English spins on GST with no traction

Written By: - Date published: 10:49 am, September 28th, 2010 - 40 comments
Categories: bill english, Economy, spin - Tags:

It’s worth having a look at Bill English’s performance on Q+A the other day. What’s telling, to my mind, is that English can’t present a real vision or even any spin-free information. Why not? Because his tax swindle is about taking from us and giving to the elite, and he can’t just come and say that.

MR ENGLISH … Businesses who do that [increase their prices by more than the GST hike] are really taking a risk. When your consumers are being so careful, if you put your prices up, people are going to be very sensitive to that. They’ll just move to someone else who hasn’t put their prices up.

GUYON And is that the only weapon – the market? Or can you clamp down on these people?

MR ENGLISH Well, the market is the weapon that works, actually.

Lolz. The wonderful market. Let’s leave it to those wonderfully efficient markets. Wait, aren’t these the same wonderful markets that failed so badly that the world’s governments have had to step in with borrowed trillions to prevent complete financial collapse.

GUYON OK, you said the vast majority of New Zealanders were going to be better off under your tax switch when GST goes up and the income tax comes down. Is there any group of New Zealanders… You’ve crunched the numbers over the last few months – is there any group of New Zealanders who will be worse off?

MR ENGLISH Well, I think that will depend on some individual circumstances. For instance…

GUYON What are they?

MR ENGLISH Well, there’s some groups, for instance, who don’t pay any accommodation costs. Because for most people, the cost of their housing and accommodation – they don’t pay GST on that, so they don’t have GST going up on it. But there are a small group of people who don’t pay any accommodation costs. There may be other people who are living on borrowed money, for instance. So there’s a few groups who may. There may be some individuals who put their heads up. But in the end, this is not just about whether people are better off – they’ll believe that when they see it – it’s about the longer-term need to balance the economy to strengthen it.

But that Nice Man Mr Key told me that I would be $50 a week better off. Now, it’s not about whether people are better off?

GUYON We had a New Zealand Institute of Economic Research forecasting paper out recently. They say that 50% of households will see their tax cuts eaten up by the end of the year. Do you agree with that?

MR ENGLISH No, I don’t, and I don’t know how they calculated that.

Who to believe? The country’s leading economic institute? Or Double Dipton, the man who claimed that cutting contributions to the Cullen Fund at a time when it was buying up assets at once-in-a-generation low prices was the sensible thing to do?

GUYON They say, though, that they estimate that 50% of households will be worse off after a year, at the end of the year, given rising food prices, GST and other one-off charges. I mean, there are a lot of costs in the economy going up.

MR ENGLISH Yeah, but when you add them all together, there’s actually some prices going down – like fuel and food prices have actually been dropping, not rising [petrol’s actually up 14.5% since English came to power]. When you add them up in the round, inflation is relatively low. Look, there’s no free lunch here. This is not a lolly scramble. It was never meant to be.

But, again, that Nice Man Mr Key told me I would be getting $50 a week of lollies. The truth, of course, is that the tax cut money hasn’t magically appeared out of thin air. The income tax cuts are paid for by the GST increase and a billion dollars of borrowing.

GUYON Yeah, and that may well be true, and that’s the theory of it, but for a lot of people, it’s going to be what’s in their pocket, and that’s fair enough for those people. And it isn’t much, is it, when you’re on the average wage of around $45,000. Your tax switch gives them $12 a week – three cups of coffee, really.

Or a block of cheese.

GUYON But when they look at someone on your salary gets $143 a week after this tax switch, and, say, someone starting out as a teacher on $37,000 gets $13 a week. Is it really fair?

MR ENGLISH It is, and we put a lot of information out around the budget.

GUYON What’s fair about that?

MR ENGLISH Well, it’s because we’ve increased the effective tax rate on property in particular. When you average it out across the income groups, most of the property tends to be owned by the higher income groups.

That may be but we all know that most wealthy people, especially the very wealthy, are not property investors – they’ll get the massive tax cuts but no depreciation clawbacks.

Imagine you’re a typical taxpayer, the Deputy Prime Minister for instance, and you’re renting your family home out to Ministerial Services who are then providing that home to you for your family to live in, you won’t be able to claim depreciation any more. On the other hand, say your rort was discovered a year ago and you’re not doing it now, then the changes to the depreciation rules mean nothing and you (already on seven times the starting teacher’s wage) walk away with eleven times the tax cut.

In the end of the interview, Guyon asks English about the abysmal growth track we’re on. English’s spin is that slow growth is good (funny, a few weeks ago he was misconstruing Labour’s record on growth to claim it was slow. I didn’t realise he meant it as a compliment). English says growth is slow because people are spending less and saving more. Now, English is an ex-Treasury official so he knows that isn’t true. GDP includes both consumption and capital formation (ie. savings/investment). The fact of the matter is that any new capital wealth we are accumulating is counted in that abysmal 0.2%.

My challenge to English is to stop spending all his time deceiving and actually come up with an economic strategy. One that isn’t based on cycleways and spinning.

40 comments on “English spins on GST with no traction ”

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  2. bbfloyd 2
    28 September 2010 at 11:21 am

    good luck on that challenge.. personally, i doubt dipton bill is capable of speaking straight english(pun intended). he’s been sounding like a wind up toy for so long the gears are jammed…

  3. Herodotus 3
    28 September 2010 at 11:37 am

    “But that Nice Man Mr Key told me that I would be $50 a week better off. Now, it’s not about whether people are better off?”
    Is that like the Nice Phil Goff informing me that GST off F&V will save $300-$400 p.a., or a MP S.Nash using his $130k+ salary and spending habits as a basis for what the rest are to save on this policy.
    It is the pollys job to use smoke and mirrors, and for the rest of us to find out the real truth, or the truth for us, and the medias job is to ? Entertain us only.
    There is no talk as to what their vision (Lab or Nat) is for NZ. Just bribe us for our vote for what is good for me. Sometimes what i sgood for me is not good for the country, we are becomming only takers.

  4. nzfp 4
    28 September 2010 at 11:52 am

    When English states “Look, there’s no free lunch here”, he is demonstrating that he either:

    1. Thinks we are complete economic illiterates

    or

    2. He is a complete economic illiterate.

    The term “Free Lunch” is a classical economic definition that has been debased by neoclassical economists. A “free lunch” in classical economics is defined as profit taken from the economic rent on products provided freely by nature. Conversely failed neoclassical economists define a free lunch as a reduction of taxes on labour – the complete opposite. In fact the term neoclassical would better be described as anti-classical.

    The best example of a “Free Lunch” is the economic rent extracted by Wealthy land owners who own lots of property that they rent out, it is typically managed in the form of a Trust (like the Double Dipton English family Trust).

    The free lunch occurs when the tax man is either prevented or refuses to tax this [land, rental properties,etc…] revenue stream and instead the tax burden is shifted from land taxes to labour – in the form of income and GST tax.

    Consequently we have a free lunch! The Wealthy land owners lke Bill English and his family get a free lunch of untaxed/poorly taxed rental revenue at the expense of the rest of us who offset the Bill English land tax with an increase in our labour costs with an increase in GST.

    In order for Bill English to keep getting his “FREE LUNCH”, English is willing to risk the stability of our economy. Bill English is literally stealing money from our back pockets to continue funding his “Free Lunch”.

    Think about that everytime you hear that A*****E say there is no free lunch.

    Stuff Englsih and stuff the rest of the anti-classical anti-liberal economists like him.

    I really want to use another word instead of “stuff”. Maybe that’s why that other website that produces agitprop/propaganda is called “Stuff”.

    • Colonial Viper 4.1
      28 September 2010 at 12:36 pm

      It must burn the Righties that smart lefty people like you exist in our society.

      They won’t worry though, a few more education cut backs and putting more vulnerable children into deprivation and you’ll be an endangered species.

  5. prism 5
    28 September 2010 at 12:07 pm

    His spin on overseas investment this morning was noticeable. He said that overseas investment is needed to start new businesses when apparently most are buying businesses already established. However Fed Farmers have recognised that overseas buying of farms should be difficult, mainly because China doesn’t allow foreigners to buy in their country. Tit for tat, that’s the only argument they can think of.

    • Colonial Viper 5.1
      28 September 2010 at 12:38 pm

      Tit for tat is the only rationale they can come up with which fits their free market neo-con view of the world. They know in their gut its wrong to sell off productive farm land to foreign interests, but their philosophy can’t deal with issues of economic sovereignty etc. You might as well be trying to talk Martian to them.

      • insider 5.1.1
        28 September 2010 at 1:12 pm

        Yes let’s have the kind of economic sovereignty rules that encourage people like the Crafars to run our farms. They’re locals so got to be better land managers than some foreigner.

        • Colonial Viper 5.1.1.1
          28 September 2010 at 1:17 pm

          Now you’re pointing to how the system of debt the dairy industry runs under is killing farms.

          Not sure why you might suggest that the Chinese can manage farmland and the surrounding environment better than capable NZ’ers. We have the expertise in that, after all.

          • insider 5.1.1.1.1
            28 September 2010 at 1:23 pm

            Well you’re the one saying foreign bad local good. I’m pointing out it’s not that simple.

            And according to recent reports NZers aren’t doing a tremendous job of managing farms and the surrounding environments, so maybe the Chinese could do better. I don’t think ability or inclination is driven by the colour of your passport.

            • Draco T Bastard 5.1.1.1.1.1
              28 September 2010 at 10:05 pm

              No, from looking at the actions of our farmers and other business leaders, it’s driven from their wallet. If it costs money they just won’t do it even though it would be better practice.

      • prism 5.1.2
        28 September 2010 at 8:41 pm

        I’ve got a sound sample of Elvish. But wait a minute NACT neo cons would come from the wraith darkland,.

  6. grumpy 6
    28 September 2010 at 1:11 pm

    I wish you would stop using the word \”elite\”. Very Sarah Palinish.

  7. randal 7
    28 September 2010 at 1:35 pm

    so bill is taking from the poor and giving to the rich. something seems wrong in this modern fable.I mean its not as if they are even rich. just two bob tories that need some cast to visit macchu piccu or buy a new harvey dalidson or sumfing.

  8. tc 8
    28 September 2010 at 3:11 pm

    Joe Bloggs like Goff’s living in the past….quoting Cullen is quoting history, that was then this is now.
    Goff’s fallen into the trap of ‘why we did what we did..’ FFS Phildo move forward and hold out the vision and reasons why……plays to NACT hands wringing your hands over yesterdays decisions in the boyant pre GFC world……no-one cares, wake up and stop getting sucked into a time we’ll never see again and focus on blinglish/sideshows tax swindle for what it is.
    An unsustainable, unecessary redistribution of wealth.

    • Jim Nald 8.1
      28 September 2010 at 3:34 pm

      I’m puzzled by the reactions from the GST purists and fundamentalists.
      The sky has not fallen for other countries.

      • insider 8.1.1
        28 September 2010 at 4:20 pm

        When the policy is premised on it being simple and there are clear cut definitions, you can’t blame people for pointing out where it might not be and saying it’s better to stick with a purer system.

        More importantly it is proposed that it will cure a whole load of ills. IMO it is a crude and poorly targeted response to those ills.

        I’m not fussed on purity, I just think you could do a lot more with $250m than rebating dollars to people like me to save cents for people on low incomes and (possibly, maybe sometime) in the future a bit more on the health system.

        • Lanthanide 8.1.1.1
          28 September 2010 at 4:36 pm

          My main complaint is over the $ values involved, and the fact that it’s going to increase compliance costs.

          Now if they were suggesting taking GST off all food (excluding restaurant/takeaway food of any kind), we’d be talking a much bigger $ value going into the hands of the poorest, while not dramatically increasing the compliance costs over what they will already be. That would be a policy I could support and I think would be useful. At the moment we’re stuck with a half-way house that doesn’t deliver much in the way of benefits while still increasing costs.

          • Puddleglum 8.1.1.1.1
            28 September 2010 at 8:31 pm

            Fair enough. Extra compliance costs probably wouldn’t increase linearly with the number of exemptions so why not go further (not that I’m sure we should be overly concerned about compliance costs – the history of modern economies over the past one or two centuries is full of ‘extra compliance costs’ and it doesn’t seem to have broken the camel’s back)?

            But, notice that when it comes to companies putting up prices beyond the GST rise, Bill English thinks consumers will switch their behaviour (for what would be very marginal differences) and enforce discipline. By contrast, when it comes to lower income groups saving ‘only’ $6 per week on fruit and vegetables, apparently this won’t make any difference to their purchasing behaviour and would be seen as an insignificant saving – talk about shifting your position with the rhetorical winds!!

          • Draco T Bastard 8.1.1.1.2
            28 September 2010 at 10:08 pm

            Processed food isn’t as good for you as fresh food. We want to enable and encourage people to buy fresh food rather than frozen ergo, we take the GST off the food that we want people to buy and not the food that we don’t them to buy.

            • Puddleglum 8.1.1.1.2.1
              28 September 2010 at 10:44 pm

              I agree about much processed food being unhealthy – I’d like to see that addressed separately. Some ‘processed’ foods, as the right will be all too quick to mention, are healthy enough given that ‘processing’ covers some age-old practices that pre-date the industrial revolution. (I read once that our digestive system has actually co-evolved in relation to the discovery of cooking so some ‘processing’ is not ‘unnatural’ for humans.)

              Personally, I’d wipe GST entirely and, in the current economic system, impose a mix of other taxes – e.g., environmental taxes, taxes on some forms of financial activity, etc.. GST at the moment is indiscriminate in that it is a tax on every and all goods and services (with some interesting exemptions in relation to charging of interest (i.e., the service of providing money) – ‘good’ or ‘bad’. (Interesting that financial services (at lest some?) are exempt – strangely the sky hasn’t fallen in under the weight of extra compliance costs in those areas.)

  9. Jeremy Harris 9
    28 September 2010 at 3:54 pm

    Because his tax swindle is about taking from us and giving to the elite,

    This is where you lose me, how is the government deceasing the amount of money it takes from another person, taking from you..? GST goes up for all of us…

    • BLiP 9.1
      28 September 2010 at 4:36 pm

      [. . . groan . . . ]

      • Lanthanide 9.1.1
        28 September 2010 at 4:42 pm

        BLiP, you must be under the delusion that tax money is revenue for the government to spend on it’s many programmes to benefit society as a whole! You’ve fallen for the leftist propaganda!

        Everyone with a brain truly knows that tax money is the government stealing from private citizens so they can go on overseas holidays, drive around in flash cars and sit around in fancy air-conditioned offices all day.

        Jeremy Harris: grow up.

        • Jeremy Harris 9.1.1.1
          28 September 2010 at 7:16 pm

          I am thanks, you accept as a given that all government funds are well spent – when clearly a lot aren’t and that the government has the right to set tax rates at whatever level it wants for whatever programmes the government of the day deems necessary…

          I think that is a troubling amount of power to give to any politician who believes they have good intentions…

          Raising the standard of living benefits society as a whole and overtaxation reduces that, all government spending isn’t good, the equation is more complex than lowering tax rates equals bad…

          • Colonial Viper 9.1.1.1.1
            28 September 2010 at 7:25 pm

            you accept as a given that all government funds are well spent – when clearly a lot aren’t and that the government has the right to set tax rates at whatever level it wants for whatever programmes the government of the day deems necessary…

            You are into transport systems, yes?

            So how do you think the AKL transportation system would fare with 3 yearly yo-yo-ing of planning and budgets based on nothing more than what the Government of the day deems necessary to see things through its own day?

            Actually, we have our answer, don’t we?

            Raising the standard of living benefits society as a whole and overtaxation reduces that, all government spending isn’t good, the equation is more complex than lowering tax rates equals bad…

            Raising who’s standard of living? Raising Peter Jackson’s standard of living further is going to benefit society as a whole, how exactly?

            Maybe if you were talking about raising the standard of living of the 2 most deprived deciles in this country as the priority I would agree with you.

            But if this is another trickle down sell, no I don’t think so.

            I am thanks

            Lanthanide wasn’t talking about your height, but more your ability to think past just one persons personal interests. Your own or someone elses. Something that used to happen by the end of the teenage years but has apparently become more and more delayed.

          • Puddleglum 9.1.1.1.2
            28 September 2010 at 8:38 pm

            Isn’t it interesting how, for the right, our government – which at other times (e.g., invading Iraq, ‘standing up’ to Communism, etc., etc.) is lauded for it being government for the people, of the people, blah, blah, blah – when it comes to taxation is seen as simply a group of politicians out for their own gain? Which is it, eh?

            Governments, in a democratic set-up, are supposed to be us exercising our will. Are they or aren’t they?

            • Jeremy Harris 9.1.1.1.2.1
              28 September 2010 at 9:47 pm

              @colonial viper, on other blogs I’ve stated that when running such huge deficits it makes no sense to have tax cuts and if we are going to have tax cuts it should be to introduce a tax free threshold, as that would give everyone an even amount, give relief to the lowest earners and act as a stimulus…

              The statement is what I have a problem with… Lowering one person’s tax rate is not taking from another person… It reduces that amount of money available for services yes but if that results in a reduction of poor government spending – say bailing out finance companies – it can ultimately be a good thing…

              • Lanthanide …
                28 September 2010 at 10:12 pm

                “Lowering one person’s tax rate is not taking from another person… It reduces that amount of money available for services yes”
                So it is taking from another person. It’s taking services that that person would otherwise enjoy.

                “but if that results in a reduction of poor government spending – say bailing out finance companies – it can ultimately be a good thing…”
                Except it doesn’t work that way at all. Note how the government has slashed night classes, early childhood education, ACC etc AND they have also bailed out the finance companies for a huge sum that far eclipses all of the other expenses. If what you suggest actually happened in reality, then we would’ve kept all the services and not had the bail out.

                Also, thank you for actually replying with something that we can actually have a discussion about and isn’t a trite inanity that know-nothing Palin supporters like to spout off – that is why I told you to grow up.

              • Draco T Bastard …
                28 September 2010 at 10:20 pm

                Lowering one person’s tax rate is not taking from another person… It reduces that amount of money available for services yes…

                Which would be removing those services from where they were needed. This is seen in the present governments actions. Decreased taxes and decreased education (Except to the rich whose private schools got a multi-million $$ boost), and did the same for health.

                but if that results in a reduction of poor government spending

                National were unable to identify any wasteful spending prior to and after entering government (they had to take down their “wastewatch” website because they didn’t have anything to put on it). This means that all the services that they’ve reduced to pay for their tax cuts was good and necessary spending.

                ay bailing out finance companies

                That needs an inquiry into it to find out why it happened when it obviously shouldn’t have and, you’ll note, that NACT aren’t going to. IMO, the SCF bailout shows prima facie evidence of corruption at the top levels of government.

                • Jeremy Harris …
                  28 September 2010 at 10:39 pm

                  You’re certainly not going to get an argument from me that National haven’t cut some very valueable government spending while wasting billions on poorly directed tax cuts and bailouts…

                  My point simply is that if the top tax rate had been lowered and poor spending eliminated to off set it then no one would have “taken” from the poster to “give” to the wealthy…

                  • Lanthanide …
                    28 September 2010 at 11:18 pm

                    Yeah, if there happened to be “poor spending”, then I would agree with you. The problem is that “poor spending” doesn’t really happen unless you have an inept government. The last government was not inept.

  10. Jum 10
    28 September 2010 at 10:14 pm

    That’s wonderful talk Marty, but until you can get it to the masses it won’t matter a damn. We know; we understand; we do the homework. So many do not. Get the picture?

    captcha: secret

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