Written By:
Tane - Date published:
12:19 pm, December 1st, 2008 - 50 comments
Categories: national/act government, tax -
Tags: council of trade unions, peter conway
The Council of Trade Unions is calling on National to re-jig its tax package to give it more balance. And fair enough too – despite the media narrative about National’s ‘moderate’, ‘centrist’ policies the figures show its tax package is actually incredibly regressive.
In fact, you could argue it’s been explicitly designed to divert money out of the pockets of working families and into the pockets of the already very wealthy.
According to the CTU’s economist Peter Conway:
‘under the Government’s proposals a worker on $20,000 a year will pay $300 a year more tax in 2010 than what is set out in current legislation whereas someone on $500,000 a year will pay $9,202 less tax. This is unfair’.
‘A two-child low income family where the parents work 50 hours a week to earn $50,000 will also pay more tax of around $300 a year by 2010 whereas the high income family earning $120,000 in the same circumstances will pay $900 a year less tax.’
Yep, you read correctly. Under National’s tax plan 40% of the cash goes to the top 10% of income earners, and it’s being paid for by gutting your retirement savings and taking money off low-middle income families.
If National really were the moderate, sensible centrists the media keep telling us they are then they might consider the CTU’s advice and introduce fairer, more progressive tax cuts like Gordon Brown is in the UK. Somehow, I don’t see that happening.
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And those on Super, get somewhat less than the Labour plan.
Tane, that common argument is completely unsound. Tax cuts will always result in a greater sum going back to the higher earners than the lower earners. Clearly because they pay more in the first place (both in percentage and actual sum) they will get more back. [I’m getting sick of this lie. There’s is no reason a tax cut must give more to the wealthy. For example, a tax-free bracket of $5000 would give the same cut in dollar terms to all taxpayers (except those on less than $5000), which is a lower % cut to those on higher incomes. SP]
If you want the higher earners to get the same or less back as lower earners during tax cuts then how about some fairness on your part and promote that higher earners pay the same or less than lower earners during times of tax increases?
Talk about wanting to have your cake and eat it too (the epitome of unfairness) …
Why are you (or anybody) surprised? Any tax cut will always benefit the better off and do little or nothing for those who actually need the increased income. This may be alleviated to some degree if those on higher incomes had their taxes increased while those on lower incomes had theirs decreased.
If the CTU and their associated unions actually want tax reform then they should be getting their members onto contract and off wages. The government will then be forced to fix the present broken system as the tax take from income taxes falls by 50% or more.
National campaigned during the election on its tax cut plan. The CTU ran a campaign, during the election, against National and its tax cut plans. National won the election. Amid all the shrieks and cries of broken promises in the past, why should National change a policy it clearly signalled before the election?
I know Michael Cullen’s catch-phrase has been overused already, but there seem to be a lot of people about who were on the losing side of the election, who want to relitigate a lot of points that the public clearly expressed its view about.
Don’t the top 10% of income earners currently pay 45% of all income tax? If so, is it really surprising that an increased share of tax cuts will go to them?
Draco:
If the CTU and their associated unions actually want tax reform then they should be getting their members onto contract and off wages. The government will then be forced to fix the present broken system as the tax take from income taxes falls by 50% or more.
How will removing the legal protections of the employment relationship by turning workers into contractors help increase their bargaining power?
Vto:
Tax cuts will always result in a greater sum going back to the higher earners than the lower earners.
Well, a lot depends on how you do them. National has designed its tax package to give a very high proportion of the cash to people on high incomes at the expense of people on low-middle incomes. They’ve primarily done this through cutting the top tax rate and cancelling the cuts to the bottom tax rate. Tax packages don’t have to be designed that way.
Noted Tane. Politically – is this possibly the swing to the roundabout of the 39c rate increase back in ’99? After all over time in the bigger picture most things tend to balance out to about the middle of what the general populace desires…
Similar to the probable pending reversal of the greater powers bestowed on local govt also by Clark several years ago…
Interesting viewing are the current and recent times
vto – National and ACT are saying they’re looking at a medium-term goal of 30% as the top rate. I imagine that “medium-term goal” will shift towards 25%, then 20% and downwards the closer they get to it.
I’m not sure there’s a huge popular clamour to cut the 39% bracket. Certainly middle-income Kiwis want tax cuts if there’s perceived to be no trade-off in public services, but the pressure around the 39% bracket seems to me to have come exclusively from the well-off folks in the press gallery, the business sector and the right wing of the blogosphere.
Tane, the bottom 21% of income-earners pay just 1% of income tax. You can’t give people a tax cut unless they are paying tax. What I suspect you’re talking about is not a tax cut, but a welfare transfer payment, of which we’ve had several in the past nine years. New Zealanders this year voted for tax cuts, not for increased welfare.
Tim, I’m suggesting if you’re going to be handing out tax cuts then the people at the bottom should take priority. Of course, as I’ve written in the past I think the way to improve the position of those at the bottom is to increase wages – not something National has the best record on. Your comment shows the folly, and dishonesty, of using tax cuts as a way to emancipate the poor.
They may have thought that they voted for tax cuts, but we’ll see in April how many actually get one.
If all tax rates on work and income can be reduced then that is a fantastic thing (provided the holy grail of ‘public’ services remain as the public desires). Bring them from, what is it, 15 to 39c down to 5 to 20c.
Why on earth we tax the work and income dollar instead of evils, or lesser necessities, such as the discretionary spending dollar or, say, sloth I do not know.
I wonder if sloth could be taxed?? Better than taxing work surely. I guess the problem with sloth is that there is nothing to tax.
“A two-child low income family where the parents work 50 hours a week to earn $50,000 will also pay more tax of around $300 a year by 2010 whereas the high income family earning $120,000 in the same circumstances will pay $900 a year less tax.’
So in your example how much tax does the low income family pay compared to the high income family (and I mean actual amount paid in dollars)? Then how about factoring in working for families payments how much are we looking at then?
Lets get some honestly into this discussion.
VTO
“Tax cuts will always result in a greater sum going back to the higher earners than the lower earners.”
That’s simply moronic. Say you take all the tax off the first $10,000 of personal income, then high-income earners get the same as low-middle earners.
National could have gone down the same path as labour with a more progressive tax system, but instead they’ve chosen a package that will only benefit the already materially comfortable.
We’ll see what that does for them at the next election though. If the media chooses to report it, it could be a deal-breaker for most of the public.
If the media chooses to report it
That’s my fear.
Selective use of statistics, Tane. Tax cuts will always appear to favour the rich if you compare the amounts “saved” (rather than the amounts actually paid by each taxpayer). It’s a mathematical certainty if the upper earners pay most of the tax to start with (which the do).
What are you arguing – that tax cuts are only fair if the absolute amount “saved” by someone on $20,000 per annum is greater than or equal to the absolute amount saved by someone on $1,000,000 a year?
Speaking about the amounts “saved”, you’ve told us: “Under National’s tax plan 40% of the cash goes to the top 10% of income earners”.
Why not also tell us a bit about tax paid:
– What % of the overall income tax take is paid by the top 10% of income earners?
– What the per head average tax paid is for the top 10% of income earners?
Then compare these stats with what everyone else pays – after all, everyone rich or poor receives essentially the same “services” from the government.
Imagine the government discovered a gigantic oil well and decided to cut everyone’s tax in half. You could write pretty much the same article about how the poor would be unfairly treated by such a move.
Jimbo, the default position is the status quo. When we look at any policy we have to ask, “who does this particular policy benefit, and who does it disadvantage?”
The fact is National’s tax cuts will take money off low-middle income families and give it to the rich. They deliberately chose to cancel the cuts to the bottom tax rate and instead cut the 39 cent bracket – there’s no getting around that.
All you’ve done is point out that we have a welfare state where wealth is (to put a complex system very crudely) redistributed from the wealthy to the poor. So what?
That doesn’t change the fact that National’s tax cuts are incredibly regressive and designed to enrich the wealthy at the expense of the poor.
Since Tane and Co don’t want to answer my question I’ll provide the numbers:
Based on tax paid in this financial year if you have 2 children and earn $50,000 you will pay $11,370.00 in income tax and receive $155 x 52 (=$8060) in working for family rebate, that is total tax paid of $3310 or $64 per week.
However if you earn $120,000 with 2 children you will pay $38,070.00 in income tax and receive no working for family rebate. That is $732 per week of tax paid.
So the family on $120,000 pay 11 times more tax than the family on $50,000 which in dollar terms is $34,760 more.
Kind of puts things in perspective doesn’t it?
RocketBoy, all that shows is that tax cuts are a very ineffective way to increase the incomes of low-middle income families as they already pay very little tax. It also puts a lie to the Right’s “overtaxation” line.
Seems to me all National and ACT’s screaming about tax cuts was a sham to persuade low-middle income families to support large tax reductions for the rich.
Far better to cut the bottom rate where necessary, target further tax cuts to programmes like Working for Families and lift incomes by increasing wages. Like I said in the post, the fairer thing to do is follow Gordon Brown and make the tax system more rather than less progressive.
needs editing
Tim Ellis: Amid all the shrieks and cries of broken promises in the past, why should National change a policy it clearly signalled before the election?
Is it your position Tim that National should keep all it’s pre election promises? Or just this one?
I’ve been depressed at how openly cynical The Herald has been in acknowledging that some of National and ACT’s (nudge nudge wink wink) “promises” were just an election line, and that they shouldn’t be kept. I think this is disgusting. On Education:
On “three strikes”:
So Tim, I think you should be prepared to defend National’s tax plans on their “merits” (hah!) – not on the fact that they were “promises”. Other “promises” are going to be conveniently swept under the carpet (with The Herald, for shame, as a willing accomplice to the crime).
roger nomeage and SP (above) my point should have been explained more. I was referring to an across the board rate cut type thing. Of course a tax free bracket at the bottom will have a different effect. My bad.
Which aint a bad idea. I think what pisses higher earners off is when there is a significant difference between higher and lower earners – because it is not fair. Everyone should contribute (extremes aside).
Like that other very unfair tax system – rates, grrrrrrrr!!!!!!
“So the family on $120,000 pay 11 times more tax than the family on $50,000 which in dollar terms is $34,760 more.”
So much for the argument that wealth envy is a domain of the left.
If we take your example a little further, the family with one earner earning $120,000 receives $1515.75 per week, whereas the family with one earner earning $50,000 brings in $897.88 per week.
It would also be interesting to note how many single earners actually earn above $50,000 that don’t have some form of tertiary qualification, 80% of whom study currently find it necessary to borrow in order to live whilst studying, which is set off at 10c in every dollar earnt over $18,000 approx. Include Kiwisaver as well, and you leave Earner #2 another $100 per week worse off.
Now to provide for a mortgage and a family on an income much lower than $800 in the hand per week, including $300 – $500 of mortgage payments, and you will see it becomes increasingly difficult.
Well, there’s two aspects here:
1.) There are legal protections in law for contractors but they tend to be expensive. This doesn’t seem to change much as most workers can’t afford the legal fees for redress anyway (my nephew just got cheated out of about 30 hours pay but it’s not worth hiring a lawyer to do anything about it). This would certainly be one benefit of belonging to a union. I’m also certain that there was at least one MP that wanted better protections for contracting workers and I’m sure the unions could lobby the government for such protections as well.
2.) There are the protections of belonging to the union which is something you’ve pointed out before and no where did I mention leaving the union.
My point was that the present taxation system is broken and that the unions would be better off showing that than lobbying for better tax cuts.
VTO
“Roger nomage”? You are a tard aren’t you?
“Which aint a bad idea. I think what pisses higher earners off is when there is a significant difference between higher and lower earners – because it is not fair. Everyone should contribute”
Oh, ok. So someone who works 50 hours a week in a job and already struggles to buy their weekly “block of plain cheese” for the kids should be denied that “privilege”, so some affluent fifty-something person can afford to have a farrari rather than a merc? nah – no sale bud.
Draco, contract work is okay if you’re highly skilled labour in a time of a skills shortage, but even then it can be incredibly unstable. For most workers it means the removal of even the basic protections they already have.
In the real world the kind of employment relationship you’re suggesting is a tool used by employers to undermine the power of workers, cut their wages and conditions and open up the ability to fire at will. That’s why casualised workers are clamouring to get status as employees.
Any union that suggested workers cast aside their hard-fought rights to become contractors would be grossly irresponsible, and would probably laughed at by its members.
engage that lada gearbox nome without the age engage
Engage that brain vto, or as Lynn Prentice says – go back to Kiwiblog.
you clunky old east european
Why should National change its policy to suit a group of people who vote Labour anyway? Labour targeted “rich pricks” for the past nine years to suit its support base and now National is looking after its voters.
You don’t want to hear that of course but along with “Prime Minister John Key” and “National-led Government” that’s one of the things you’ll have to come to terms with.
now National is looking after its voters.
I don’t necessarily like it, but I can accept that. Now if the media can also accept it and stop pretending National is moderate, centrist and leading some kind of government of national unity then I’ll be happy.
National also targeted for support people who thought of themselves as ‘middle income’ ($35-60k), an section that Labour mismanaged while failing to shore up support from the rest.
If Labour and the Greens are to win the next election, they’ll have to win back the confidence of this sector of the electorate. A negative campaign lost them, and negative campaigning is highly unlikely to get them back.
r0b, there are a range of issues that you’ve helpfully pointed out.
Firstly, I’m not quite sure what your first point about education is. National campaigned on maintaining the student fee maxima cap. The VCs Committee wants the student allowances policy changed and the money chanelled to universities. Anne Tolley has said it isn’t going to happen. I don’t see how that’s a broken policy.
Of course in the process of forming multi-party coalitions, there are trade offs. But there are two different scenarios here: expectations of what a minor party should achieve, and expectations of what a major party should achieve. Minor parties can promise what they like. Jim Anderton promised free dental care. At what cost? I’ve no idea. Half a billion maybe. Act promised three strikes. Probably the same sort of cost. Greens campaigned for various things that Labour wouldn’t do.
Small parties have the luxury of being able to make extravagant statements of position because they don’t have to deliver and are only judged on the achievements they deliver. Winston Peters wanted to cut immigration to the bone. He never achieved it. But what he did achieve was the gold card, increased super, and primary healthcare to under 6s. He also got increased funding for racing and evidently was popular among some elements of the fishing industry. He was a master of getting three or four achievements out of every government he worked with.
Likewise look at the Greens. They state clearly what they’d like to see in an ideal world where they’re actually the government, but the real world lets them off the hook by attributing their successes–the anti-smacking legislation, housing insulation, etc. I don’t know why you would hold a different measure to Act.
The major party in government doesn’t have the luxury of promising things it can’t deliver on. I think most people would believe that if National is in power, then National would control economic policy, social policy, foreign policy. At the margins there might be some influence from minor parties, but just as Labour would not radically change the tax structure to appease the greens, it’s poppycock to think that Act is going to force National on some radical right-wing economic policy. If there is nothing for middle New Zealand to fear from the Greens involvement in a Labour-led government, then there’s just as little to fear from Act’s involvement in a National-led government.
Next, you ask me to defend National’s tax policy. I say again, it’s what the public voted for, in the expectation National would deliver it. I don’t think many Act voters really thought that by having Rodney and Roger Douglas in Parliament they would be able to force National’s hand to implement a right-wing agenda, any more than Green voters would have the same aspirations about Jeanette Fitzsimons.
The bottom 21% of New Zealand income earners pay just 1% of the tax. That’s $248 million a year. The bottom 47% pay just 9% of the tax. If there are going to be tax cuts, it’s very difficult to lower it beyond zero. Do you think it’s morally right for so many people to be paying no tax at all?
I suspect that a lot of the antagonism towards reducing top tax rates is much more about the politics of envy than anything else. But let’s have a discussion about fairness. The top 10% of taxpayers happen to pay 46% of income tax, yet absorb far less than 46%, or even 10%, of government services. Is that fair? Is it fair that the bottom 47% pay 9%, yet absorb far more than 47%, let alone 9%, of government services? If it is unfair that 40% of the tax cuts go to 10% of the income earners? I don’t see the unfairness argument. I can see the political expediency in some people using it, but I think we abandoned the principle of fairness in tax at about the time when we introduced PAYE.
Personally, I’m more concerned about economic efficiency. If our tax rates are seriously out of whack with our nearest labour market competitor, and it is a contributing factor to lower incomes and economic productivity then I think it’s sensible to make some moves to address it.
Tim Ellis suggests:
and roger nome says:
I doubt many people would see that as fair. But I also find unfair the fact that if I’m earning, for argument’s sake, $50,000 and choose to spend it on cheese and meat and warm clothes for the kids and my neighbour on $50,000 spends his on booze, ciggies and the TAB while his kids go hungry, we pay exactly the same tax.
Similarly if I’m on $120,000 and choose to use some of that to invest it responsibly in NZ companies – providing capital to create jobs – and my neighbour on $120,000 blows his on a Maserati, we pay the same tax on that income.
Taxation can be a very subtle instrument, encouraging certain behaviours and discouraging others – especially when it’s applied to consumption. One instance that comes to mind immediately is Australia’s “luxury car tax” which applies to cars over (I think) $57,000. Yet NZ’s system has become blunter as deductions were removed to the extent that most taxpayers now don’t even have to bother filing a return.
Yes, I know there are administrative overheads on anything other than a flat, universally applied value added tax. But without going crazy and arguing about “what is food, exactly?” as the Australians did with GST, there is still, it seems to me, ways to shift the burden from earnings to certain types of expenditure which would potentially have vastly better results for low income earners and encourage positive expenditure by higher income earners.
All i have seen here from the right wingers is that they dont need to worry about putting food on the table…so the people that do need to worry about it can get stuffed!!
Im a rich prick…….and vote Labour. Why? because Labour cared about ALL New Zealanders…yes even the ones with fuck all money. Nats want all kiwis to look after themselves….in other words if you cant pay you go without and that goes for Health care, education etc……..ummmm what is government there for again?????
Right wing policies like those of that thing GW BUSH do not work!!!! Hello!
PS Paul Henry is a talentless prick!
Tane, I ask you to consider that 12% of taxpayers pay 51% of the tax take and then tell me that a plan where 40% of tax relief goes to 10% of taxpayers is unfair.
Kerry – Government is as much about making it possible for individuals to pay as it is paying for them if they can’t. Part of getting us to a point where more people can pay for themselves is ensuring excessive redistribution doesn’t remove incentives and screw up the economy. National and Labour differ in their view about what the balance is. Chill out and use some of your rich prick money to invest in an economic education and see if you still want to post angry-moron style drivel.
The top 10% of taxpayers happen to pay 46% of income tax, yet absorb far less than 46%, or even 10%, of government services. Is that fair? Is it fair that the bottom 47% pay 9%, yet absorb far more than 47%, let alone 9%, of government services? says Tim Ellis.
Tane, I ask you to consider that 12% of taxpayers pay 51% of the tax take and then tell me that a plan where 40% of tax relief goes to 10% of taxpayers is unfair. says Gustavo Trevellis.
We live in a capitalist system built on private property rights and state-imposed and maintained markets. These private property rights and state-supported markets are entirely a social construction, and they lead to radically unfair outcomes, such as the inequalities of wealth that cause 10% of taxpayers to pay 46% of income tax.
If you want to play the “oh it’s so unfair that the rich pay all this tax” line then I suggest you question how the rich came to be so rich in the first place. It is because the far greater mass on low-middle incomes allow them the system of property rights and state-supported markets to amass this wealth. A progressive tax system is a small price to pay.
Consider that before you whine about paying too much tax.
In the spirit of the season I think we should all bow our heads and give thanks to Camryn, Trellis et al – and especially Tim Ellis – for providing us with such a convincing new definition of “fairness”. Those of us so hopelessly brainwashed down the centuries by such losers as that paragon of deceit from Nazareth will welcome this illuminating revelation and immediately, I hope, dig deep and give till it hurts to any and all of our friends and acquaintances who are suffering the burden of paying higher taxes than our fortunate selves.
And doesn’t it warms our hearts to know that the Ellis turkey will be partitioned with scrupulous neo-fairness this season? Largest portions to the plumper family members who will gorge till ill and hoard the rest; those who toil at the most arduous and dangerous chores will cheerily gnaw on crusts; and any sick or infirm children will enjoy a subsistence platter of crumbs while the whole happy assembly joins hands and gives thanks for deliverance from the evil politics of envy.
Tim Ellis
You are a boring twat.
I’m willing to hazard a guess that the 55,000 majority that the right got this time was made up mainly of resentful, avaricious, arrogant and self-centred people who want to get rich at the expense of anyone who stands in their way.
They heard a bunch of whistles from the Herald and reacted like dogs as in dog eat dog.
In fact the most productive enterprises in NZ are getting big tax breaks, R&D and export incentives. Tax cuts that undermine the source of those incentives are not in their interests. Nor is burying your head on global warming, or sacrificing the EMA.
If you have any doubts, one word: Melamine.
NZ as clean green producer of healthy commodities makes wealth, cutting costs for US pension funds to plunder what’s left of NZ assets only makes funny money.
The ones who have scrambled for their tax dollars back and voted John Key in are the grasping, greedy, unproductive individualists who have bought into the neo-liberal dream just when it is turning into a nightmare. Its like a pyramid scheme. Everybody is on a contract which relies on rent from some developers scheme. Now all of the crappy little self-justifications for their anti-social behaviour suddenly goes down the drain.
Except that we have a Prankster in charge, handing out bikes to kids, micromanaging stranded Kiwis in Thailand, and sucking up to Bush and Bachelet. Promising riches to the grasping. Its theatre of the absurd.
Tax cuts from JK are just a starter. What he would really like is to be minister of tourism to welcome all his rich mates to the little old Kiwi taxhaven downunder. By then the only jobs around for the rest of us will be the shit jobs.
rave before you go round calling others twats. Perhaps its you who needs to have a hard look at themselves. Your views and opinions you may well believe in but the majority of this country do not and will not. Your views on almost everything are supported by a very small minority and not Labour, National, Act, United Future, the Maori party and not even the Greens.
As for your conspiracy theories they’re unsubstantiated and have no relevancy to most people in this country.
r0b, there are a range of issues that you’ve helpfully pointed out.
What can I say, I’m just a helpful kinda person.
Firstly, I’m not quite sure what your first point about education is.
My point in both cases was not the policies themselves, it was the cynical way The Herald was treating those pre election “promises” as election lines that didn’t need to be kept – in short as knowing lies.
Next, you ask me to defend National’s tax policy. I say again, it’s what the public voted for, in the expectation National would deliver it.
That’s just fine and dandy if you intend to hold National to all it’s pre election policy promises. Do you? Did you mean it when you said – “Amid all the shrieks and cries of broken promises in the past, why should National change a policy it clearly signaled before the election?” – or are you going to be selective in holding National to its promises?
ak, What a post!!!!
Post of the month, no doubt. That was awseome.
Especially:
“And doesn’t it warms our hearts to know that the Ellis turkey will be partitioned with scrupulous neo-fairness this season? Largest portions to the plumper family members who will gorge till ill and hoard the rest”
That was a genuine laugh out loud.
John Key: Steals from the poor to give to the rich.
illuminatedtiger: Steals from the eloquent to look smarter than s/he is.
Camryn – one thing i can guarantee for you and thats I will be doing bugger all with my money while dumb and dumber are running the show……
I look forward to the watching the useless National/act/maori/united government fall on its arse….and judging by Keys performance overseas (hasnt done anything in NZ yet) it wont be long.
Oh does anyone know when John starts as PM???? Perhaps its after his next trip away????
PS – I have to wonder about some of the supposed “rich” pricks who bitch and moan about the tax they pay…i for one have never ever worried about the amount of tax i pay…..and I cant imagine any decent person with a few dollers worrying about it either!!!