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‘Become a nation of savers’

Written By: - Date published: 11:52 am, November 27th, 2008 - 35 comments
Categories: bill english, kiwisaver, national/act government, tax - Tags:

That’s Finance Minister Bill English’s message to Kiwis.

So, that would be why he is cutting our Kiwisaver nesteggs in half to pay for tax cuts for the wealthy, eh?

35 comments on “‘Become a nation of savers’ ”

  1. IrishBill 1

    Because, as I have previously pointed out, the people in receipt of the bulk of the tax cuts are more likely to use them to pay down debt and increase savings. At the expense of the other 80% of taxpayers and any short-term fiscal stimulus.

  2. gingercrush 2

    Those tax cuts go to everyone. National dropped the larger tax cuts that would have targeted higher income earners.. Tax cuts always benefit the people who pay the most tax. Personally I think that is fair. [we’ve been through this time and again. look at the archives under ‘tax’. Cuts don’t have to favour the rich and they definitely don’t have to get infinitely larger as income rises. Labour’s cuts, the current legislated ones, cap out at 80K, National’s ones just get larger and larger the richer the taxpayer is, and National’s cuts for ordinary Kiwi’s are smaller than Labour’s. SP]

    As for Kiwisaver. An option to save 2% of your weekly income is fair. And the employer giving extra I never liked and think its still too harsh. Where National went wrong was in making the changes where the income cut in to how much the government kicks into the scheme. Hopefully, they make that change when they legislate.

  3. the sprout 3

    Well he does have a point, nothing like the state abandoning all responsibility to its citizens to to encourage self-reliance. Just a bit of a shame the people needing the most ‘incentive’ don’t actually have any money to save.

  4. Tane 4

    The tax cuts targeted the average taxpayer.

    No they don’t. Forty percent of the cash goes to the wealthiest ten percent of taxpayers, while anyone with a family earning less than $44,000 a year pays more tax than they would have under Labour.

    Oh, and any anyone in Kiwisaver is worse off, no matter what their income.

    Right plans give away to rich at your expense


  5. gingercrush 5

    I did say average. And why link me to two left blogs (one this very blog) who are clearly partisan when it comes to tax cuts and thus are not balanced.

    [the numbers in the links are accurate. If you’re arguing they’re not just because the sources are leftwing, I hope you have some evidence. SP]

  6. vinsin 6

    Ginger: why do you persevere with this practice of saying things that happen to be wrong, and then when you’re provided with evidence proving you’re wrong you claim bias, or, partisanship?
    As Tane pointed out – quite succinctly I might add – “Forty percent of the cash goes to the wealthiest ten percent of taxpayers, while anyone with a family earning less than $44,000 a year pays more tax than they would have under Labour.” Both the links he provided provide you with are only “biased” stylistically, the numbers provided on both links come from National’s tax policy. If the same numbers were on a site like Kiwi-blog the writing around it would show “bias” towards right-leaning ideology. My point is: look at the numbers, not the rhetoric surrounding them.

  7. All the recent history (several decades) shows Kiwis SPEND money and don’t SAVE it.

    National cutting the saving capacity of Kiwisaver is no help to saving.

    With interest rates expected to head to 4% to subsidise all the debt addicts….tell me again why people would save?

    I’m not seeing it.

  8. Mr Magoo 8

    Actional giving tax cuts to the rich? My god, what is the world coming to.

    In other news: China is a communist country that everybody wants as a friend and Russia does not hold fair elections and is about to change their constitution to let Putin back in. Such is the world.

    I am going to make such a mint off them this year it is obscene. And I would give it all away to have labour/green in power right now. Go figure.

    I like your input here Ginger. A lone, (semi 🙂 ) rational right voice in a sea of lefties.

    I don’t agree with anything you say, but I figure that provide us something worth being annoyed by and typing about. Good on you!

  9. vinsin 9

    Yeah, please don’t leave us Ginger, I don’t know what we’d do without you and those of your ilk. This site would be a left-wing hug-fest if people like you weren’t around.

  10. Tim 10

    Clearly not everyone is going to be able to save because some at the bottom need all their available income to meet their living needs. Kiwisaver wasn’t a complete fix for this, at the lower end of the income scale people were still unable to afford it, especially with a 4% entry. I’d prefer to see Kiwisaver reduced to a 1% (or even lower) entry to enable those at the bottom to join in. Employers shouldn’t be forced to match contributions, it makes it harder for those struggling just to pay the staff they have and raises the risk of having to lay off staff to keep their business running.
    I think we need some sort of cap on how much the government contributes though, it can’t just be an open chequebook.

  11. Tim: 1% is useless for retirement saving….unless you live to be 150 and don’t retire until you’re 120.

  12. Mr Magoo 12

    The tax relief being touted by National is NOT the solution to this problem for all its cost. In rough summery: it is a short-term and therefore short sighted solution to a long term problem. It will also leave NZ in a worse debt situation than before with a very low stimulatory effect due to the income bracket it targets. (i.e. High income bracket tax relief such as the “bush tax cuts” have the lowest stimulatory return)
    See the graph at the end of this blog entry:

    Kiwisaver was a long-term solution the core debt problem in NZ which is compacting this crisis on NZ and NZers who have taken on too much debt. Of course kiwisaver would not be a complete solution to this problem either – but it sure does help. In 10 years once savings have grown and compounded, it might be renamed “economy saver”.

    I would have preferred more ingenious and targeted initiatives. Utilising industries that have or will have spare capacity – such as the building industry. More specifically using them to increase the growth potential of our country.

  13. gingercrush 13

    No offense but my first reply could have rebutted without editing inside.

    The problem is not with the data in either of those left-wing blogs. Its the context you put them in. You say the tax cuts are taken away from lower income people to support the higher income. But tax cuts do that. Labour’s tax cuts do that. When you earn 80, 000. You don’t pay that 80, 000 dollars at the top rate. You pay a proportion at the top rate. Even if you said no tax in the first 20, 000 its still the taxpayers who earn the most money. Second, the tax cuts targeted average income earners. Its clear in the data that is what happened. Yes higher income earners get more benefit from the tax cuts. But that is because they pay the most taxes and they only pay a proportion of tax at that top rate. The rest is taxed at what other income earners are paying.

    If it was really a tax cut for the rich. The top tax rate and threshold would have dramatically dropped. Ie. 30 cents for earners $50, 000+. National’s plan originally was to see a bigger tax cut for the rich. But because of economic conditions that was changed so they insured AVERAGE earners would get a tax cut. So while with National’s plan higher income earners get the most benefits. That is inherent in how tax is paid in New Zealand in the first place.

    You can make your argument with families. That is a fair assessment. But National’s tax cuts benefit most income earners. Always higher income earners benefit from tax cuts more than others. But the tax cuts still delivered to the average worker. Thus was targeted to the average worker.


    Oh and thank you vinsin and Mr Magoo its nice to be insulted. You can say a lot about me but I typically don’t go round insulting people and its a pity you can’t do the same.

  14. Mr Magoo 14

    Oh and thank you vinsin and Mr Magoo its nice to be insulted. You can say a lot about me but I typically don’t go round insulting people and its a pity you can’t do the same.
    Actually it was an honest compliment to an opponent about being stoic in an obviously hostile environment. But I guess you are so used to the insults on this site that you missed it?

    Regardless. On to my disagreements with your point of view:

    At the end of the day, tax cuts give cash back to workers. They do not have to be given back proportionately and in fact can be given in a almost completely flat across the board way. (e.g. first 20K tax free)
    The effect of that policy on anyone earning more than 20K is that they ALL (i.e. almost all in full time work) get the same amount of tax relief. No differentiation at all.

    The opposite scenario is to reduce the tax rate by a flat amount. (i.e. all tax reduced by 2% at all levels)
    The obvious effect of this policy is to give the richest people a disproportionate amount of the total tax relief. This is because most people in NZ do not actually earn a heck of lot compared to the top 5-10%. (i.e. we are talking medians here, not averages!)

    There are all sorts of interesting policies in between. Working for families being one of the most innovative I have seen in that the poorer and more “child strapped” you are, the more you get.

    National have opted for a solution more towards the “2% for all” scenario, except that they offset the lower income people by cutting a few other things they may have been entitled to. Their package is quite complicated and as far as I can tell was mostly based on gettimg votes from those not covered by working for families and kiwisaver.

    Now you may make an argument over whether the wealthy deserve more cash than the average person during this crisis because they “deserve it more”, but I would imagine that 70% of NZ would not agree with you.

    I completely disagree with tax cuts as a solution to this problem. Tax cuts to anyone earning over 70k, triply so. I would remind everyone that we already got a tax cut, so a second is just not sensible at the moment. (some missed out, but the idea is that a cut stimulates growth, not make single and/or rich people feel good)
    As I mentioned earlier, I would prefer that the money be spent generating jobs and smart infrastructure investment.

  15. ginger. you’re right you can’t argue with the numbers, and the numbers for nationak’s cuts are 40% of the money going to the wealthiest 10%.

    The major difference between national’s tax cut and labour’s is national will cut the top rate by 2% and not raise the threshold for the bottom 12.5% rate. Tax cut packages don’t have to be designed like that

  16. randal 16

    so this is a national special huh sp!

  17. Macro 17

    You have to give it to him! – Ginge is persistent, or thick, or both!
    How is it possible to NOT see that the tax package promised by National rewards the top income bracket AT THE EXPENSE of those on low incomes – the very ones that will be affected the most by the stricter mortgage criteria introduced by the Banks? And now English has the AUDACITY to somehow claim it, as if its a good thing and the result of National’s prudent management of the economy already!

  18. gingercrush 18

    Low income earners pay very little tax. Low income families are generously supported by working for families. Low income earners get a tax cut. Its not at the expense of them as they are supported several ways via state housing, accommodation supplement etc etc etc. Tax cuts will never work for the truly low income workers. They can only benefit via welfare transfers.

    The mortgages are a whole separate matter. Labour didn’t do well in this area either. And I can’t see how low income earners could even come up with 5% deposit on a mortgage.

  19. the sprout,

    personal interest.. re your wee picture at top right comments.. is it a brussels sprout? I ask because recently the seeds I planted came up with the look of yours but rounded leaves and tips.. and I’m wondering just what I have got.. someone having mentioned they look like broccoli..

  20. Mr Magoo 20

    Low income earners pay very little tax
    Yes, because they also earn very little. They also have a much larger propotion of their income devoted to “keeping alive and well” than wealthy people.

    state housing, accommodation supplement
    Most families do not receive these or live in a state house. Shocking, I know. The waiting list for state houses is 3+ yrs.
    Over 4000 families in significant housing need or greater. Thats of those who bother to apply…

    Tax cuts will never work for the truly low income workers.
    The difference they make is far more pronounced for low income earners than for the wealthy. Come on now, you really think that 60/wk for someone on 150k per year is going to impact them more than 20/wk for someone on 30k per year?? Pleeease.
    But I do agree with you on that point! Tax cuts are a “block of cheese” joke and will not really serve the public good in the end. As much as we like cash in our hand, it has a history of not being as useful to us as we had hoped compared to healthcare, savings, etc.

    “And I can’t see how low income earners could even come up with 5% deposit on a mortgage.”
    Welcome home loans. More state houses. Shared equity.
    I am sorry, your argument here simply does not fly. In fact it barely stands up at all.

  21. gingercrush 21

    State Houses. Labour is opposed to selling state houses to tenants. Welcome home loans has numerous problems. The fact is there are very few houses that fall under its criteria. Shared equity is very limited and you still need to raise 5% deposit.

  22. QoT 22

    Haha, nice one, Ginge. All those families on benefits who don’t qualify for Working for Families are clearly a figment of my imagination.

    Please, please respond with something about “they should stop spending the dole on booze and drugs”, I like that one.

  23. Chris G 23

    Once again the Nats show how effective saying the agreeable things to certain audiences is. I dont think they can commit to saying the same thing time and time again.

    Except: “Fresh” and “Ambitious” They sure like saying that.

  24. Phil 24


    Please, please respond with something about “they should stop spending the dole on booze and drugs’, I like that one.

    If I recall the HES breakdown from Statistics New Zealand correctly, it shows that lower income households spend proportionately more of their income on cigarettes and alcohol than the national average… take from that what you will.

  25. gingercrush 25

    QoT – Why are you talking about beneficiaries. No one is talking about beneficiaries. The only way they make more money is if their benefits rise or they get a job.

  26. Gustavo Trellis 26

    It amuses me that when people argue people who pay less tax should be given back more of it. 12% of the working age population in New Zealand pay 51% of the personal tax take. So who is being dealt a disproportionate hand here?

  27. Pascal's bookie 27


    “12% of the working age population in New Zealand pay 51% of the personal tax take. So who is being dealt a disproportionate hand here?”

    Need more info. What percentage of NZ’s total wealth does that 12% control, what % of national annual income do they earn, etc and so on and so forth.

    In any case, who here is arguing that the rich don’t pay a higher proprtion of the tax take?

  28. QoT 28

    Right ginge, because beneficiaries don’t pay tax … OH WAIT THEY KINDA DO, just like Real People.

    Phil – as soon as you define “lower income households” and state the actual proportions involved, it’s just so much “Poor people are stupid and deserve to not be able to afford food for their children”.

  29. gingercrush 29

    Yes they do pa tax indirectly true. But I still struggle to see your point about beneficiaries. Since we’re talking about tax cuts for those who pay income tax.

  30. Gustavo Trellis 30

    Pascal. I do not have those figures at my fingertips, and I believe they fall outside the study’s parameters. But income tax levels should be set on the basis of income, and not wealth.

  31. ginger. benefit payments are taxable income, you pay income tax on them

  32. TimeWarp 32

    What Mr Magoo said on the first pass… hit it in one.

    We seem to be damned to at least 3 years of one-dimensional quick fix approaches to long-term systemic issues.

  33. Nasi_Lemak 33

    Yikes – I feel for Ginger. It’s nice to get a little heated debate going, but lets be rational.

    1. Low income families earn less, therefore spend proportionately more on consumption. Therefore they save less than those on higher incomes. This is always going to be true…can anybody suggest a way out of this?

    I agree with Tim – maybe the threshhold for Kiwisaver should be dropped to 1% – yes its a tiny amount, but something is better than nothing no? 4% is really high for somebody on the average wage or lower…and we should be encouraging saving at all levels of society.

    2. Beneficiaries pay tax through GST – consumption taxes and yes they don’t benefit from income tax cuts, seeing as they do not technincally work and pay personal income tax. I’m sorry, but that seems fair to me. If an individual is on the unemployment benefit I feel they shouldn’t receive the same advantages as somebody who works. Those on sickness or invalid benefits are an entirely different story. Maybe the problem is in lumping different types of beneficiaries into one category…when they all have different needs and incentives.

    3. The response to National’s tax cut package was that the rich are benefitting more than the average kiwi…

    The way I see it is that if you have natural talent or you worked your butt off to get a job that pays highly, why should you be penalised for that? Most of the people I know that earn over $60,000 have either spent a significant amount of time studying or working their way up to get there. They spent time and money to get where they are and to maintain that position. Why begrudge somebody for having money?

    Also – note the difference between income and wealth. Two very different things…!

    Lastly, what constitutes an average kiwi? Moreover define ‘rich’…

  34. Tim 34

    Steve Withers, yes 1% makes for a poor retirement plan but is nonetheless savings and in that respect is better than saving 0%. Also these people will receive superannuation.
    Additionally Kiwisaver funds can also be used towards a house deposit (and contributions can be funnelled to mortgage payments) and in that respect the 1% could be more useful.

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