All the facts

Written By: - Date published: 11:52 am, November 25th, 2008 - 80 comments
Categories: dpf, national, spin, tax, uk politics - Tags:

National’s David Farrar has been running a series for some time trying to paint NZ Labour as out of step with Labour Parties around the world when it comes to their attitude on tax cuts. His intention, of course, is to portray Labour as extreme left and his mates in National as centrist and middle of the road. Problem is, he’s more interested in spruiking for the National Party than he is in getting his facts right.

Yesterday he reported excitedly that while NZ Labour was “almost alone in the world with its hostility to personal tax cuts”, in contrast the UK Labour Party is “delivering a massive package of tax cuts” to deal with the economic crisis.

We’ll forgive him for selectively ignoring the huge family tax cuts in Working For Families, the cut to the corporate tax rate, the personal tax cuts in this year’s budget and the tax credits for Kiwisaver and R&D – these are things National has to omit for its spin to make any sense.

But despite his obvious disdain for the intelligence of his readers he can’t get away with this one – under Gordon Brown’s tax plan that he endorsed so wholeheartedly the wealthy will face a hefty tax increase, while the cut is to VAT, a regressive tax similar to our GST that hits the poor the hardest.

Essentially, it’s a more progressive tax system, with tax reductions for those on lower to middle incomes paid for by tax increases on the rich, and it’s being described in the media as a rejection of Blairism and a return to traditional Labour values – values that would fit in very well with those of the Labour Party here that Farrar has tried to paint as extreme and “almost alone in the world”.

The only question is, given his enthusiasm for Gordon Brown’s plan, will Farrar now be rejecting National’s regressive tax plan – where families on less than $44k pay more tax so the rich can pay less – in favour of a system that’s fairer and more progressive? Somehow, I doubt it.

80 comments on “All the facts”

  1. Daveski 1

    Correct me if I’m wrong (I know you will) but I thought the increased tax rate only came in at around 150K pound – or the equivalent of $300-$450K in NZ.

    It’s more window dressing than pure regressive taxation.

    Mind you, the definition of rich pricks here used to be $60K!

  2. Tane 2

    Yeah it’s only the genuinely wealthy who are being asked to pay more. I’m not saying it’s a perfect system, just that it’s a progressive move in line with the NZLP’s view of tax cuts. I do think it’s a good move though – in times of economic hardship those who are most comfortable should be asked to contribute to help those at the bottom who are really feeling the brunt.

  3. deemac 3

    Rod Oram on Nine to Noon this morning was very critical of Key and the rest of National (in his usual circumspect and polite way of course) for saying one thing in office ie the problems here were the result of govt profligacy and a completely different thing now, ie it’s the fault of irresponsible money men (the current received wisdom).
    Oram was clearly implying that this dishonesty went beyond the normal cut and thrust of oppositional politics. (You can hear the interview on the Radio NZ website).
    Scary that a lightweight like Key is now in charge of the country…

  4. Dave 4

    I still believe that lowering GST is the best way to give everyone a tax cut without anyone viewing there saving as ‘unfair.’ But I agree that National’s spin over tax cuts was ridiculous, Labour was using innovative ways to lower tax for particular industries and seemed to be investing the money well. But hey, it must of been time for a change, maybe they should substitute every 6 months or so?? Just to keep it fair 😀 hahaha

  5. Santi 5

    “We’ll forgive him for selectively ignoring the huge family tax cuts in Working For Families, the cut to the corporate tax rate, the personal tax cuts in this year’s budget and the tax credits for Kiwisaver and R&D..”

    Say no more, Tane. I’m missing Michael Cullen already…….NOT!

    The truth is red Labour overtaxed the NZ population and scrambled the lollies around in handouts, yes, the same ones you listed.

    Luckily, the approach failed miserably at the last election.

  6. burt 6

    Daveski

    So they are putting in place a “rich prick” threshold that is actually aimed at “rich pricks” rather than teachers, nurses, police officers, junior doctors etc.

    How weird, tall poppy bashing that bashes tall poppies rather than anyone who might not be a Labour voter. It will never work – people will see through it and realise it’s sensible rather than sensational and policies of envy vote grabbing stuff.

    DPF reminds me of Dr. Cullen back in 1999 when he said the proposed rich prick threshold of 39% was moderate compared to the US which had a top tax rate of 48% at that time. In the same way Cullen forgot to mention at that time that the US rate kicked in at $400K USD (circa 10 times the rich prick threshold he was proposing) DPF forgets to mention the top tax hike as well.

    Partisan people all make fools of themselves defending things their own team do while attacking the same things in the other team.

  7. I would doubt that the UK VAT cut to 15% (which is, in the fine print, offset by an increase in petrol, alcohol and tobacco excise) or a cut to GST in NZ will benefit consumers. My hunch it will go straight to the retailers’ margins instead.

  8. Daveski 8

    Tane – I think there is an inherent fairness in a progressive tax rate – at least in principle.

    There are however a couple of issues that tend to get overlooked.

    First, regardless of the extent of a regressive marginal rate, the “rich” – however you define them will pay more tax. Even with a flat tax, the rich will pay more tax than lower income earners.

    The second point which is a problem Cullen left us with. With company rates at 30%, trusts at 33% and some savings taxed at less than 39%, the current taxation scheme is unfair – those individuals who can operate as company have an unfair advantage over those who pay PAYE on salaries and wages over the highest threshold.

    I’m no expert but your last sentence/para must surely be incorrect. The tax scales are undoubtedly progressive but changes in the rates affect different people differently. Yes, those on higher get increased cuts but it is still a progressive tax rate (even if WFF has confused the clarity of the system).

  9. randal 9

    I am sure that the recipients of wff will not be using their targeted assistance to buy a house in the south of france or bach at taupo or a harldly davison so they can go round showing off what sort of rugged individuals they are

  10. randal 10

    I am sure that the recipients of WFF will not be spending their money on a house in the south of france or a hardly davison to go round skiting about how ruggedly individual they are

  11. Tane 11

    Daveski, regarding the use of the word “regressive” to describe National’s cuts, I was starting with a baseline of the status quo, which was Labour’s legislated tax cuts. Clearly they would still maintain a progressive tax system, with a move to a flatter tax system over time.

  12. Jimbo 12

    WFF and all the other stuf IS NOT tax cuts. Calling them “tax relief”, “tax targeting”, “tax cuts” etc DOES NOT make them tax cuts, no matter how many times you say it.

    In the end, NZers had enough of the cynicism.

    Under Labour, even something as simple as lowering a couple of tax rates instead got wrapped up in a welfarism, feel-good branding, red-tape, nannyism, winner-picking and politicking.

  13. Jimbo – I guess that means research tax credits, devaluation credits and National’s plan to provide tax credits to middle income earners is also welfarism. We should do away with them all then?

  14. Jimbo 14

    Robinsod – no, what I said was WFF was welfarism, feel-good branding, red-tape, nannyism, winner-picking and politicking. You can go ahead and pick examples of what National is doing to try an disprove the point, but you won’t change my mind on that!

    You can out money in people’s pockets through welfare, tax cuts and combination of the two. WFF is welfare (despite Labourt govt’s efforts to brand it as something else).

    Some people wish the Labour govt has at times given a pure, unganished tax cut. That is all.

  15. So WFF is welfare but National’s tax credit isn’t? Neither is (was) the R&D tax credit? Despite being delivered in exactly the same way by the same institution???

    I’m starting to think your definition of welfare is based entirely on your own inane prejudice…

    If we’re gonna set rules that way then I shall define your existence as pointless. As opposed to mine – which is critical – just y’know because (insert stupid catchphrase here). Idiot.

  16. jbc 16

    ‘sod: is MSD/WINZ involved in the R&D credit? I’d call it welfare if they were.

    I’ll agree that the govt has tried very hard to disguise WFF as a tax credit (replacing “payment” with “tax credit” in their documentation – they have still missed some places) but not hard enough. It has not fooled Susan St John for example.

    If the govt had stuck to a simple tax credit (eg: write off 10k income for each dependent child) then they would also have avoided landing working people with the steep benefit abatement that they now have.

  17. deemac 17

    it wasn’t the Labour-led govt that was out of step with other social democratic parties around the world – it’s the right wing nutters who infest this site who are out of step with mainstream centre right political thinking now that the neoliberal bubble has burst.
    Are they being paid to read The Standard? Or are their lives so sad they have nothing better to do than frequent a blog they don’t like??

    [lprent: There are some of them who are worth reading. Some of them are even good at making me have to flick out of programming or moderation mode (closely related) into political mode. ]

  18. Vanilla Eis 18

    jbc: As far as I’m aware, the only agency you have to interact with to get a WFF credit is the IRD. Does that answer your question?

    http://www.ird.govt.nz/wff-tax-credits/

  19. Quoth the Raven 19

    It’s interesting to read the entry over at Lenin’s Tomb. They’re calling it a “minute shift away from kapitalist realism” and “an overall package of moderate wealth redistribution.” It seems to me that Farrar is the one who’s out of step.

  20. jbc 20

    Vanilla. My only question was about R&D – and it was rhetorical. I know that WINZ were not behind the R&D credits.

    But their DNA is all over WFF. Payments, entitlement, etc. There’s even a WINZ logo on every page.

    I know you don’t have to front up to the WINZ office, or fill out WINZ forms to collect WFF. That’s just so that people don’t feel too awkward collecting it

    Their application form states “Family assistance has been renamed Working for Families Tax Credits”. So you apple to WINZ IRD to collect Family assistance Family Tax Credits.

    I’m not the only person who sees this as a tax credit in name only. Not trying to change anyone’s mind on this but just telling it how I (and many others) see it.

  21. Jimbo 21

    Robisod – “inane” and “idiot” in the response to my post? A bit OTT I would have thought.

    I simply said that WFF was never a “tax cut”, and that I thought it was “welfare”. I said I thought the Labour government continually called it “tax cuts” when in fact it clearly is not. Do you agree or disagree with this?

    In response, you started talking about a proposed National policy that I did not even refer to.

    I wasn’t talking about proposed National policies – I was talking about the cynicism of describing welfare as “tax cuts” in the hope that the electorate will come to believe they are the same thing (seems to have worked with you…). If the National party are doing it, then they are wrong, too.

    Even if National introduces 99 new forms of welfare, I will still believe that:

    1. WFF is not a “tax cut”, it is welfare.
    2. The Labour government consistently tried to label WFF as “tax cut” when clearly it is not. They did this for political purposes.

    How about putting aside the name calling for a second or two and considering the point in an even-handed manner? If you want to stick with the name-calling, then that’s fine too. I’ll no doubt be “moderated” out of existence and you can chalk up another victory for the powers of good.

  22. mike 22

    WFF is not a tax cut.
    It’s a welfare payout that rewards reproduction not production.

    With my 3 sprogs I got enough to buy a kick-ass bose sound system so I’m not complaining – it just aint a tax cut

  23. Pascal's bookie 23

    That’s strange mike.

    You consider it a welfare payment, that you don’t need, yet you signed up for it anyway.

    I guess now you are thinking about replying that you pay an unreasonable amount of tax in your view, and so you signed up to this ‘welfare payment’ as a means to clawing back some of that tax. Something like that? You pay your taxes so that entitles you to get some of it back?

  24. mike 24

    PB – yes that is correct. Next year I’m thinking spa pool.

  25. Pascal's bookie 25

    ACT voter by any chance, Mike?

  26. Jimbo 26

    PB,

    It’s not about whether one deserves it or not (the tax cut or the welfare…). It’s not even about whether one is better than the other, or whether WFF is particularly good or bad example of welfare policy.

    The point is simply that tax cuts and welfare are different things. WFF targets welfare to particular portions of society based on various social factors (such as the number of kids they have). WFF is welfare and not a single credible economist would argue otherwise. For some reason, the Labour government when WFF was introduced, and many Labour supporters to this very day, continue to call it a “tax cut”.

    Why not just say: “No, the Labour government never cut taxes. It didn’t cut taxes because it instead decided to redistribute the money via WFF, which I believe is an excellent policy”…(if that’s what you believe)?

    Why the desperation for it to be seen as a tax cut?

  27. lprent 27

    Jimbo: I’m pretty sure that they were never referred as tax cuts apart from idiots of the right. They were defined as tax rebates. Perhaps you could define the difference between the two?

  28. Pascal's bookie 28

    That’s just silly Jimbo. Can I play too ? 🙂

    All policy is welfare policy. No credible political scientist would disagree. All policy is social, by definition, therefore all taxes that are not strictly flat, are disguised redistributional welfare payments.

    Easy, but boring isn’t it? There’s no there, there.

    All sorts of redistribution is done via the tax system, either through tax credits, progressive rates of taxation combined with universal entitlements, and so on and so forth.

    But that’s not what I was getting at in any case, I was just having fun with mike’s apparent dissonance. “It’s not a tax cut – it’s welfare, but I’ll take it to reduce my unjust tax burden” – justifying his ‘welfare receipt’ as a tax cut.

    No desperation here Jimbo, just amusement. The whole debate is about framing. They are just words for the same thing, with different connotations attached to them. Righties are upset that the left tried to adopt their tax cut language. mike adopts it for his use of the policy, but not for the actual policy. Funny eh?

  29. Mike – you’re a bludger. Give me my tax back.

    Jimbo – good to see you;re now trying a little harder to rationalise your prejudice… You’re still taxonomising according to a blind ideological value system but at least you’ve shifted off “nanny-state” kneejerk platitudes…

    Now let’s see if you can reach level two:

    Explain why facilitating procreation and financially stable child-rearing (which is important to the long-term success of our economy) is different to rewarding research and development (which is also important to the long-term success of our economy) and thus why one should be considered welfare while the latter should not.

    If you manage that then please explain what you mean by “not a single credible economist ” and provide a clear explaination of cross-elasticity of demand in order to reassure me you actually know what you you’re talking about when you make such claims. It would be a terrible let-down to think you were just employing cheap rhetoric…

    Oh and just so I don’t disappoint you? You’re a moron…

  30. Jimbo 30

    Robinsod – you just don’t seem capable of separating a simple discussion about whether a policy is properly described as: (1) welfare; or (2) tax cuts, from an argument about whether WFF (whether it’s a tax cut or welfare) is any good. As far as I’m aware, I’ve not been having an argument about whether WFF was a good or bad policy. What I’ve been saying is that some voters wanted tax cuts, plain and simple. Labour tried to call WFF a “tax cut” so it could claim it had responded to the electorate. I think this was cynical and wrong.

    Whether WFF is “welfare” or a “tax cut” not a political question. The answer doesn’t depend on my “prejudice” or your use of big words. The answer comes from engaging your brain and sticking to the point. But you carry on the name-calling, etc. if you want to. You just look like a tool.

    To repeat: You are a tool.

    PB (and Iprent) – yes I agree it’s all about framing. Labour consistently called a welfare policy a “tax cut” to try and get some sort of political benefit. Why did they do this? Is welfare now a dirty word?

    Sure, all tax is redistributional and lowering a tax rate will change the dynamics of that redistrbution. 100% agreed.

    The only point I was making is that “tax cuts” mean exactly that. Cutting the rates of tax applying universally to anyone whose earnings happen to fall within a particular tax bracket. Changes to the tax system (be it lowering, increasing, changing the bands), when done properly, is one of the most simple, fast and easy to understand way of changing the way a society redistributes it wealth. I AM NOT saying that our tax system doesn’t redistribute wealth. I also AM NOT in any way arguing against a progressive tax system.

    When a policy implements other goals by deciding that only SOME people get the reduction in tax or “tax credit” (for example those involved in “financially stable child rearing” as Robinsod a.k.a King Tool calls it), then it’s no longer what most people would call a tax cut.

    For example, if I passed a law saying that all returning veterans would henceforth get a 20% tax credit, it would not be right for me to announce that policy to the world as proof that I’d delivered tax cuts. Similarly, if I said that anyone who finds the cure for cancer will get 100% tax credit for the rest of their natural life, that would not be a “tax cut” either. These two examples might both be worthy policies, but the fact that the “payments” are delivered through the tax system (as tax credits) does not make them tax cuts.

    WFF and the policies I’ve described above are simply not tax cuts. They are policies designed to achieve particular social outcomes that COULD NOT be achieved through simple changes to tax rates or tax bands.

    Again, I agree it’s about “framing”. The Labour govt bent over backwards to call WFF a “tax cut” rather than simply acknowledge that it’s a different type of welfare. What’s wrong with calling it by its proper name?

  31. Andrew 31

    “Essentially, it’s a more progressive tax system, with tax reductions for those on lower to middle incomes paid for by tax increases on the rich”

    If only that was the case. The 2.5% reduction in VAT alone is expected to cost 12 billion pa, while the increased “rich pricks” tax will only bring in 2 billion pa. Also, one thing to note is that these cuts are only temporary and will likely be withdrawn at the end of next year. The 45% rate is due to be brought in in 2011 (after the next election) so no doubt Labour will be out and it wont be brought in.

    I read in a news paper this morning that 2% of the population in England pays 93% of the tax. If a lot of these people loose their high paid jobs and businesses due to the recession, then Labour over here are going to have a very hard time generating tax income.

    Borrowing is expected to top 1 trillion this year so at some point all taxes will need to be incresed to pay it all back. The recession over here is going to be a stinker, with over 370,000 jobs lost in london alone (7.9% of all jobs in London). Makes the recession that NZ is sliding into look rather shallow really.

    Anyway, im glad ill be returning to NZ mid next year some time. Hopefully i’ll keep my job until then.

  32. Felix 32

    Jimbo,

    I said I thought the Labour government continually called it “tax cuts’

    The Labour government consistently tried to label WFF as “tax cut’

    Labour tried to call WFF a “tax cut’

    Labour consistently called a welfare policy a “tax cut’

    The Labour govt bent over backwards to call WFF a “tax cut’

    Humour me and provide a few examples of this, would you?

  33. maxx 33

    Welfare handouts arent tax cuts full stop. WFF is a welfare handout.

  34. RedLogix 34

    Jimbo,

    I don’t give a rat’s patui what you call the mechanism, tax cut, credit, welfare, redistribution… it’s just a name All that really matters is a person’s nett tax position. (Which can be positive or negative.)

    A person who pays more to the State in the way of tax, than they receive in any form of benefit or credit, can be defined as a taxpayer.

    A person who receives more from the State in the way any form of benefit or credit, than they pay in tax, can reasonably called a beneficiary.

    Everything else is framing, spin, or bluster.

  35. Jimbo – you don’t seem capable of defending your position and instead transparently try to renegotiate the basis of the original argument to avoid addressing your failure to argue you point. You lame bastard…

  36. higherstandard 36

    “A person who pays more to the State in the way of tax, than they receive in any form of benefit or credit, can be defined as a taxpayer.

    A person who receives more from the State in any form of benefit or credit, than they pay in tax, can reasonably called a beneficiary.”

    Nicely put I don’t think any reasonable person could argue with that.

  37. “A person who pays more to the State in the way of tax, than they receive in any form of benefit or credit, can be defined as a taxpayer.

    A person who receives more from the State in any form of benefit or credit, than they pay in tax, can reasonably called a beneficiary.’

    So all state employed staff (teachers, health professionals, cops, state bureaucrats, MPs, SOE employees, consultants), WFF and welfare recipients (if it cancels out their net tax contribution) and state superannuitants are all beneficiaries?
    Are there any taxpayers in New Zealand left? What would be the ratio? Is this sustainable?

  38. Felix 38

    “Nicely put I don’t think any reasonable person could argue with that.”

    No reasonable person would bother.

    Think for a moment about how you could calculate the the value of the benefit an individual receives from having a police force and how you intend to factor that into the equation.

    Then expand that to include every area where taxes fund services and infrastructure.

    I think you’ll find that any “reasonable person” would have better things to do.

  39. Jimbo 39

    Felix – Well, you can’t say I’m not consistent! Perhaps to be accurate I should have said “tried to imply” that WFF was tax cuts. In the original post, Tane asserted that Labour was not idealogically opposed to “tax cuts” because it had delivered “family tax cuts”.

    I disagree that Labour has delievered tax cuts when it introduced WFF – it delivered extra payments to certain membes of society made through letting them off some of their tax burden.

    I’m not really in position right now to try and dredge through Hansard or every public comment on WFF. Nevertheless, I’m pretty confident that most times tax cuts were brought up in the media or during parliamentary questioning, Labour politicians would respond by talking about WFF. It was clearly a deliberate attempt to muddy the waters.

    Yes, a lot of it is a question of terminology – but tax cuts and selective welfare (or selective tax credits) have different incentive effects. Proper use of the terminology allows the debate to be had in fair way. A government can respond in various different ways to a particular social issue or problem. Why the need for WFF to be seen as tax cuts (even to this day)?

    I don’t agree with Higherstandard’s definitions of “taxpayer” or “beneficiary”. Whether someone is a net contributor or net recipient of Govt assistance is probably impossible to calculate and pretty much irrelevant to whether or not Labour used spin to claim WFF was tax cuts. I believe the true difference is closer to my description above about policies that selectively chose certain people to “win” on grounds other than where they fall in the tax bracket.

    It’s fascinating to hear some of the views on the board about this (and the depth of feeling from some). I really believe it’s interesting times in politics when the centre-Left party WANTS to be seen to cutting tax and tries to spin it’s policies as such. I don’t reckon WFF would have been pitched as “tax cuts” if it had been introduced in Labour’s first term.

    Robinsod – I’m certainly capable of defending a position and that’s exactly what I’ve been doing. You’re the King Tool who’s been dropping big words from Wikipedia, alleging prejudice, using the three year-old’s “but they do it too” argument, and generally running away from the fight by typing out long-winded insults that you mistakenly believe sound erudite and clever.* They’re not. You sound like a Tool.

    * See I can do the long-winded insult too! It’s not hard. Especially for those of us who aren’t Tools…

  40. RedLogix 40

    In the original context of this discussion, the terms beneficiary or taxpayer only have meaning in terms of cash paid to or received from the State. In every other sense we are all beneficiaries of the State; we are all better off for having a decently functioning civil society, than not.

    If in doubt on this point, ask a someone who has lived in a country without one.

  41. Felix 41

    I agree Jimbo, it’s largely about terminology.

    Cullen and Clark may well have referred to WFF as an alternative to tax cuts or words to that effect.

    I don’t think I can recall an instance of them ever implying that it is a tax cut, and while I don’t expect you to trawl the Hansard I’d have thought you’d be able to recall at least one instance off the top of your head, as it’s clearly made an impression on you.

    Terminology it is, but words are important. They’re all we have to separate truth from lies.

  42. Jimbo – you’re not capable of defending a position. Let me refresh you:

    You claimed WFF was nanny-statism and not a tax cut.

    I pointed out that it was as much of a tax cut as R&D credits and the Nat’s targeted tax breaks for middle income earners.

    You then claimed there was a difference but failed to explain what that difference was.

    I then challenged your ability to argue your point.

    You then tried to change the argument to one of which was better policy.

    I called you on changing the ground of your argument because you couldn’t defend your first premise which was that there was a material (rather than subjective) taxonomic difference between WFF and R&D credits.

    You decided to attack my eloquence. And you wonder why I call you a loser…

    Oh and I feel obliged now to point out that yes, Jimbo, I am smarter than you – that’s why I can defend my arguments and you can’t.

    Just as an aside I suspect I’m better looking, wealthier and do better with the ladies than you too…

  43. Billy 43

    Just as an aside I suspect I’m better looking, wealthier and do better with the ladies than you too

    ‘Sod, are you…me?

  44. Billy – your wife and probably everybody else you know wishes that was the case…

  45. Phil 45

    Just as an aside I suspect I’m better looking, wealthier and do better with the ladies than you too

    Only if Jimbo had less than 5 digits on one hand.

  46. Oh Phil! You made a funny… Good wee Phil… good boy…

  47. Jimbo 47

    Robinsod – let me break it down for you:

    (1) The original post claims that Labour delivered “tax cuts” through WFF. The post was about how National never admit that Labour gave “tax cuts”.

    (2) I said I do not believe WFF is tax cuts. I said it is welfare. I said some people in the electorate wanted pure and simple tax cuts, not “tax cuts” that are only given to certain chosen groups. Labour did not get credit from the electorate for “tax cuts” because IT NEVER DELIVERED tax cuts. That’s the only point I’ve been making

    (3) Admittedly, while I used the terms nanny-state, winner picking etc., they weren’t really relevant to the argument, which is that WFF is not “tax cuts”, even though it was spun that way. This is where you came in on your white horse and started the petty name calling.

    (4) I gave a pretty good explanation of what I consider to be “tax cuts”, including examples of what would not be tax cuts – 20% rebate for veterans or 100% for life to whoever cures cancer. These, like WFF, are also not tax cuts. Answer this, Nimrod: do you agree or disagree?

    (5) You started asking me to describe what cross-elasticity of demand is. I’m still not sure why…!

    (6) You said that National had introduced an R&D tax credit, and therefore I was wrong on the issue of whether WFF is a tax cut. Again – I don’t follow your reasoning or see any connection between the two events. I never drew a comparison between the two policies – you must be hallucinating instead of reading what’s on the screen. To make it simple for you, R&D tax credit is ALSO NOT TAX CUTS, as most people understand the term. If all National did was provide R&D credits, it would also be wrong to call this a programme of tax cuts.

    (7) Re-read my posts. The original post from Tane, and my replies, are not about whether WFF is a good or bad policy. I’ve not once tried to change the argument to a policy comparison between WFF, R&D tax credits, or anything else. You don’t even know whether I collect WFF. You’e the only guy playing the right/left good/bad game here. The rest of us are talking about spin, terminology and the way particular policies are framed.

    In conclusion, a few of us have had an interesting discussion about whether Labour could ever be regarded as having cut taxes. It looks as if no consensus has been reached.

    You might be right that you are smarter, better looking, wealthier and “do better with the ladies” than me. I don’t really give a toss, but I doubt it… Based solely on the petulant way you’ve approached this topic, you’ve pretty much proved yourself to be an underachieving, dimwitted, Tool.

    Nice try, though.

    [lprent: As a suggestion, if you want to do this type of point by point stuff, then I’d suggest a different technique. Otherwise it gets to be like reading a turgid legal document rather than the net, and a bit of a bore because it is a lot of work for readers to figure out what you’re talking about. Hyperlinking is the way….

    You should use the permalinks available. With posts these are the title (right click the title and select the “Copy Link Location” – wording may vary between browsers). With comments they are located in the date/time stamp on each comment (same right click etc).

    You can paste the links into your comment, ideally using the technique from this FAQ]

  48. Jimbo 48

    Felix – I guess my point is that Tane (in the original article here) cites WFF as an example of tax cuts. That’s what made an impression on me and reminded me of what I believe was intentional postioning of the WFF policy by Cullen and Clark. The spin was an attempt to deal with the political issue of people asking for tax cuts.

    Hansard is definitely full of examples where a “when will you cut taxes” question got a “WFF is an excellent policy which…” answer.

    Labour never got credit for “cutting taxes” because most people simply don’t accept that WFF is “tax cuts”. It’s a welfare programme for people who have families. Labour would have been better served to stick to its guns and call a spade a spade, rather than attempting to placate both the traditional supporter base and the centre-righties who wanted genuine tax cuts.

    If I order lamb chops, I’m not going to thank the waiter for bringing me pork with mint sauce, am I…?!

  49. Jimbo – I ride an ass, not a horse.

    Oh and your veteran and cancer examples? Tax cuts. In that these people are having their tax takes cut. Geddit? Tax?? Take??? Cut???

    BTW – I never read past the first paragraph of any of your comments – they’re just so goddamn dull. Thanks for taking the time to try an argument though. Do you like, not have a job or something better to do with your time?

  50. Jimbo 50

    You’re embarassing yourself now.

    Is that really what you think “tax cuts” means? I’d have expected more from such a smart, good-looking, wealthy man of the people who does so well with the ladies and knows all about important things like cross-elasticity of demand.

    Like I said: nice try, Tool.

  51. Tim 51

    Bray bray bray Rottensox. Where’s your rebuttal? Seems Jimbo beat you into submission

  52. Scribe 52

    Robinsod,

    Tax cuts. In that these people are having their tax takes cut. Geddit? Tax?? Take??? Cut???

    WFF didn’t cut the amount of tax someone paid. If it did, then there would have been no need for hundreds of IRD staff to figure out how much money to give BACK to people who would not have paid that tax in the first place if it was truly a tax CUT.

    Geddit?

  53. Scribe/Tim/Jimbo – a tax rebate is a tax cut. If you people are too stupid to understand that I suggest you get together and see if you can get a group discount on an economic literacy class…

    But right now I’m just trying to figure out which one of you is Moe…

  54. Jimbo 54

    Robinsod – Erm… No, it’s not.

    Assume starting tax rate of 30%:

    Rebate = you start with the basic obligation to pay 30%, but since you meet certain other criteria (2 kids or whatever), the Govt gives you back 2%. If you qualify, your net position is that 28% of your income is paid to the Govt. If you don’t qualify, you still pay 30%, effectively supplementing the income of people who do qualify (again – I’m not saying such wealth distribution is wrong in principle).

    Tax cut = you start with the basic obligtion to pay 30%. Govt cuts tax rates by 2%. Your net position is that 28% of your income is paid to the Govt. No hurdles to jump over and no administrative costs in policing the programme or advertising its availability. No one has chosen who should qualify and how much they should receive.

    The two policies are DIFFERENT. You’d have to be stupid (or a Tool) not to at least concede that one point.

    Pretty happy with my economics education, thanks. Keep on grinding…

  55. Felix 55

    Jimbo I don’t think WFF is a tax cut either.

    However I think you’re stretching the truth to say it was promoted as a tax cut. You really should provide a couple of quotes if you’re going to continue with this assertion.

    Also if the waiter who brings you pork looks a little like Sophia Loren, politely make your excuses and leave. Trust me on this.

  56. Jimbo 56

    Fair enough, Felix. Like I said, Tane’s original article about how Labour delivered “tax cuts” was a reminder to me about how the distinction got blurred. The mistaken view that’s out there (e.g. Tane, Robinsod as per this chain) must’ve come from somewhere.

    You’re saying it wasn’t deliberate spin by Labour to encourage such a view. I doubt there’s much “proof” I could find to convince you otherwise – to my mind the constant references to WFF whenever the opposition called for tax cuts is the way it got played out. I might try and drag up a a few of those exchanges from Hansard some time.

    The Sophia Loren warning is sound advice!

  57. RedLogix 57

    Actually it was probably more administratively efficient to implement WFF as a tax rebate than a tax cut.

    For those of you who have forgotten IRD has hugely simplified the way it deals with most ordinary wages/salary only taxpayers. Most of us have forgotten about the annual form-filling ritual we all used to do. For most of us taxation is a matter that our employer takes care of via PAYE. Once the system is set up, it just rolls on with very little change from year to year.

    The problem with IRD implementing a targeted tax reduction is that they spoil this simplicity. People have one, two or more children at irregular intervals, they divorce and reconstitute families… from IRD’s point of view changing family configurations are messy and expensive to deal with.

    By contrast WINZ is ideally configured to handle this kind of thing. People go on and off benefits all the time. Their circumstances alter sometimes week by week. WINZ already had the people and systems in place to deal effectively with the kind of moving targetting that WFF required .

    Yes there is an administrative overhead to any form of targetted taxation mechanism like WFF. But that overhead would still exist regardless, whether IRD implemented the scheme directly as a tax reduction, or WINZ implemented it as a tax rebate… but ultimately the task was probably a better fit for WINZ.

    And the end result in your net tax position is exactly the same.

    Jimbo,

    You comparison is totally invalid. Your first example is a description of a targetted tax reduction scheme like WFF. Your second example is a description of a universal tax reduction which WFF is most definitely not.

    If you implemented WFF universally it would no longer be what it was intended to be.. a tax reduction for working families with children.

  58. Okay. I can see this stupid argument is going to run forever if someone doesn’t bring some sense to it. I guess that’ll have to be me:

    While there is no financial or economic definition of “tax cut”. The effects of a rebate and a rate cut are micro-economically indistinguishable. Thus for all intents and purposes a rebate can be considered to fall within the definition of a “tax cut” at an individual taxpayer level.

    But like I said there is no strict economic or financial definition of “tax cut” so we are free to construe our own understanding of it. That means this argument is as pointless as an argument about who would win in a game of bingo between batman and the incredible hulk (batman – every time).

    Oh and Cullen talked about WFF as “Tax Relief” – a term the right used interchangably with “tax cut” but that also has no fixed definition.

    Just for the record Jimbo – I was under the impression you considered National’s rebate for childless middle income earners, the R & D credit and depreciation to be a cut. To save me having to trawl through your turgid prose could you specify if this is the case in ten words or less?

  59. I would also point out that even though a rebate will have a different effect to a rate reduction at a macro economic level that still does not preclude it from being considered a cut – it is simple a cut with a different macro-economic effect than another type of cut…

    If I was forced to provide a definition I would consider WFF to be a tax cut because it involves the return of tax dollars to a taxpayer in the form of dollars and thus reduces their total tax payment. Because cash is fungible and nobody is entitled to receive more than they pay in tax this represents a cut. If WFF meant the government took cash and returned foodstamps or blocks of cheese or returned more than they took I would consider WFF to be welfare

  60. Jimbo 60

    Robinsod – just for the record, not once did I say that any of National’s policies you mention are “tax cuts”.

    Redlogix – that’s my point. People wanted “tax cuts”, not “targetted tax reduction schemes” directed at particular subsets of society (even if such policies are admirable). WFF is a lump sum payment depending on (a) how much tax you currently pay, and (b) how many kids you have.

    Some people wanted “tax cuts” that weren’t affected by how many kids you have. It’s not National spin to say that Clark and Cullen only gave “tax cuts” right at the end…

    In my view, Labour would have romped in for a fourth term if it had kept the swing voters happy with measured tax cuts during the 2nd and 3rd terms. Instead, many actual and potential Labour voters “missed out” and realised that a policy dressed up as “tax credits” had nothing in it for them because they didn’t get past first base (i.e income and # of kids thresholds). Those voters started to believe that Labour was idealogically opposed to ever giving proper tax cuts (the the way that Aus and UK Labour govts have been prepared to do). In a close election, this “stupid argument” as Robinsod calls it may have been one of the factors that tipped the balance.

  61. RedLogix 61

    Jimbo,

    It might be timely to point out that a govt that depends on tax cuts for electoral popularity everntually runs out of places to go. You could go on offering a 2% reduction year in year out, but at some point you do reach zero tax…. and people just might notice that the schools are shut, and nothing much works anymore.

    The point is of course that tax cuts can be framed as a slogan to appeal to the dopey, but in reality it is a self-limiting, self-defeating tactic. At some point you cannot go on doing it any more, and then what do you do?

  62. Billy 62

    RedLogix,

    It might be timely to point out that a govt that depends on promising state-provided services for electoral popularity everntually runs out of places to go. You could go on offering more services year in year out, but at some point you do reach the point where the state runs the entire economy …and people just might notice that they have no money and no choice about what services they choose to consume and who provides them.

    The point is of course that “free” this and that can be framed as a slogan to appeal to the dopey, but in reality it is a self-limiting, self-defeating tactic. At some point you cannot go on doing it any more, and then what do you do?

  63. Jimbo – tax cuts in the second term would have been economic idiocy. We had an economy running hot, a labour and skills shortage and capital at the limits of its productive capacity. All tax cuts would have done then is force inflation up.

    That would have led to even higher interest rates which would in turn have made us an even more attractive debt market thus increasing the supply of cash, the rate of inflation and our interest rates… Do you see where that little cycle is going? It’s called a credit bubble. That leads to a credit crisis and as our US friends will tell you that’s something you don’t want to have to deal with – especially if you’ve increased your debt to GDP ratio to 60-70% by cutting taxes or going to war rather than by paying down debt to the low 20s…

    Tax cuts in those circumstances? Nah. I’d rather see the left lose an election than win it by crippling our economy. You should also realise that the tax cuts National are offering put 30% of the cash into the top ten percent of earners – the only way national has managed to get any money to middle-income swing voters’ pockets is through a tax rebate…

    Tax cuts – as this stupid argument has elucidated – were simply a tool of political rhetoric that were open to a broad interpretation devoid of economic sense…

    God – I can’t believe I’ve decided to argue this inane point with you… What a waste of my time…

  64. Billy – go to Somalia. The government lets you keep all of your money there…

  65. Billy 65

    ‘Sod,

    RL was trying to say that, if you want tax cuts you are (somehow) obliged to keep cutting tax forever. This is patent nonsense and I was trying to demonstrate by…oh, fcuk, you know what I was doing.

    [lprent: you don’t have to misspell the word. I removed all of those from auto-moderation after I got the anti-spam to work correctly. Now you just have to worry about true swear words like Whaleoil. Biased, bigoted – I have cause to be about idiot liars in the national smear unit 😈 ]

  66. Billy 66

    But thinking about Somalia, I might just fit in there. I already have the eye patch…

  67. Daveski 67

    Sod

    I think you make a couple of valid points.

    However equally valid are two factors you haven’t mentioned.

    1. The increase in Government spending as a % of GDP having similar effects as to those you describe.

    2. The fact that average % of tax paid actually increased for two reasons. One, the addition of the 39% marginal rate for the top bracket (“rich pricks”). Two inflation leading to tax creep as people received higher salaries but paid a higher marginal rate and average rate (especially those around the $60K mark).

    Addressing either of these would have allowed for scope in tax cuts. That Labour chose not to address either of these lead to considerable resentment, particularly among the chattering classes

  68. Pascal's bookie 68

    “It’s not National spin to say that Clark and Cullen only gave “tax cuts’ right at the end”

    Yes it is.

    I don’t know if you’re a religious chap. I’m not, but I know the bible. There’s a story in there that you’ve most likely heard of about Joseph interpreting the dreams of the Pharaoh. Skinny cows and fat cows? The point being that it is really stupid for an economy to eat all the good times and then have everyone starve during the next famine. That’s what Cullen did, ran surpluses, paid back debt, got the public sector functioning again and generally acted like a finance minister that believed that government has a role to play in promoting freedom and prosperity in the long term.

    You say he is ideologically opposed to tax cuts, which really is spin. Or rather, a sort of reverse projection, whereby the right assumes that because they have a ideological “belief in tax cuts”, that the left must be polar opposites. I’m sure someone as smart as you can identify the name of that particular logical error.

    What Cullen has an objection to is the belief that tax cuts are a cure all panacea to any given economic circumstance. When put that bluntly, it sounds stupid, but that’s what the right has been preaching for many years now.

    Gov’t running a surplus because the economy is running flat out? Taxes are too high! Pay it back!

    Economy slows down? Must need a tax cut to stimulate growth!

    Wage growth not happening? Tax cuts will increase after tax pay!

    Cullen simply rejects this flatulence and goes with a more non stupid idea that for everything there is a season, and that fiscal policy is a useful tool in more than one direction. One that needs taxes to sometimes rise as well as fall. It will be interesting to see if the right will be prepared to raise taxes to pay back the debt we will be taking on to weather the coming storm, once that storm passes. I doubt it, but live in hope. It’s a deeply conservative idea that they used to understand very well, till they got the supply side jesus religion.

  69. Quoth the Raven 69

    Daveski – Not sure about your point on government spending. Government spending as a percentage of GDP was 32.4% in 1999 and 31.8% this year. So actaully less under Labour then under National in the nineties.

  70. Daveski – a lot of that government spending was locked up in non-inflationary ways such as debt payment, the Cullen fund and Kiwisaver. I think they should have dampened the housing market with a capital gains tax and perhaps introduced a compulsory retirement scheme with an adjustable contribution rate instead of depending on the OCR alone to manage inflation (Singapore does this).

    The 39% bracket was a good idea and signaled in the ’99 campaign. Bracket creep is a marginal argument.Anyone who shifts up a bracket has more money in their pocket and tying it to CPI is a red herring for a whole lot of reasons I can’t be bothered going into…

    Billy – arrgg and you knows what I was doing too, m’arty…

  71. Billy 71

    I admire pirates for their assiduous use of the subjunctive case.

  72. Daveski 72

    Sod

    Thanks for your reply. Ironically, I think your comments support the view that Labour took the “don’t rock the boat” strategy and largely went with the current. I do agree with your comments about capital gains tax although it does open up a pandoras box.

    I’ve commented before about the 39% rate – it may be a good idea in terms of a progressive tax system but it’s impractical and inefficient when company rates are being cut to 30%. As to your other point, if govt spending is not increasing as a % of GDP (everything else being equal), there’s no argument against adjusting the thresholds.

    It’s difficult to argue with the belief that Cullen was against tax rates on ideological grounds, more than economic ones.

  73. Daveski – I’m not arguing Cullen as the perfect economic manager but he did better then most and under a lot of political pressure to do exactly the wrong thing…

  74. Daveski 74

    Sod

    Happy to agree. I’ll even go as far as to state he most likely disappointed those on the Left as much as those on the Right by steering a steady ship rather than responding to the different criticisms. He was brave in as much as he wouldn’t bow to pressure to change from the course that was set. Not all would agree that that was right but credit to him for doing so.,

    However, I think he painted himself into a corner with his refusal to consider changes to taxation when he could have done so without rocking the boat.

    FWIW, I don’t see WFF as tax cuts either.

  75. lprent 75

    Daveski: About the 39% vs 30%. Provides a pretty incentive to start companies rather than getting pay rises. Businesses are where the country makes money from exports. Perhaps it isn’t as silly as it looks at first glance.

    captcha: bridge totaled
    Where ?

  76. RedLogix 76

    Billy,

    Of course tax cuts forever is patent nonsense; just as forever increasing taxes is. (I thought I made that perfectly obvious, but apparently you missed it.)

    So why then do we ONLY hear constant bleatings for tax cuts? Why is it that most right wing commentators frame tax cuts as the magic formula for winning elections, turbo-charged economic growth, and wonderful happiness all through the land ever after? (And why no political aspirants who plainly propose to increase taxes in order that the country runs better?)

    Any populist drop kick can promise tax cuts, it takes no skill, leadership or vision. Just the willingness to appeal to people’s basest sense of self-interest. But it is inherently a self-limiting formula. At some point it stops working. Then what do you dummies do for a slogan?

  77. RedLogix 77

    PB,

    Yes the story of Joseph is one of the most complex and deeply layered stories in the Bible. The business of the seven years of plenty, followed by the seven years of famine makes an ancient and indelible case.

    The years of plenty are rendered meaningless if society collapses and millions die during the years of famine.

    Whoever the author of the story was, his condemnation of short-term thinking still resonates all these thousands of years later. Some truths never change.

  78. Billy 78

    Lprent,

    You can start a compnay without starting a business. You can start a business without starting a company.

  79. Tim 79

    RedLogix – I agree there is too much bleating about tax cuts. Unfortunately all too often some post or comment includes the line “tax cuts for the rich”. While I am looking forward to having more money in my pay packet, I’m not opposed to lower income earners also having more money in their pay packet. I also don’t count myself in the ‘rich’ category.
    I posit that as long as the line keeps getting rolled out there will be indignant reaction from those like me who could genuinely use the extra money in their hand for genuine reasons like housing and feeding their family.

  80. lprent 80

    Billy: Sure you can. But the joys of limited liability and lower tax rates sure help to swing it one direction.

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