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Armstrong on Key’s thinking

Written By: - Date published: 12:07 pm, March 22nd, 2011 - 30 comments
Categories: election 2011, tax - Tags: , ,

John Armstrong’s contacts in National are telling him that Working for Families and student loans are the targets for cuts in this year’s budget. He also reveals the real reason for National opposing the widely-supported earthquake levy: putting on a tax would be an admission that tax cuts for the rich were a mistake in the first place.

Armstrong says National’s ‘the sky is falling, the sky is falling’ cries are about

“softening up voters to a paring back of so-called “middle-class welfare” by removing the entitlement of large, wealthy families to Working for Families income top-ups while stopping interest-free student loans.”

Of course, these measures would raise just a fraction of the money needed, the rest would have to come from widespread cuts to other public services. So why doesn’t National just fund the rebuilding out of an earthquake levy? Key says that would strangle growth. To which the response might be ‘what growth?’ but, more seriously, how does raising a tax and spending that money straight away hurt growth more than slashing household incomes with WFF and student loan costs?

Armstrong reveals the real reason for National not putting on a small earthquake levy is pure politics:

“Though Opposition parties such as the Greens back a levy, its introduction could end up being widely seen as a reason why National should not have cut taxes in the first place, even if the last round of such cuts was fiscally neutral.”

So, there you have it. Key just can’t admit he made a mistake, so he’s digging us deeper into trouble. Rather than putting the rich back in the position they enjoyed just two years ago, he wants to shove the cost on to the poor and middle income families instead.

Btw, come on, John, you go to the Budget lock-up don’t you? You should know that the last round of tax cuts weren’t fiscally neutral, it’s right there in the executive summary:

Cost of the tax cuts, $1 billion over four years. Or $400 million, if you believe in voodoo economics.

30 comments on “Armstrong on Key’s thinking ”

  1. Lanthanide 1

    I like how the voodoo magic grows from 205 in 2013 to 435 in 2014, just big enough to give a profit of 175, sufficient to wipe out the previous 2 years of losses and let them wig their way on “revenue neutral”. Very convenient for them. I bet they changed the ‘assumptions’ and ‘modelling’ behind these figures over and over until they got a scenario that fit what they wanted to see.

    Journalists must hum and har about it, and eventually think “well these government types know what they’re talking about with this economics stuff, so I guess a 175 profit in 2014 does mean that going forwards after that it will be revenue positive!” and so buys their shit hook, line and sinker.

    captcha: realitys

  2. Bored 2

    This table represents another reason why the tea leaf readers must be resisted, they are running the lunatic asylum that is Treasury.

    Some salient points:
    * the personal tax rate cuts line indicates that there will be substantial income growth over the next three years (nearly doubling the current loss). How does that work given the recession is not going away?
    * company tax cuts..as above assumes that companies will be making more. In a depression. Post earthquake. Post the lowest dairy receipts for a while. Post a crash in tourist receipts. In the face of an oil price and availability crisis. Should I go on?
    * the working for families money costs diminish…does that mean we will all be earning more or that they are going to slash it?
    * depreciation measures…so where does the cost of subsidising the rentiers get passed on to? Tenants? Is this an admission that the property owners have been rorting the taxpayers for years?

    Quite frankly the numbers are a load of tosh, an indication of an out of control government looking after their mates. Fiddling whilst Rome burns. Hiding behind charlatan economists projections.

  3. randal 3

    hey bored you forgot dickey licking lickspittles.

  4. Kevin Welsh 4

    So, am I correct in assuming that the line that says “Adjustment for macroeconomic effects” is the line where you pick a number out of your arse that somehow corresponds to making everything look rosy and therefore justifies everything above?

    • Bored 4.1

      pick a number out of your arse…..you have been watching economists and Nat ministers far too closely.

  5. there seems to be an ‘n’ missing from the hand graphic

  6. Nick C 6

    Any evidence that the earthquake levy is widely supported?

  7. Dan 7

    A levy plus a return to the tax levels of before. It is simple logic.
    The Nats are so overwhelmed by ideology that they have lost touch with the sensible middle ground. They have made a mistake with their tax cuts. They are a bigger danger to the Left if they admit their mistake. Key would be seen as a sensible populist. If however, as I suspect, they will not change and lose a huge number of singing voters for avoiding the obvious.
    Christchurch deserves much better.

  8. The levy will not cover it all but I support it.
    It’s a debt over time so not all of it has to be paid tomorrow. Better a levy to offset some of the proposed increased public debt (with interest) plus putting us into slavery to international interests that dictate policy to us.
    Not having read Armstrong, but he may need to go even one step further and say it is all about blind adherence to, and religious adoration of, economic dogma.
    A tenant of their religion is (and their identity revolves around) the idea that tax cuts are the answer to all that ails society.
    They would rather increase public debt (plus interest) than admit that their religion is flawed.
    Well, at least they can follow their religion and attack the size of the state!
    http://www.flickr.com/photos/19473099@N05

    • Colonial Viper 8.1

      A tenant of their religion is (and their identity revolves around) the idea that tax cuts are the answer to all that ails society.

      Or the answer to all which ails the society of the privileged.

  9. Jim Nald 9

    Re Armstrong “as John Key put it yesterday – everything changed at 12.51pm on February 22”

    Super fabulous, Key!
    He has been doing a Microsoft Word ‘find and replace’ for beloved George Bush’s oft repeated line that everything changed on September 11. Great to know whose script he is using.
    Guess what? I have a Republican streak within me and he has just massaged it.
    I am catching up on economic news this evening and can say I am masturbating furiously to his “everything changed at 12.51pm on February 22”.
    I hope he repeats that a lot more.
    I love it.

    • Kevin Welsh 9.1

      Ahhhhhh, so that’s what they mean by a stimulus package 🙂

    • Jim Nald 9.2

      How about, tomorrow, Armstrong writes:
      “NZ voters warned about scammers taking advantage of the Christchurch earthquake” ?

  10. Anne 10

    felix… your turn. 😀

  11. George.com 11

    Tax cuts partially funded by the tax payer having to borrow $1 billion over 4 years, based on very optimistic growth levels. In essence, the $1 billion based on NZ quickly getting out of recession. Reality, Bill English has taken us back into recession and the rosy growth estimates are out the door, along with the anticipated tax growth. $1 billion borrowing over 4 years probably looks more like $2 or 3 billion. I wonder if English will give us an update at this budget on how much his income is shy of each predicted income line (GST, LAQC changes, thin Capitalisation, depreciation) ?

    Maybe a clever standardero could crunch the difference between the forecast numbers from 2010 and the updated numbers in 2011 to provide us with an update on how much extra we are borrowing to pay for the tax cuts.

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