Written By: - Date published: 6:48 am, November 18th, 2008 - 69 comments
Categories: national/act government, tax -
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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.
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randal, ev is a tedious bore who tries to ruin every thread with what is basically spam. Instead of blaming the Right for your troubles, it might help if you didn’t think that all the world is trying to gang up on you.
Randal. I read more comments than you care to imagine. I also have to make judgements over what to allow and what not to allow in order to ensure the blog is a constructive place for people to visit and participate in. Ev has been warned, and warned, and warned, and then warned some more. Today’s jacking attempt, and the flame war that ensured, was the final straw.
This blog is for everyone who wants to participate in good faith. It is not a sounding board for Ev’s personal obsessions. She has her own blog, she can write to her heart’s content there. When she’s here she can stay on topic and respect that not every thread is about her.
As for your other point – no, I’m not giving in to the Right. I’ve faced down more than my fair share of them, don’t you worry brother.
randal, ev is a tedious bore who tries to ruin every thread with what is basically spam.
Tim, ev has asked questions that you can’t answer, and your personal attacks on her (“Ev is a liar, a fruitcake, and is mentally disturbed, in need of psychiatric therapy”) tell us far more about you than about her.
“the rich” make their money out of businesses that ultimately, one way or another, rely on the working class to generate their wealth. Yes, that includes investment bankers also. So looking after them is good for everyone AND the economy.
They also rely on those people to provide other things to enable them to exist: police, nurses, tradesmen, farmers, cleaners, etc. Without these people their rather “artificial and detached” existences would not be possible.
So the thought that somehow “Cherry the CEO” fully deserves a $250,000 a year income AND a fat tax cut, while “joe the plumber” fully deserves to struggle to pay the power and higher tax with 50,000 is not a good enough argument. In fact it is downright wrong headed.
That assumes that Cherry even pays as much tax as Joe in the first place, as we all know about tax dodging enabled among the wealthy. Also that all that wealth and asset they are able to accumulate actually earns them even MORE wealth on top of it. The security, opportunity and control that a wealthy person has in their life is huge. e.g. should Cherry be out of work for 6 mths, for instance, her quality of life will be impacted by a very small amount – especially given the golden handshake she will get. Inflation barely touches her cost of living.
A tax cut of 300/week means little to Cherry at 6.24% of her already heavily surplused income.
Meanwhile, Joe is struggling to save for a deposit on a house because property investors own 5+ each and have priced him out of the market. He is forced to be exposed to the market and falling on hard times and/or losing his job could mean the dole queue and eviction from his current rental house. Inflation makes a big impact on his food bill and eats directly into his savings in significant % points.
A tax cut of 40/week means a whole lot more to Joe at 4% of his income, because it would increase his disposable/savable income for 15-50%+ in many cases.
But hey, maybe we CAN make this work. How about we introduce an asset/wealth tax then? (ref: http://en.wikipedia.org/wiki/Wealth_tax ) How about capatal gains tax across the board in all cases?
Disclaimer: I am one of those “rich pricks” in the middle of my career and stand to make massive gains from “rich prick cuts”. But I also grew up in a beneficiary family in a backwater area and know what the difference in opportunity an auckland well-to-do kid has vs. someone of my ilk and how much HARDER I had to work than them to put myself through university without any assistence at all. I also know how much more disadvantaged I am because of it.
I believe in a fair and just society and screwing the middle class with your wealth, power and connections to increase your profits so you can pay yourself large bonuses and golden handshakes is just not good enough. There has to be a pressure valve here and differential tax rates is it.
“The rich have worked really hard for their money. They have displayed the skills necessary for our economy to thrive; enterprise, hard work, determination and innovation. They deserve a reward for such attributes.”
Argh…. this has nothing to do with it. Everyone benefits from the welfare system, even the rich. Most people do not like the idea of people living on the street or the elderly having to eat pet food. Most people who might end up living on the street don’t want to and all of the elderly do not like the idea of eating pet food. The welfare system satisfies both sets of preferences in the most efficient manner. Private charity is not an option because it is subject to market failure. I repeat: it is not an option because it is subject to market failure. Think of the tax you pay as what you pay to make society worth living in and to insure yourself against crime, because that is what it is.
The free market can produce many goods more efficiently than any other institution, but there are a lot of things it does badly. The welfare state picks up the slack and ensures a liveable society. Asking for the market to do it is to completely misunderstand how our economy works. Them’s the facts and there is no avoiding them.
The idea that we should cut taxes on the rich is insane. It means that we either have to cut spending, which will create problems for everyone, or we have to increase tax on lower income earners, which will create problems for everyone. There’s a reason we pay progressive taxes and it has nothing to do with fairness – it is because taxing the rich more provides the best result, even for the rich.
As it is in New Zealand the wealthy do not pay enough tax. The Nordic economies shame all others when it comes to producing a high overall standard of living, and they are high tax economies. Any clown who argues for the benefit of low taxes has those inconvenient facts to deal with.
The political right are basically a bunch of idiots who don’t understand the basics of how our society works. It’s like they didn’t pay attention during economics 101. I sometimes wonder if they are being dumb on purpose.
Ag:
As per my first post – they are being “intentionally stupid” because it serves themselves and those they represent.
Occam’s razor.
The example of Nordic economies makes a return.
Everyone in those countries are pretty much protestant and lets face it white. They have strict immigration policies and thus don’t have problems other countries have.
New Zealand, Great Britain, Australia, USA, Canada and most of Europe are completely different. We have ethnic and religious mixes and these will always cause conflicts and will always add complexities. That is something Nordic countries don’t really experience.
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Though I was informed at Kiwiblog that Sweden now days have a large number of Arabs and Africans now days.
I’m not saying that one can’t use examples from Nordic/Scandanavian countries just that they’re so different politically, historically, ethnically even religeously to New Zealand, other english speaking countries and most of Europe. Not to mention trade relationships with the European Unions.
How do the hardworking people like Mr Magoo feel about the Rich who have never actually produced anything but gained their wealth by wheeling and dealing in money markets?
And no doubt that their wealth is tied up in Trusts so that they pay little or no tax at all. Is that how it is for Mr Magoo?
And no doubt that their wealth is tied up in Trusts so that they pay little or no tax at all.
Look, this is just a wild guess, but Ianmac, you know nothing about our tax system, do you?
On the off chance that you do and I have missed something big, explain how “tying wealth” up in trusts enables one to pay “little or not tax at all”.
No pressure but I am prepared to be fascinated.
Gingercrush – The numbers of christians agnostics athesits in the scandinavian nations aren’t really different from that here (look at the stats I just did). What does the fact that we’re more ethnically diverse or that there are more white people in scandinavia have to do with our tax system and social spending – please explain clearly.
QtR- Goodness knows what he meant.
It sounds like he thinks white people won’t stand for their tax dollars supporting not white people, and that all the ‘principled’ arguments we hear from the right against progressive taxation and redistribution are just hot air. It’s really all just about religious tribalism and race, and that if we didn’t have so many of them stinking up the joint, they’d be all gung-ho for democratic socialism.
Who would’ve thought? Must be reading him wrong. Hopefully he’ll explain.
Billy: I know Farmers who have paid virtually no tax for years, since the Farm is a Family Trust which by the time all the farm expenses are paid , new car, new house, power then the identifiable income is almost nil.
Slightly different but in principle the same, I know of a specific family who sold their farm for $11million, to become a vineyard, built the new house (huge) and the Family Trust formed meant that the daughter could go to varsity and obtain a Living allowance of $150 because on paper her parents were well below the thresh-hold.
You are right. I know little about tax but I do know that clever accountants minmise the tax otherwise due.
A good ol’ rich bashing. My favourite.
[lprent: Probable troll - see the Policy. Lift your standard - where is the point in your last few comments]
“Everyone in those countries are pretty much protestant and lets face it white.”
Where have you been for the past 40 years? I guess the difference with the Nordic countries is that they don’t have right wing nutbars constantly race baiting all the time.
If you don’t like the Nordic countries, then try Canada, which is probably the most ethnically diverse country on the planet.
What will the next desperate denial be?
“What will the next desperate denial be?”
‘The dirty Scandi countries are getting a free lunch from all that Nartzi gold they’ve been hiding, but they’ve reached Peak Nartzi Gold and it’s all downhill here from here for them. They’ll all be living off lanolin and soylent green within months’
It was in response to this: “As it is in New Zealand the wealthy do not pay enough tax. The Nordic economies shame all others when it comes to producing a high overall standard of living, and they are high tax economies. Any clown who argues for the benefit of low taxes has those inconvenient facts to deal with.”
That has no relevance when you’re talking about a history of similarity and largely a lack of other groupings. I do see that the number of refugees and immigrants over the last 10 years or so has seen some real changes. And from what I read at in links provided via Kiwiblog there is a certain tension towards people with Islamic beliefs. My guess its likely just misunderstandings.
To clarify I had no intention to be racist but I do think race and religion has a background here and needs to be thought carefully as to why those Nordic countries seem so much more successful in most areas than other countries. There are certain traditions, shared history and the like meaning the nordic grouping of countries have a similarity
The movement from old orthodox Catholicism to Protestant was much easier than for instance the shift to Protestantism in Great Britain. There wars and years of history have caused long resentment, the use of class to deny low income earners.
Europe for years has been reshaped constantly where ethnic groupings share the same country but think very differently.
In the United States you saw the near eradication of native Indians and the slavery of Black people under colonial rule.
Australia you saw the misuse of Aboriginals.
In New Zealand lets face it while we were able to sign the Treaty of Waitangi there has been long running tensions between Maori and Pakeha. This has allowed Maori to fall below level
In the nordic countries they have not had such tensions because of their similarity and this has allowed them to make concensus agreements. Their successes in having high tax, large welfare economies does have to with them largely being the same and not having the huge differences other countries have.
I’m sure I’m not making sense and I’m sure someone will attack it as being racist or whatever.
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Also how you can compare the Nordic economies to New Zealand’s economy is strange. New Zealand earns its money via agriculture, dairying, horticulture, seafood, forestry and tourism. That is what earns us dollars.
Sweden and Finland is technology and engineering. Norway is shipping and oil. Denmark has a business tax of 25% and has a number of huge corporations such as Lego. And all receive more tourist numbers than we do.
There is a clear difference in how we make our money. Those Nordic countries also tend to export inside the European Union while we have to look for several markets for our imports and we have difficulties in regards to the EU on Agriculture and Dairying.
Our economy can’t have a supersize government, huge intake of taxes etc because we’re so vastly different.
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None of that makes sense does it.
Our economy can’t have a supersize government, huge intake of taxes etc because we’re so vastly different.
I’m sorry, but you really do not explain adequately why that is at all and another thing there needn’t be any racial tensions whatsoever. A lot of people need an attitude change there.
I think I can see where you are coming from ginger. But I may well be wrong.
Are you saying that in societies where there is a variety of cultural groups, and a history of exploitation and grievance between those groups, there will less inclination towards social unity? That those historical and ongoing differences will play out with each group seeing politics through the lens of that history and making political judgments based around zero sum calculations about who benefits? And that this will mean that there will be reluctance for social and economic policy that the dominant group perceives as being beneficial to other groups at their expense? That sort of thing?
If so, then the problem is surely bigotry of one form or another, and gets us nowhere in terms finding out whether or not low taxes are necessary for growth, or whether progressive taxes and redistribution promote higher aggregate standards of living. It may well be that the Scandinavian way really is better for everyone, but bigotry stops other countries from following their lead. In which case it is the bigotry that is the problem, rather than the Scandinavian systems.
Certainly Scandinavia benefits from EU membership etc, but that doesn’t explain why they have better living standards than other EU countries.
Homogeneous societies tend to provide more public goods than heterogeneous
societies, as public services can be more easily tailored for the needs of the “median
voter”. The Nordic countries are homogeneous, and it is thus be no surprise
that the public sector is large in all of them.
- Nordic Model – A Success Story? Ms. Sinnika Salo. European Policy Centre
http://neweconomist.blogs.com/new_economist/2005/12/almost_everythi.html – May also be of interest and has the pdf file in regards to Nordic Model – A Success Story.
“The Nordic countries have more in common than their geographical proximity; at least three features are salient for our concerns. In terms of legal tradition they are historical strongholds of Scandinavian Legal Realism. Politically they are egalitarian social democratic welfare state regimes. Culturally, their citizens have regarded themselves as highly homogeneous, religiously, culturally and ethnically.”
- Rawls in the Nordic Countries, Andreas Føllesdal
http://www.taipeitimes.com/News/editorials/archives/2006/04/27/2003304851 – A balanced approach that shows how it could work in less homogeneous countries.
http://www.planetd.org/2008/04/29/a-dynamic-welfare-state/ – Interesting article
http://www.entrepreneur.com/tradejournals/article/177028390_2.html – Article talks about how Sweden may need to change.
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This is what I was trying to say albeit unsuccessfully.
The Nordic countries also have a very high proportion of very good looking citizens which tends to make people fitter happier and more productive.
30 years ago Australia successfully negotiated reciprocal sexual attraction deals with several Scandinavian countries (most notably Sweden) whereby each country’s citizens are required to find the other’s sexually appealing.
If NZ hopes to compete with Australia in the world market we need to get to work stitching up similar arrangements.
That is an excellent suggestion Felix. On top of Sweden, I think we could advocate similar arrangements with the Czech Republic, Hungary, Ukraine, Georgia and Russia.
“I’m sure I’m not making sense”
You’re not. 40 years ago New Zealand had a similar commitment to the welfare state and at that time one of the world’s highest standards of living. That’s the same New Zealand with a large indigenous population. Similarly, Canada has a much more diverse immigrant population than New Zealand does, and it has indigenous peoples as well. Yet, the welfare state has proven remarkably resilient in Canada.
The idea that it has to do with race or culture just does not pass muster.
“Homogeneous societies tend to provide more public goods than heterogeneous societies, as public services can be more easily tailored for the needs of the “median
voter’. ”
This is obviously false. Developed societies are considerably less homogenous than most underdeveloped societies, and yet deliver more public goods. Just make a list of 100 countries and rank them in this way and you will see I am right.
Save the partisan links. The right have been predicting the downfall of the Nordic model for three decades. It has been long enough to declare them full of it.
“Also how you can compare the Nordic economies to New Zealand’s economy is strange. New Zealand earns its money via agriculture, dairying, horticulture, seafood, forestry and tourism. That is what earns us dollars.”
Irrelevant. The main reason for these countries doing well is not that they are rich. Norway has a much higher GDP per capita than the others, but they don’t differ much in standard of living. The US is much richer than Canada, but Canada provides a better standard of living. The reason is that the Nordics and Canada are efficient societies. They are extremely good at converting national wealth into standard of living. The US is extremely poor at this by comparison, even though it is a very wealthy country. New Zealand needs to be an efficient society. That means getting rid of the right wing plonkers who are preventing this from happening. They have no case.. no case at all.
Our economy can have now and has in the past had a much higher tax take than we do at present. It would simply be the expression of a preference for more collectively funded goods and less individually funded goods. The idea that this would be a drain on the economy is simply wrong. It would be a drain on the private sector, but would be more than made up for by the gains in overall quality of life, which is the whole point of having an economy.
The Nordics have demonstrated how a modern society ought to be run. If we don’t run our society that way, it is because we’re stupid.
We’re stupid.
Ag – superb post.
Tane
I accept your apology for removing the first post I have put on your blog for a little while. Please accept mine for lowering my standards in calling you names.
I don’t know the history with you and Travellrev – I should have checked. Maybe one thread on your blog for Travellrev to vent her off topic spleen on and we can reply to that and keep your other threads sacrosanct??
I did find her post interesting and that’s why I replied to it. I haven’t changed my thinking on your blog as being a leveller of the media – it will be even more valuable now.
[lprent: Thanks - I think so which is why I and the others support it (and it does take a lot of time). The thing with tev was likely to happen for a while. We tolerate quite a lot of off-thread in a thread, but this was starting to jump threads. It was also getting bloody tedious to read. It was interesting (as much to see what info could be extracted from the net) but just too much and too often.]
Ianmac
How do the hardworking people like Mr Magoo feel about the Rich who have never actually produced anything but gained their wealth by wheeling and dealing in money markets?
I could not work out if you were being sarcastic, in agreement, or just completely misread what I wrote?? You do realise that I was agreeing with you, right?
I AM one of those rich pricks. So I feel quite happy with myself. As for my other rich peers I am not. (some of which shown drunkenly swinging their pot bellies and swilling red wine at National’s victory party )
And yes, I also agree that trusts and such allow people to bury wealth and assets which are earning them effectively an income and pay little to no tax. (no cap gains for example on a house that is having tax expense CLAIMED ON IT!?!?!?)
Ag
You ‘hit the nail on the head’. Why do people continue to equate lots of money with an enriched lifestyle.
This 3 year cycle of right-wing Government will not improve matters.
Maybe we should ask the perennial question as people seem to have forgotten; who will be gathered around your bed on the day you die and will you want them there? (That’s two questions)!
Randal
“it is typical rightwing tactics from hooten and his mob to gang up on people and make mass complaints”
This is happening on Colin Espiner’s blog. I first encountered it on the toxic Kiwiblog. It was a nasty experience for me to realise that people like that existed. I’ve learnt a lot since I lost my political ‘innocence’ on Kiwiblog.
It makes me laugh that over nine years of personal attacks on Helen Clark and Labour was quite ok, but 2 weeks of questions about Key’s personality and National’s ability to keep to the policies it has agreed to and they’re bleating about being picked on.
(This is my third post. I’ll stop for awhile!)
yes disingenuous allegations of dirty tricks seems to be National’s primary dirty trick at the moment, which is really just another permutation of their very successful Jewish Lightning campaign.
they must have got tired of the “make baseless allegations to authorities in order to reject subsequent dismissals of allegations by said authorities as politically motivated” technique.
they have many such tools in their toy box.
gingercrush and Ag: As a spectator your dialog is fascinating as you both explore the debate. Thanks.
Mr Magoo: Yes I did misread your post. OOps. The people that have made their own wealth by their own efforts, impress me. Perhaps I even envy them a little from the point of view as a salary earner. Yet I regard myself as a very lucky chap; family, friends with the sparrows and growing stuff for fun. I suspect that some of my rich friends have a different value system.
Felix: Wot a great plan to have a reciprocal sexual attraction arrangement. Perhaps NZ could set up a Ministry of Sexual Collaboration MOSC (or Musk for short.) Appoint as Minister …..um.
I have no problem with rich pricks being rich pricks. Swilling wine, looking down noses, counting money, smoking cigars and all the other cliches. They like criminals are here to stay – short of a truly successful communist revolution.
The problem I have is when their money, power and influence is used to skew society’s balance so that they can tip the wealth balance even more in their favour than it already is. When the majore news outlets and media start running biased stories about how terrible “Helengrad” is and then promptly calling her “one of NZ’s best prime ministers” 5 minutes after they manage to throw her out. When any action taken to protect and/or help people/the environment/society is taken as “nanny state”.
When the man in the street is so f’ing confused I see a paint-covered handyman taking a pamphlet from a young nat in a suit, snarling and sneering about how “they” are going to show helen. (true story)
That is when there is a problem. Something needs to be done.
Phase one is complete. National, Act and (unfortunately) the Maori party have been given the reins at the worst possible time. It has become quite clear to those paying attention that they ARE going to try and get through a right wing agenda whereever they can.
Phase two will be to call them out on this shite at every available opportunity. Make sure they don’t get away with ANYTHING.
Phase three will begin in 2011.
Iamac said: I know Farmers who have paid virtually no tax for years, since the Farm is a Family Trust which by the time all the farm expenses are paid , new car, new house, power then the identifiable income is almost nil.
The trust makes no difference to this. Deducting expenses incurred in procuring assessable income is something all taxpayers are able to do, whether they are trusts, companies or individuals.
lprent, I just find this constant ridiculding of anyone remotely wealthy to be rude and quite petty. They deserve tax cuts just as much as anyone else. Yet some people commenting on this site seem to treat them like second class citizens.
Felix:
“The Nordic countries also have a very high proportion of very good looking citizens which tends to make people fitter happier and more productive”
My mate went to Sweden last year and he said it was absolutely ridiculous how good looking everyone was (He, naturally, tended to mention the women)
Very off topic I know, but apparently its like a must see thing. haha
unrelated to the content of the post…
I don’t know if anyone else noticed the change in Steve’s Graphics… What do you think of Excel 07, Steve?
It’s a culture shock compared to 03, that’s for sure…