ACT: tax cuts for the rich, please

Written By: - Date published: 3:34 pm, May 13th, 2008 - 139 comments
Categories: act, tax - Tags: , , ,

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.]

139 comments on “ACT: tax cuts for the rich, please”

  1. Billy 1

    It’s pretty hard to give a tax cut to people who don’t pay tax.

  2. Tane 2

    Funny that Billy, I thought John Key had been telling us tax cuts were going to close the transtasman wage gap?

  3. But it’s not at all hard to give an equal amount of tax cut to all who do have an income or target your tax cut at the bulk of the population, rather than the wealthy few.

  4. Billy 4

    Is JOhn Key in the Act party now, Tane? Must have missed that announcement.

  5. Tane 5

    Billy, I’m pointing out the absurdity of the right’s arguments on tax.

    On the one hand there’s only so much you can cut the tax on low income earners because they don’t pay much anyway, while on the other hand tax cuts are somehow able to close the thirty percent wage gap with Australia.

  6. roger nome 6

    So Act’s tax cut policy would only really benefit the 5% of the population that need it least. What a surpirise

  7. Peter Nelson 7

    A tax cut for all the rich pricks on $60000 PA. Yeah, we deserve it.
    But hang on, I now have a train set to pay for, oops, there goes $1.15bn.
    What is the crime you lefty idiots in allowing people to keep more of THEIR OWN money? Cullen certainly does not know how to use it better than me.

  8. r0b 8

    Cullen certainly does not know how to use it better than me.

    So Peter, how much of your money do you choose to spend on roads, schools and public health?

  9. Populist maybe not – but certainly popular with me.

  10. Billy 10

    “So Act’s tax cut policy would only really benefit the 5% of the population that need it least.”

    Or, put another way, Act’s tax cut policy would benefit the people who paid the tax in the first place.

    Scandalous!

  11. Oh Billy, Billy, Billy. You’re time in a real estate boom has left you hardened…

    I think you’ll find the bulk of the tax paid is paid by people below that 5% and yet we let them drive on our roads and use our health system? That just seems so unfair.

  12. Tane 12

    Sod, that’s ‘your’, not ‘You’re’. Sheesh.

  13. I know – it really gets under billy’s skin…

  14. Why shouldnt the rich get a tax break?

    Can you also please provide the stats and hard data that says ACT will increase Doctor fees?

  15. they oppose the GP subsidy. can’t hold your hand on everything Brett.

  16. That still doesn’t mean school fees are going to increase?

  17. roger nome 17

    “What is the crime you lefty idiots in allowing people to keep more of THEIR OWN money?”

    Idiots? Don’t think you’re going to last too long around here Brett.

    BTW I don’t oppose tax cuts that benefit EVERYONE equally. i.e. first $10,000 tax-free. Act’s tax cuts will just make all OUR social problems worse (notice we don’t live all alone in our own universe). They’re stupid.

    [lprent: what do you mean – it is one of my favourite words]

  18. you asked about GP fees. Again, I can’t hold your hand on everything – get educated about what ACT’s policies mean for the public education system.

  19. roger nome 19

    Brett: you can’t promise those kind of tax cuts and maintain current levels of social spending without massive borrowing, stoking inflation, raising interest rates, destroying our export sector and ruining the economy.

    Also – you should know that Act’s philosphy to nearly all of the services provided for by the state.

  20. Tamaki Resident 20

    Rodney seems to be assuming that tax was at the “right” level in 1999, but I seem to remember that back then a lot of public/social services needed more money.

    Brett – how would you pay for the tax cut Rodney is suggesting?

  21. Many low income earners are already effectively paying zero tax under WFF while being supported by those of us on so called higher incomes who are not eligible to receive any income transfers.

    “A further indication of the extent to which WFF distributes income beyond those on low incomes is given by the level at which a single-income family will be in a net zero tax position (ie the level of income before tax at which family income assistance equals
    income tax and ACC that would otherwise be payable). All children are assumed to be less than 13 years of age. The income levels given are therefore the lowest possible, given the number of children. They are $31,043 (one child), $36,721 (two children), $41,577 (three children) and $47,409 (four children).

    Families with dependent children on upper incomes and households without dependent children will predominantly pay net income tax. There is a risk that perceived vertical inequities could undermine trust in the income tax system. Moreover, if relatively few
    people pay income tax, net of family income assistance, while many people benefit from public spending, politicians may be unduly encouraged to promise additional spending that is not in the national interest to obtain the support of favoured groups that do not
    bear the direct cost.”

    http://www.nzbr.org.nz/documents/publications/publications-2005/dissecting_wff.pdf

  22. mag. the last point in your quote is an argument against tax-free brackets and one with some virtue, even if only at a theoritical/principle level.

    I’m sure you’ll find most leftwing peope would say that it’s just for most people to give something towards the cost of the social wage, even if only a small amount.

    It’s not an argument to give CEOs and ministers a $200 a week tax cut though.

  23. Ari 23

    Hey Steve- fancy doing a graph about where the bulk of tax revenue comes from? I seriously doubt you’ll find it coming from people at the extreme ends of the top bracket. There really aren’t that many of them. 🙂

    Brett- the rich SHOULD get a tax break. But because their capital circulation is much lower, it’s economically beneficial that they get an equal tax break to everyone else. Basically, the principle of the rich paying more tax is based on them having a higher percentage of their income as disposable spending.

  24. higherstandard 25

    In addition to Steve’s link I’m sure people are aware that a large proportion of the tax take comes from both GST and Business Tax

  25. Ari 26

    You know, I should’ve really known that. Shows how much research I do, huh?

    Anyway, hopefully our friendly lefty-baiters will have a look there before making…interesting claims. Note that the income brackets there aren’t seperated into the tax brackets, but instead come in groups of $10,000, so it artificially inflates the last two figures in comparison. 🙂

  26. Ari 27

    HS- sure, but getting into exactly who’s being taxed by the business tax is tricky. 🙂 Sadly, we know that GST disproportionately effects the poor- part of the reason why income tax is so sloped in New Zealand, I suspect. Of course, I didn’t think I really needed to include GST to make my point- for instance, the second and third tax brackets each pay more than 20% of the total tax take.

  27. Steve: I followed the link and had a look at the “Who pays tax… and how much?” table. Does this table take into account the WFF income transfers ?

  28. maw. no.

    WfF is a credit, not a rebate. For accounting purposes, it appears as a portion of government spending rather than a decrease in the tax take. That makes the tax take and spending look bigger than they are.

  29. Thanks Steve: so given that the average family has two children and the WFF tax credits outlined in my previous post a lot of those ‘taxpayers’ in the 30-50k band will effectively be paying zero tax. That am I right in concluding that leaves the bulk of the tax burden on us ‘Michael’s rich pricks’ earning over 60 k ?

  30. Most net tax is certainly paid by those with more money to pay.

    Basically, it’s you and me maw. Shall we shrug on the count of three? one, two…

  31. roger nome 32

    “the tax burden on us ‘Michael’s rich pricks’ earning over 60 k ?”

    Yep -and they can afford it the most. It causes them the least pain. So what?

  32. Santi 33

    Rich on 60K/year? Utter nonsense!

    That miser Cullen should adjust the tax brackets instead of continuing milking the taxpayer.

    [lprent: I could just block you out entirely? Haven’t done it for a while, and I have a few new techniques to trial.]

  33. higherstandard 34

    Santi you’re a naughty boy go away

  34. Billy 35

    “Brett – how would you pay for the tax cut Rodney is suggesting?”

    I’d start by making Rogernome get a proper job.

  35. Billy 36

    “I think you’ll find the bulk of the tax paid is paid by people below that 5%…”

    But only just, ‘sod. Apparently, 36% of the total tax take is paid by the top 6% of taxpayers. And yet Rogernome has never had the common manners to thank them.

  36. vto 37

    Oh me oh my – imagine trying to have a tax debate on this website!

    One thing though – tax cuts are not a cost.

  37. burt 38

    If you compare the graph in this post with the graph you presented a few days ago here http://www.thestandard.org.nz/?p=1882#comments

    It makes it very obvious just how harshly Labour policy is taxing low income earners. Sure the ACT graph as presented here reduces the tax take significantly on high earners, but you guys are cutting off your noses to spite your faces because under ACT policy low paid workers would also be paying a lot less tax.

    Such is the policies of envy eh, you would rather see the people you claim to represent suffer just so that the people you envy don’t get another cent of their own money.

  38. Rocket Boy 39

    Guys why don’t you add a bit of honesty into the argument about tax and add another line on your graph, the actual amount of income tax that someone on that income would pay.

    You might also want to add a fourth line, the amount of tax paid after the WFF ‘tax credit’ (say if you had 2 children).

    Then we might give a clearer picture of who actually pays income tax in New Zealand.

  39. burt 40

    Rocket Boy

    That’s asking the standard to be objective and balanced. They would need to throw away their “Labour good – National bad” mindset long enough to think about the reality of taxation in NZ.

    Remember tax cuts were the worst thing that could ever happen to NZ up until a month or two ago… Now of course it’s only National and ACT tax cuts that are bad because Labour tax cuts are cool.

  40. vto 41

    Just remember this supremely relevant fact … the government is rich and the people are poor.

  41. burt 42

    vto

    That’s exactly the point that people need to understand. Dr. Cullen said in the 2007 budget that a degree of fiscal drag was required to finance their social spending program.

    In other words: We need to reduce the buying power that individuals have to increase the buying power the govt have. Deliberate lowering of peoples buying power to enable the state to play fairy god mother with our own money. How f##ked up is that!

  42. Steve: so given we now agree on “Most net tax is certainly paid by those with more money to pay.

    Basically, it’s you and me maw.” perhaps we can agree that we are the ones most deserving of a tax cut ? 🙂 It appears that Rodney is trying to give us one: it would be churlish to say no.

    Yes, yes I hear can already you saying: but what will we need to cut to pay for it ?

    Lets start by cutting the Tertiary EC, the extra layer of management between the taxpayer and the doctors/nurses that is the DHB’s, the Family Commission, the Maori Langauage Commission, Creative NZ, Te Mangai Pao, NZ On Air, moonlight golf, the Treaty Comissioner, the disability commissioner, foreign aid to Samoa to pay for the kings coronation, Michaels train set, all university departments apart from medicine, engineering science and business (i.e. ditch the arts) and especially all the 16,000 policy wonks that have been added to the state sector in the last 8 years (they can go and work in Australia) http://www.interest.co.nz/ratesblog/index.php/2008/01/01/chart-public-service-staffing/

  43. vto 44

    burt (8.43) I completely and totally agree. It is disgusting. And the people aren’t stupid – they can see that. That is why the party is over for Cullen and his envy-driven ‘rich prick’ haters.

  44. Lenny 45

    Cut all the uni departments except medicine, engineering science, and business, mawg? You forgot the lawyers, National’s other core constituency – I imagine you’d want to keep them on as well as they do real jobs unlike this Treaty Commissioner person who you have just invented. Oh, and should we replace the DHBs with National’s wildly successful 90’s Crown Health Enterprises and Area Funding Authority scheme? Ah yes, more sensible National party ideas. Are you a moron?

  45. rex brown 46

    I thought Rodneys press release was about the tax drag.

    Labour increased taxes with a plan – only the top 5% of people would pay that rate. Now plenty are paying it.

    So really, Labour have not kept their word.

    50% of people earn less that 27k? that must include part time workers, like students etc?

    There does need to be a balance. I am *cough* in that 1% you mentioned and I’m single, so life is pretty good. BUT there are people earning 60k that are struggling big time. 300k mortgages don’t come cheap.

    There needs to be more rewards in this country for working hard.

  46. jon 47

    roger nome
    May 13, 2008 at 5:49 pm
    “Yep -and they can afford it the most. It causes them the least pain. So what?”

    Look at it this way Roger. My 7 Series is a V8 (740) as takes 70 litres of 98 so its costing over $150 a tank that lasts 5-6 days. By comparison you losers probably only drive lovely litte bitty cars, motor scooters or ride pushbikes, so your costs aren’t the same. My swimming pool takes chlorine as does my spa, my power bill is about $450 a month. Turn the temp down in the spa to 35 and it causes me some pain -(just not the same). These are costs you probably dont have so I do need some of my own 39% tax back.

  47. AncientGeek 48

    jon: You have to love GST.
    Gets the conspicuous over-consumer every time.

  48. jon 49

    never met a man who wont accept cash!

  49. Alan 50

    Interesting to note today’s paper records that Kevin Rudd, the PM of the land all Kiwis are flocking to to “escape the high taxing government”, has proposed higher tax rates for those in the high income brackets, higher taxes on luxury cars… in order to ensure equity of income distribution. After reading Rodney’s plea for tax relief for the rich I wonder who is actually living in the “real” world? It’s definitely not Rodney and his tax cut puppet John.

  50. AncientGeek 51

    Oh no. I can stand a kiwi exodus (it happens every 10 years or so in cycle with mineral prices). But an affluent aussie stampede could shake the very foundations of kiwi society.

    It would be like the yanks escaping from Reagan all over again.

  51. Razorlight 52

    This is complete spin.

    As many have mentioned, a more appropriate graph would be to show how much tax is paid at each income after these proposed tax cuts.

    The more you earn, the more you pay. Before and after these cuts. A person earning 100,000 pays a considerable more to be part of this society than a person who is on minimum wage. He doesn’t use more services, arguably less, but he still pays alot more because he is in a high earning job.

    So don’t spin the sob sob Labour line of tax cuts for the rich.

    The high income earners are still paying for your pet projects, so dont abuse them.

  52. r0b 53

    Such is the policies of envy eh, you would rather see the people you claim to represent suffer just so that the people you envy don’t get another cent of their own money.

    Such is the politics of greed Burt, that you would rather see someone that doesn’t need it get a four times bigger tax cut than someone that does?

    Rejecting ACT’s tax cuts doesn’t mean rejecting tax cuts for low wage earners. Indeed, I sincerely hope that Labour’s tax cuts, when delivered, are structured to help those that need it most.

  53. Ari 54

    Razlorlight- Do you really think Act could keep both those tax cuts and WFF while still funding even a moderate public service? I don’t.

  54. Lenny: thanks for your kind thoughts. I guess I put ‘law school’ under the generic heading of ‘business’ along with ‘accountancy’, ‘economics’, ‘management’ etc but thank you for pointing out my omission.

    It is very hard to keep up with all the new commissions, quangos and related gravy trains the government had created so I apologize if I have left some out or misnamed some. I am sure however that given Western Australia’s skills shortage the 16,000 new passengers on the government gravy train will have no problem getting jobs as stop/go persons in the mines. There they will be contributing to both mine and Australia’s tax cuts.

  55. vto 56

    “you would rather see someone that doesn’t need it get a four times bigger tax cut than someone that does”

    rOb, the give-away to the fundamentally different outlooks on how society operates is your reference to the richer person’s “NEED”.

    Of course it is not a NEED. That has absolutely zip to do with why people go to such great lengths, working ridiculous hours, taking on obscene risks, putting their family’s livelihoods on the line, stretching the bounds of human possibility. It has to do with DESIRE.

    And just before you off on another tangent, that is, in the near-100% majority a DESIRE that has little to do with actual money and more to do with extendiong themselves and as I said stretching their bounds. Trying something big. Getting excited.

    Society doesn’t NEED all sorts of things. A good example is the textile machinery in the early 1800’s that the Luddites clearly thought was also not NEEDED for society.

    Sometimes tax debate gets lost. In my opinion it must stem from a philosophical approach. One of my such approaches is that human endeavour must not be crimped, as the current tax structure does to those with DESIRE to push their boundaries. This area simply must be addressed, for society’s own sake. Cullen won’t.

  56. higherstandard 57

    Interesting to look at this thread in relation to the Australian budget for those interested in “the lucky country”

    http://www.news.com.au/business/money/story/0,25479,23693608-14327,00.html

  57. r0b 58

    That’s a lovely speech vto. When they make the movie I suggest a score from Wagner. Something epic.

    Or in other words – I admire your rose tinted view of the high wage earner as epic hero. But in reality most are just doing their jobs. The epic hero types that you describe are more likely to be entrepreneurs of some kind, not necessarily paid salary, and with accountants arranging their affairs to minimise tax.

    You also have a sadly limited view of DESIRE. It is possible to DESIRE many things, and financial gain is the least of them. It is possible for example to DESIRE to live in a fair society, where all persons can live a decent life.

  58. vto 59

    Ha ha, thanks rOb, a movie is a great idea. I realise my “speech” could be attacked from many angles but as I said it was just my opinion. I definitely enjoy rose-tinted glasses.

    Of course there are many desires possible on this planet. I was only referring to those where the tax structure has a negative effect, not just on the desire but also on society as a whole.

    I do not accept that ‘better’ tax structures for those that do stretch and desire as I described are mutually exclusive from the desire you (and I) have for a decent society…

    the problem is the political sell of that…

  59. r0b 60

    I do not accept that ‘better’ tax structures for those that do stretch and desire as I described are mutually exclusive from the desire you (and I) have for a decent society the problem is the political sell of that

    The political sell is bound to fail unless it rests on strong foundations of demonstrable fact. So what facts show that tax cuts for the rich lead to a decent society? (Note that the “trickle down” argument is thoroughly discredited).

  60. higherstandard: Interesting to note that Swann has cut $A20 billion (over 3 years) of spending out of the budget to reduce inflation while Cullen is ramping up government spending ( Note to self buy one way ticket to Australia today) : http://www.interest.co.nz/ratesblog/index.php/2008/05/14/video-australian-budget-surplus-of-a217-billion/

  61. Tane 62

    Note to self buy one way ticket to Australia today

    Mawg, this is the third time I’ve seen you threaten to leave for Australia in a matter of days. FFS, just go already.

  62. vto 63

    rOb I am going to have to pass on getting into a detailed technical debate. Got some things I have to get done today. But I think you have the question backwards..

    What facts show that leaving more of the hard-earned rewards of those that stretch out in their own hands has a negative effect on those on lower incomes? (note that the “growing gap between the rich and the poor” argument is demonstrably not true).

  63. Tane: Thanks for your encouragement, it is appreciated. I think Michaels 9 year reluctance to cut taxes is identified best in the article below on stuff.co.nz.

    “This, I suspect, is the guts of the problem for our Labour government. It sees this group as its key constituency. Interest rate cuts don’t benefit renters as much as home owners.”

    http://stuff.co.nz//blogs/showmethemoney/2008/05/14/if-only-our-labour-pm-cared-as-much-about-inflation/

  64. Pascal's bookie 65

    And just before you off on another tangent, that is, in the near-100% majority a DESIRE that has little to do with actual money and more to do with extendiong themselves and as I said stretching their bounds. Trying something big. Getting excited.

    They won’t mind having the bejayzus taxed out of them then. 😉

  65. vto 66

    Ha ha pascals bookie. funny.

    rOb, one other thing.. You said “The political sell is bound to fail unless it rests on strong foundations of demonstrable fact.” I dont think this is the problem for the political sell..

    The political sell is bound to fail because such an idea immediately stirs one of those most basic of human emotions – envy. Your own post above betrays that fact (where I first picked this thread up), namely where you said “you would rather see someone that doesn’t need it get a four times bigger tax cut than someone that does’

  66. r0b 67

    rOb I am going to have to pass on getting into a detailed technical debate.

    What a pity.

    What facts show that leaving more of the hard-earned rewards of those that stretch out in their own hands has a negative effect on those on lower incomes?

    (1) governments have a limited budget. (2) if they decrease the tax take on the rich they have less to spend on social services and welfare support for those in need.

    In any case your form of the question twists the issue to avoid even considering the possibility of decreasing the tax take from the poor.

    (note that the “growing gap between the rich and the poor’ argument is demonstrably not true).

    Simply and factually wrong vto, as you could learn from multiple sources, but for example see:
    http://www.socialreport.msd.govt.nz/economic-standard-living/income-inequality.html

  67. r0b 68

    The political sell is bound to fail because such an idea immediately stirs one of those most basic of human emotions – envy.

    In might not fail at all, eg under a Nat government, because it immediately stirs up one of the most basic of human emotions – greed.

    Your own post above betrays that fact (where I first picked this thread up), namely where you said “you would rather see someone that doesn’t need it get a four times bigger tax cut than someone that does’

    How is that an example of envy exactly? And what assumptions are you making about my income?

  68. r)b: so are you saying that the Labour government agenda is to discourage hard work by enforcing uniformity and mediocrity through income transfer? Can you name one country that this socialist agenda has worked?

  69. vto 70

    rOb;

    1. It is not greed to expect to keep what you work for.

    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.

    2. In the following periods of history the poor were poorer than today and the rich were considerably richer – 50 years ago, 100 years ago, 500 years ago, 1,000 years ago. specific examples include the French at Versailles, Getty’s wealth vastly exceeding Gates’ wealth today, no dirt floors today, etc. 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.

    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. And NZers are keen hard-working industrious people who would jump at it if they got to keep more of their efforts.

    Put it this way – I go into business with a partner, I do all the work, I put up all the money, I take all the risk.. then when/if its payout time the partner who has done nothing comes along and takes 40% of the profit (and none of the loss), and that partner gets paid first and if they dont get paid I get shmacked on the head with a hammer. It’s simply unfairly balanced. And I for one example am not as active as I could be for simply this reason. Cant be f#@*&d when these are the settings.

    When I tell people this their eyes just glaze over and they sort of don’t believe me. Odd.

  70. r0b 71

    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.

  71. Billy 72

    “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.

  72. r0b 73

    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?

  73. r0b 74

    Here you go vto, a little something to get you started:

    http://www.cbpp.org/9-27-06tax.htm

    Myth 1: Tax cuts “pay for themselves.’

    Reality: A study by the President’s own Treasury Department confirmed the common-sense view shared by economists across the political spectrum: cutting taxes decreases revenues.

    But when Treasury Department staff simulated the economic effects of extending the President’s tax cuts, they found that, at best, the tax cuts would have modest positive effects on the economy; these economic gains would pay for at most 10 percent of the tax cuts’ total cost.

    The claim that tax cuts pay for themselves also is contradicted by the historical record. In 1981, Congress substantially lowered marginal income-tax rates on the well off, while in 1990 and 1993, Congress raised marginal rates on the well off. The economy grew at virtually the same rate in the 1990s as in the 1980s (adjusted for inflation and population growth), but revenues grew about twice as fast in the 1990s, when tax rates were increased, as in the 1980s, when tax rates were cut. Similarly, since the 2001 tax cuts, the economy has grown at about the same pace as during the equivalent period of the 1990s business cycle, but revenues have grown far more slowly. (http://www.cbpp.org/3-8-06tax.htm)

  74. vto 75

    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..

  75. vto 76

    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.

  76. AncientGeek 77

    mag:

    higherstandard: Interesting to note that Swann has cut $A20 billion (over 3 years) of spending out of the budget to reduce inflation while Cullen is ramping up government spending

    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.

  77. r0b 78

    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

    Perhaps the most obvious of these is retirement income, where present arrangements and/or current tax rates are unlikely to be sustainable over the long term. Adjustment is inevitable, but moving now will be smoother and less costly than moving later. Mechanisms to ensure reasonable stability are important.

    Although there is much uncertainty about how our economy and society will evolve, our current projections indicate that as the population ages, the ‘promises’ inherent in current government spending and taxation policies and procedures will not add up. The issue is whether to continue adjustment now through reducing debt or accumulating assets, or to attempt to match future spending and revenue by some mix of reducing future expenditure and increasing taxes . Predictable, measured, well-signalled and widely accepted change will reduce the risk of sharp and costly adjustments or reversals later.

  78. vto 79

    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.

  79. r0b 80

    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.

  80. Ari 81

    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 😉

  81. AncientGeek 82

    I’d say they were far too timid, so much of the issue of our aging population remains to be addressed.

    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.

  82. vto 83

    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.

  83. AncientGeek 84

    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?

  84. r0b 85

    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!

  85. r0b 86

    Must be about time to start increasing the input into the Cullen fund.

    Hear hear!

  86. vto 87

    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.

  87. r0b 88

    Jolly good vto, nothing wrong with optimism.

  88. Mike Collins 89

    “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.

  89. Matthew Pilott 90

    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.

  90. Mike Collins 91

    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.

  91. Julie 92

    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

  92. MikeE 93

    Tell me, are Australian Labour evil right wingers for doing virtually the same thing?

  93. 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.

  94. vto 95

    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.

  95. Matthew Pilott 96

    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.

  96. vto 97

    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.

  97. Pascal's bookie 98

    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.

  98. Billy 99

    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?

  99. vto 100

    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.

  100. vto 101

    I will keep attacking envy where I see it.

  101. Mike Collins 102

    “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.

  102. Matthew Pilott 103

    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?

  103. Pascal's bookie 104

    ” 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.

  104. Matthew Pilott 105

    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.

  105. r0b 106

    I will keep attacking envy where I see it.

    vto – I thought we’d got past this stuff. OK OK, I will keep attacking greed where I see it.

    vto, Billy and Mike Collins all need to some reading on what poverty is and how it is defined. This is not a bad starting place:
    http://en.wikipedia.org/wiki/Measuring_poverty
    http://en.wikipedia.org/wiki/Poverty
    http://en.wikipedia.org/wiki/Economic_inequality#Effects_of_inequality

    Poverty can be defined in either absolute or relative terms. Most “first world”countries define it in relative terms, for reasons that I would have thought were blindingly obvious. You can meet the standards for absolute poverty with tent cities and soup kitchens. Is that good enough for New Zealand? No!

    Billy From where does this right to be no worse off than everyone else come?

    Where does this right to have personal private property come from Billy? Who creates or grants “rights”?

    Mike Collins: It is precisely because of the reason of increasing marginal returns that economic growth is generated by tax cuts.

    Could we see the long term large scale data that supports this claim please? In the American context at least it seems to be untrue:
    http://www.cbpp.org/9-27-06tax.htm

    Myth 3: The economy has grown strongly over the past several years because of the tax cuts.

    Reality: The 2001-2007 economic expansion was sub-par overall, and job and wage growth were anemic.

    Members of the Administration routinely tout statistics regarding recent economic growth, then credit the President’s tax cuts with what they portray as a stellar economic performance. But as a general rule, it is difficult or impossible to infer the effect of a given tax cut from looking at a few years of economic data, simply because so many factors other than tax policy influence the economy. What the data do show clearly is that, despite major tax cuts in 2001, 2002, 2003, 2004, and 2006, the economy’s performance between 2001 and 2007 was from stellar.

    Growth rates of GDP, investment, and other key economic indicators during the 2001-2007 expansion were below the average for other post-World War II economic expansions (see Figure 2). Growth in wages and salaries and non-residential investment was particularly slow relative to previous expansions …

    Median income among working-age households, meanwhile, fell during the expansion. … Similarly, the poverty rate and the share of Americans lacking health insurance were higher in 2006 than during the recession. (http://www.cbpp.org/8-28-07pov.htm)

  106. Billy 107

    “Where does this right to have personal private property come from Billy? Who creates or grants “rights’?”

    Apparently, anyone can create or grant rights. People do it all the time. You’ve just done it.

  107. higherstandard 108

    rOb

    Attached some long term data on tax cuts

    http://www.house.gov/jec/fiscal/tx-grwth/reagtxct/reagtxct.htm

    And rather than engaging in a I’ll trump you with this data can we agree that cutting or increasing taxes and their associated effects is dependent on the country and the relative state of the local and world economy at the time of the cut and evolving external conditions.

  108. Billy 109

    …although my property rights have a somewhat better pedigree than your right not be too much worse off than everyone else.

  109. Pascal's bookie 110

    r0b:

    There are some very interesting graphs at the end of this paper:

    http://www.princeton.edu/~bartels/income.pdf

  110. Pascal's bookie 111

    errr: warning!! above link is a PDF. Sorry.

  111. r0b 112

    Billy: Apparently, anyone can create or grant rights. People do it all the time. You’ve just done it.

    Ummmm – what?

  112. r0b 113

    PB: There are some very interesting graphs at the end of this paper

    Ta, I’ll take a look…

  113. r0b 114

    HS: Attached some long term data on tax cuts

    The link you cite is short term data. It’s mainly about tax avoidance behaviour of the rich, but it does make this claim about growth “The Reagan tax cuts … showed that reducing excessive tax rates stimulates growth”. It shows nothing of the sort, because the authors are apparently do not take account of the fact that the economy grows anyway. There is nothing to identify the specific impact of tax cuts.

    In order to sort this stuff out you need examine trends over decades (within a single country), and / or compare different countries. See for example: http://www.huppi.com/kangaroo/L-taxgrowth.htm

    The highest period of growth in U.S. history (1933-1973) also saw its highest tax rates on the rich: 70 to 91 percent.

    Almost all rich nations have higher general taxes than the U.S., and they are growing faster as well.

    can we agree that cutting or increasing taxes and their associated effects is dependent on the country and the relative state of the local and world economy at the time of the cut and evolving external conditions.

    Yes, we can certainly agree on that. In the NZ context I think tax levels have 3/5ths of bugger all impact on growth. Considering growth in our economy over 9 years of the previous National government vs 9 years of Labour (higher taxes!) it’s impossible to make an argument that lower taxes were better for growth: http://www.rbnz.govt.nz/keygraphs/Fig2.html

  114. Mike Collins 115

    r0b – I’m not asking for anyone to take my word that tax cuts lead to enhanced economic growth. I’m realistic in that they won’t. However it can’t be avoided that Treasury costed ACT’s tax policy at the last election. They found that not only could it be implemented without spending cuts, but it would add an extra 100 basis points to economic growth on average each year.

    These are economic experts making the claim, not a group of people huddled around a computer arguing with one another.

  115. Mike Collins 116

    “Considering growth in our economy over 9 years of the previous National government vs 9 years of Labour (higher taxes!) it’s impossible to make an argument that lower taxes were better for growth”

    No it’s not. Comparisons need to be made not with different time periods but what outcomes would have been in the same time periods under different conditions. Tax rates are but just one condition affecting economic growth levels.

  116. r0b 117

    Treasury also recently lost – and then found again – $600 Million:
    http://www.nzherald.co.nz/section/1/story.cfm?c_id=1&objectid=10501759
    Their projections of surpluses and deficits are regularly off by billions of dollars. I’m not blaming the poor dears, it’s just that economics (over the short term) is not an exact “science”.

    In other words, I’m not particularly interested in or impressed by Treasury’s assessment to three decimal places of any particular budget. If I want to know how factors affect economies I will look to long term historical trends and / or international comparisons.

  117. vto 118

    but rOb yesterday you were using short term data to justify the claim of a growing gap between rich and poor

  118. r0b 119

    Indeed I was, different question, different data. Income gaps are easy to calculate for any given point in time. The effect of tax cuts on growth is horrendously ill defined in comparison.

  119. vto 120

    rOb today you acknowledged you “look to long term historical trends”

    and yesterday when I said “The ‘growing gap’ is one of the biggest myths around. It is just bollocks. The poor are better off and frankly the rich are not as rich.”

    You said “In long term historical terms you are correct”

    It seems you actually agree with me then on the myth of ‘the growing gap’ then.

  120. randal 121

    first off lets make this clear…there are very few rich people in new zealand…some people are well off and maybe they have two of everything and enough left over to a) bribe the grandkds into kissing their bums or b) terrifying their bank manager by threatening to remove their deposits…yep…that about covers it!

  121. vto 122

    Randal

    first off lets make this clear there are very few poor people in new zealand some people are not so well off and maybe they only have one of everything and not enough to a) bribe the grandkds into kissing their bums or b) terrify their bank manager by threatening to remove their deposits yep that about covers it!

    whatever your post was about

  122. r0b 123

    vto: You said “In long term historical terms you are correct’
    It seems you actually agree with me then on the myth of ‘the growing gap’ then.

    vto – you have already noticed that there is a different debating style he versus KiwiBlog. One of the things that we frown on here is quoting people out of context in order to try and make some twisted point. What I said was: “In long term historical terms you are correct and irrelevant (just as medieval health practices are irrelevant to a discussion of today’s health system)”.

    For some questions it is relevant to examine historical trends. For other questions it is not. Not that difficult really.

  123. vto 124

    ok ok I knew that, naughty naughty.

    It is however entirely relevant “to examine historical trends” when it comes to the state of the gap between rich and poor, otherwise all context is lost and there is nothing to compare it with. Fail to see how the long term closing of the gap between rich and poor has suddenly turned around to widening.

  124. vto 125

    Or in other words how can you know the gap is growing if you aren’t aware of the historic trends?

    captcha: Mr generosity !!

  125. Scribe 126

    Someone may well have made this point already — haven’t got time to read all 125 comments — but one of the reasons larger tax cuts for the wealthy is a good idea is because they are the ones who can use that extra money to invest in their small businesses and employ more people, which in the long run is a great thing for the nation’s economy.

  126. r0b 127

    Ahh Scribe, good old “trickle down” economics. Doesn’t work.

    http://en.wikipedia.org/wiki/Trickle-down_economics

  127. vto 128

    Exactly Mr Scribe.

    Business people who get an extra dollar from wherever (here tax cuts, hopefully) in my experience invest it directly back into the local economy. (it certainly doesnt get spent on junky imported crap like tvs and whatever the assumed consumer spend of the moment is). That dollar then gets ‘worked’ extremely efficiently for maximum benefit to flow from that dollar.

    And that benefits all of that local community.

    It seems the only people that dont understand this simple truism are those who have never been in business themselves.

  128. vto 129

    rOb, I think you need to get out more (said with a smile).

    It does work. I have seen it and done it myself. Invest in the local economy myself over the last few years and that resulted in the direct employment of approx. 100 people and indirectly about the same number again. If I had not made that investment those people would not have been employed.

    I just dont understand what is so difficult to understand about that.

    I suspect you may bury yourself in too many reports and can’t see the woods for the trees

  129. r0b 130

    rOb, I think you need to get out more (said with a smile).

    That’s entirely possible.

    It does work. I have seen it and done it myself. Invest in the local economy myself over the last few years and that resulted in the direct employment of approx. 100 people and indirectly about the same number again. If I had not made that investment those people would not have been employed.

    Good for you! Did a tax cut make you do that? No. You just did it.

    Or in other words, yes some people invest productively in the economy. And no, tax cuts don’t seem to make them do it significantly / reliably more (which is the claim made by trickle down economics).

    I just dont understand what is so difficult to understand about that.

    So now you do.

  130. vto 131

    Not quite right rOb. Recall I earlier explained how I am not as active as I could be? I said one of the main reasons for that was the ‘invisible hammer-shmacking partner’ called the IRD, who after all of my investment, risk, work, grey hair, stomach ulcers and heart attacks gets first dibs at the profit to the tune of 40% for doing absolutely zip.

    So you ask “Did a tax cut make you do that? “. Answer is no – but the state of the tax system stops me from doing more. Now I stop. This is true.

    But further, scribe’s point was about what business people do when they get extra dollars (or any dollars at all). And what they do is invest it and drive far more benefit out of it than any govt action ever could with that same dollar.

  131. r0b 132

    Now I stop. This is true.

    Now you stop, and you’re blaming taxes, but that could just be that you’re getting old and lazy (said with a smile).

    Even if it was true that you are stopping purely because you feel aggrieved at the tax system, It is only true of you individually, it is not true collectively and over time for the economy.

    If it was true, if it was that simple, trickle-down economics would work, and it doesn’t. There would be a strong positive correlation between tax rates and growth, and there isn’t.

    vto much as we all like to think but we are the centre of the universe, our individual experiences are not necessarily reliable predictors of social or economic trends.

  132. r0b 133

    But further, scribe’s point was about what business people do when they get extra dollars (or any dollars at all). And what they do is invest it and drive far more benefit out of it than any govt action ever could with that same dollar.

    Oh yes – proof please?

    Governments build roads and power stations and schools, getting incredible economic leverage out of money spent.

  133. vto 134

    ha ha, you’re a tough cookie.

    I just said it was one of the reasons, not the sole reason. Rest assured I am not alone.

    Later

  134. vto 135

    Well I just cannot believe it. Cullen still insists on maintaining the govts riches at the expense of the people.

    He cannot bear the thought of the govt struggling a little financially but does not give one hoot about the people struggling out here a lot. He is absolutely adament that the govt must not suffer – what f*%##@g planet is he on?

    I have said it before and I say it again – he has his philosophy all backwards. The people come first.

    But the good thing to come out of it – he is signing this govts death warrant. He is so out of touch he does not seem to realise this. Or perhaps he is more concerned about his legacy as mcscrooge.

    The people are not silly. The people see him and walk away.

    Its all over. At the expense of the people.

    I so wish I could use more colourful language on this site.

  135. r0b 136

    What’s the problem vto – are you talking about this?
    http://www.nzherald.co.nz/section/1/story.cfm?c_id=1&objectid=10510487

    Tax cuts and more money for health and education, is that the problem?

    (I’ve got to be out and about for a few hours, but I’m sure I’ll find you here when I get back!)

  136. vto 137

    oh rOb, no no no no no….,

    You miss my whole point.

    anyways I am off fr the weekend so unfortunately I wont be here for a few daze. Fish, surf, relax, yarn, mmmmmmm. Actually off to labour heartland, where it all started. The labour movement that is.

    And you should see and hear what they think of this govt there. Try piccies of Clark festooned with hitler mo’s and comments on the local pub noticeboard!

    Over and out

  137. higherstandard 138

    Crikey you two are determined not to let the other have the last say why not just agree to disagree.

    Rob Tax cuts and more money for health and education is a great thing bit is completely dependent on the size of the tax cut and where the money for health and education is targeted.

  138. r0b 139

    vto, enjoy your break, hope you find it very calming!

    HS: Crikey you two are determined not to let the other have the last say why not just agree to disagree.

    I’ve tried to stop many a time, and then it heads off on new tangents again! Never mind, all good clean fun.

    Rob Tax cuts and more money for health and education is a great thing bit is completely dependent on the size of the tax cut and where the money for health and education is targeted.

    HS, I couldn’t agree more.

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