitedly that while NZ Labour was “almost alone in the world with its hostility to personal tax cuts”, in contrast the UK Labour Party is “delivering a massive package of tax cuts” to deal with the economic crisis.
We’ll forgive him for selectively ignoring the huge family tax cuts in Working For Families, the cut to the corporate tax rate, the personal tax cuts in this year’s budget and the tax credits for Kiwisaver and R&D – these are things National has to omit for its spin to make any sense.
But despite his obvious disdain for the intelligence of his readers he can’t get away with this one – under Gordon Brown’s tax plan that he endorsed so wholeheartedly the wealthy will face a hefty tax increase, while the cut is to VAT, a regressive tax similar to our GST that hits the poor the hardest.
Essentially, it’s a more progressive tax system, with tax reductions for those on lower to middle incomes paid for by tax increases on the rich, and it’s being described in the media as a rejection of Blairism and a return to traditional Labour values – values that would fit in very well with those of the Labour Party here that Farrar has tried to paint as extreme and “almost alone in the world”.
The only question is, given his enthusiasm for Gordon Brown’s plan, will Farrar now be rejecting National’s regressive tax plan – where families on less than $44k pay more tax so the rich can pay less – in favour of a system that’s fairer and more progressive? Somehow, I doubt it.
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Correct me if I’m wrong (I know you will) but I thought the increased tax rate only came in at around 150K pound – or the equivalent of $300-$450K in NZ.
It’s more window dressing than pure regressive taxation.
Mind you, the definition of rich pricks here used to be $60K!
Yeah it’s only the genuinely wealthy who are being asked to pay more. I’m not saying it’s a perfect system, just that it’s a progressive move in line with the NZLP’s view of tax cuts. I do think it’s a good move though – in times of economic hardship those who are most comfortable should be asked to contribute to help those at the bottom who are really feeling the brunt.
Rod Oram on Nine to Noon this morning was very critical of Key and the rest of National (in his usual circumspect and polite way of course) for saying one thing in office ie the problems here were the result of govt profligacy and a completely different thing now, ie it’s the fault of irresponsible money men (the current received wisdom).
Oram was clearly implying that this dishonesty went beyond the normal cut and thrust of oppositional politics. (You can hear the interview on the Radio NZ website).
Scary that a lightweight like Key is now in charge of the country…
I still believe that lowering GST is the best way to give everyone a tax cut without anyone viewing there saving as ‘unfair.’ But I agree that National’s spin over tax cuts was ridiculous, Labour was using innovative ways to lower tax for particular industries and seemed to be investing the money well. But hey, it must of been time for a change, maybe they should substitute every 6 months or so?? Just to keep it fair
hahaha
“We’ll forgive him for selectively ignoring the huge family tax cuts in Working For Families, the cut to the corporate tax rate, the personal tax cuts in this year’s budget and the tax credits for Kiwisaver and R&D..”
Say no more, Tane. I’m missing Michael Cullen already…….NOT!
The truth is red Labour overtaxed the NZ population and scrambled the lollies around in handouts, yes, the same ones you listed.
Luckily, the approach failed miserably at the last election.
Daveski
So they are putting in place a “rich prick” threshold that is actually aimed at “rich pricks” rather than teachers, nurses, police officers, junior doctors etc.
How weird, tall poppy bashing that bashes tall poppies rather than anyone who might not be a Labour voter. It will never work – people will see through it and realise it’s sensible rather than sensational and policies of envy vote grabbing stuff.
DPF reminds me of Dr. Cullen back in 1999 when he said the proposed rich prick threshold of 39% was moderate compared to the US which had a top tax rate of 48% at that time. In the same way Cullen forgot to mention at that time that the US rate kicked in at $400K USD (circa 10 times the rich prick threshold he was proposing) DPF forgets to mention the top tax hike as well.
Partisan people all make fools of themselves defending things their own team do while attacking the same things in the other team.
I would doubt that the UK VAT cut to 15% (which is, in the fine print, offset by an increase in petrol, alcohol and tobacco excise) or a cut to GST in NZ will benefit consumers. My hunch it will go straight to the retailers’ margins instead.
Tane – I think there is an inherent fairness in a progressive tax rate – at least in principle.
There are however a couple of issues that tend to get overlooked.
First, regardless of the extent of a regressive marginal rate, the “rich” – however you define them will pay more tax. Even with a flat tax, the rich will pay more tax than lower income earners.
The second point which is a problem Cullen left us with. With company rates at 30%, trusts at 33% and some savings taxed at less than 39%, the current taxation scheme is unfair – those individuals who can operate as company have an unfair advantage over those who pay PAYE on salaries and wages over the highest threshold.
I’m no expert but your last sentence/para must surely be incorrect. The tax scales are undoubtedly progressive but changes in the rates affect different people differently. Yes, those on higher get increased cuts but it is still a progressive tax rate (even if WFF has confused the clarity of the system).
I am sure that the recipients of wff will not be using their targeted assistance to buy a house in the south of france or bach at taupo or a harldly davison so they can go round showing off what sort of rugged individuals they are
I am sure that the recipients of WFF will not be spending their money on a house in the south of france or a hardly davison to go round skiting about how ruggedly individual they are
Daveski, regarding the use of the word “regressive” to describe National’s cuts, I was starting with a baseline of the status quo, which was Labour’s legislated tax cuts. Clearly they would still maintain a progressive tax system, with a move to a flatter tax system over time.
WFF and all the other stuf IS NOT tax cuts. Calling them “tax relief”, “tax targeting”, “tax cuts” etc DOES NOT make them tax cuts, no matter how many times you say it.
In the end, NZers had enough of the cynicism.
Under Labour, even something as simple as lowering a couple of tax rates instead got wrapped up in a welfarism, feel-good branding, red-tape, nannyism, winner-picking and politicking.
Jimbo – I guess that means research tax credits, devaluation credits and National’s plan to provide tax credits to middle income earners is also welfarism. We should do away with them all then?
Robinsod – no, what I said was WFF was welfarism, feel-good branding, red-tape, nannyism, winner-picking and politicking. You can go ahead and pick examples of what National is doing to try an disprove the point, but you won’t change my mind on that!
You can out money in people’s pockets through welfare, tax cuts and combination of the two. WFF is welfare (despite Labourt govt’s efforts to brand it as something else).
Some people wish the Labour govt has at times given a pure, unganished tax cut. That is all.
So WFF is welfare but National’s tax credit isn’t? Neither is (was) the R&D tax credit? Despite being delivered in exactly the same way by the same institution???
I’m starting to think your definition of welfare is based entirely on your own inane prejudice…
If we’re gonna set rules that way then I shall define your existence as pointless. As opposed to mine – which is critical – just y’know because (insert stupid catchphrase here). Idiot.
‘sod: is MSD/WINZ involved in the R&D credit? I’d call it welfare if they were.
I’ll agree that the govt has tried very hard to disguise WFF as a tax credit (replacing “payment” with “tax credit” in their documentation – they have still missed some places) but not hard enough. It has not fooled Susan St John for example.
If the govt had stuck to a simple tax credit (eg: write off 10k income for each dependent child) then they would also have avoided landing working people with the steep benefit abatement that they now have.
it wasn’t the Labour-led govt that was out of step with other social democratic parties around the world – it’s the right wing nutters who infest this site who are out of step with mainstream centre right political thinking now that the neoliberal bubble has burst.
Are they being paid to read The Standard? Or are their lives so sad they have nothing better to do than frequent a blog they don’t like??
[lprent: There are some of them who are worth reading. Some of them are even good at making me have to flick out of programming or moderation mode (closely related) into political mode. ]
jbc: As far as I’m aware, the only agency you have to interact with to get a WFF credit is the IRD. Does that answer your question?
http://www.ird.govt.nz/wff-tax-credits/
It’s interesting to read the entry over at Lenin’s Tomb. They’re calling it a “minute shift away from kapitalist realism” and “an overall package of moderate wealth redistribution.” It seems to me that Farrar is the one who’s out of step.
Vanilla. My only question was about R&D – and it was rhetorical. I know that WINZ were not behind the R&D credits.
But their DNA is all over WFF. Payments, entitlement, etc. There’s even a WINZ logo on every page.
I know you don’t have to front up to the WINZ office, or fill out WINZ forms to collect WFF. That’s just so that people don’t feel too awkward collecting it
Their application form states “Family assistance has been renamed Working for Families Tax Credits”. So you apple to
WINZIRD to collectFamily assistanceFamily Tax Credits.I’m not the only person who sees this as a tax credit in name only. Not trying to change anyone’s mind on this but just telling it how I (and many others) see it.
Robisod – “inane” and “idiot” in the response to my post? A bit OTT I would have thought.
I simply said that WFF was never a “tax cut”, and that I thought it was “welfare”. I said I thought the Labour government continually called it “tax cuts” when in fact it clearly is not. Do you agree or disagree with this?
In response, you started talking about a proposed National policy that I did not even refer to.
I wasn’t talking about proposed National policies – I was talking about the cynicism of describing welfare as “tax cuts” in the hope that the electorate will come to believe they are the same thing (seems to have worked with you…). If the National party are doing it, then they are wrong, too.
Even if National introduces 99 new forms of welfare, I will still believe that:
1. WFF is not a “tax cut”, it is welfare.
2. The Labour government consistently tried to label WFF as “tax cut” when clearly it is not. They did this for political purposes.
How about putting aside the name calling for a second or two and considering the point in an even-handed manner? If you want to stick with the name-calling, then that’s fine too. I’ll no doubt be “moderated” out of existence and you can chalk up another victory for the powers of good.
WFF is not a tax cut.
It’s a welfare payout that rewards reproduction not production.
With my 3 sprogs I got enough to buy a kick-ass bose sound system so I’m not complaining – it just aint a tax cut
That’s strange mike.
You consider it a welfare payment, that you don’t need, yet you signed up for it anyway.
I guess now you are thinking about replying that you pay an unreasonable amount of tax in your view, and so you signed up to this ‘welfare payment’ as a means to clawing back some of that tax. Something like that? You pay your taxes so that entitles you to get some of it back?
PB – yes that is correct. Next year I’m thinking spa pool.
ACT voter by any chance, Mike?
PB,
It’s not about whether one deserves it or not (the tax cut or the welfare…). It’s not even about whether one is better than the other, or whether WFF is particularly good or bad example of welfare policy.
The point is simply that tax cuts and welfare are different things. WFF targets welfare to particular portions of society based on various social factors (such as the number of kids they have). WFF is welfare and not a single credible economist would argue otherwise. For some reason, the Labour government when WFF was introduced, and many Labour supporters to this very day, continue to call it a “tax cut”.
Why not just say: “No, the Labour government never cut taxes. It didn’t cut taxes because it instead decided to redistribute the money via WFF, which I believe is an excellent policy”…(if that’s what you believe)?
Why the desperation for it to be seen as a tax cut?
Jimbo: I’m pretty sure that they were never referred as tax cuts apart from idiots of the right. They were defined as tax rebates. Perhaps you could define the difference between the two?
That’s just silly Jimbo. Can I play too ?
All policy is welfare policy. No credible political scientist would disagree. All policy is social, by definition, therefore all taxes that are not strictly flat, are disguised redistributional welfare payments.
Easy, but boring isn’t it? There’s no there, there.
All sorts of redistribution is done via the tax system, either through tax credits, progressive rates of taxation combined with universal entitlements, and so on and so forth.
But that’s not what I was getting at in any case, I was just having fun with mike’s apparent dissonance. “It’s not a tax cut – it’s welfare, but I’ll take it to reduce my unjust tax burden” – justifying his ‘welfare receipt’ as a tax cut.
No desperation here Jimbo, just amusement. The whole debate is about framing. They are just words for the same thing, with different connotations attached to them. Righties are upset that the left tried to adopt their tax cut language. mike adopts it for his use of the policy, but not for the actual policy. Funny eh?
Mike – you’re a bludger. Give me my tax back.
Jimbo – good to see you;re now trying a little harder to rationalise your prejudice… You’re still taxonomising according to a blind ideological value system but at least you’ve shifted off “nanny-state” kneejerk platitudes…
Now let’s see if you can reach level two:
Explain why facilitating procreation and financially stable child-rearing (which is important to the long-term success of our economy) is different to rewarding research and development (which is also important to the long-term success of our economy) and thus why one should be considered welfare while the latter should not.
If you manage that then please explain what you mean by “not a single credible economist ” and provide a clear explaination of cross-elasticity of demand in order to reassure me you actually know what you you’re talking about when you make such claims. It would be a terrible let-down to think you were just employing cheap rhetoric…
Oh and just so I don’t disappoint you? You’re a moron…
Robinsod – you just don’t seem capable of separating a simple discussion about whether a policy is properly described as: (1) welfare; or (2) tax cuts, from an argument about whether WFF (whether it’s a tax cut or welfare) is any good. As far as I’m aware, I’ve not been having an argument about whether WFF was a good or bad policy. What I’ve been saying is that some voters wanted tax cuts, plain and simple. Labour tried to call WFF a “tax cut” so it could claim it had responded to the electorate. I think this was cynical and wrong.
Whether WFF is “welfare” or a “tax cut” not a political question. The answer doesn’t depend on my “prejudice” or your use of big words. The answer comes from engaging your brain and sticking to the point. But you carry on the name-calling, etc. if you want to. You just look like a tool.
To repeat: You are a tool.
PB (and Iprent) – yes I agree it’s all about framing. Labour consistently called a welfare policy a “tax cut” to try and get some sort of political benefit. Why did they do this? Is welfare now a dirty word?
Sure, all tax is redistributional and lowering a tax rate will change the dynamics of that redistrbution. 100% agreed.
The only point I was making is that “tax cuts” mean exactly that. Cutting the rates of tax applying universally to anyone whose earnings happen to fall within a particular tax bracket. Changes to the tax system (be it lowering, increasing, changing the bands), when done properly, is one of the most simple, fast and easy to understand way of changing the way a society redistributes it wealth. I AM NOT saying that our tax system doesn’t redistribute wealth. I also AM NOT in any way arguing against a progressive tax system.
When a policy implements other goals by deciding that only SOME people get the reduction in tax or “tax credit” (for example those involved in “financially stable child rearing” as Robinsod a.k.a King Tool calls it), then it’s no longer what most people would call a tax cut.
For example, if I passed a law saying that all returning veterans would henceforth get a 20% tax credit, it would not be right for me to announce that policy to the world as proof that I’d delivered tax cuts. Similarly, if I said that anyone who finds the cure for cancer will get 100% tax credit for the rest of their natural life, that would not be a “tax cut” either. These two examples might both be worthy policies, but the fact that the “payments” are delivered through the tax system (as tax credits) does not make them tax cuts.
WFF and the policies I’ve described above are simply not tax cuts. They are policies designed to achieve particular social outcomes that COULD NOT be achieved through simple changes to tax rates or tax bands.
Again, I agree it’s about “framing”. The Labour govt bent over backwards to call WFF a “tax cut” rather than simply acknowledge that it’s a different type of welfare. What’s wrong with calling it by its proper name?
“Essentially, it’s a more progressive tax system, with tax reductions for those on lower to middle incomes paid for by tax increases on the rich”
If only that was the case. The 2.5% reduction in VAT alone is expected to cost 12 billion pa, while the increased “rich pricks” tax will only bring in 2 billion pa. Also, one thing to note is that these cuts are only temporary and will likely be withdrawn at the end of next year. The 45% rate is due to be brought in in 2011 (after the next election) so no doubt Labour will be out and it wont be brought in.
I read in a news paper this morning that 2% of the population in England pays 93% of the tax. If a lot of these people loose their high paid jobs and businesses due to the recession, then Labour over here are going to have a very hard time generating tax income.
Borrowing is expected to top 1 trillion this year so at some point all taxes will need to be incresed to pay it all back. The recession over here is going to be a stinker, with over 370,000 jobs lost in london alone (7.9% of all jobs in London). Makes the recession that NZ is sliding into look rather shallow really.
Anyway, im glad ill be returning to NZ mid next year some time. Hopefully i’ll keep my job until then.
Jimbo,
Humour me and provide a few examples of this, would you?
Welfare handouts arent tax cuts full stop. WFF is a welfare handout.
Jimbo,
I don’t give a rat’s patui what you call the mechanism, tax cut, credit, welfare, redistribution… it’s just a name All that really matters is a person’s nett tax position. (Which can be positive or negative.)
A person who pays more to the State in the way of tax, than they receive in any form of benefit or credit, can be defined as a taxpayer.
A person who receives more from the State in the way any form of benefit or credit, than they pay in tax, can reasonably called a beneficiary.
Everything else is framing, spin, or bluster.
Jimbo – you don’t seem capable of defending your position and instead transparently try to renegotiate the basis of the original argument to avoid addressing your failure to argue you point. You lame bastard…