Cumulative Effect

Written By: - Date published: 1:51 pm, May 23rd, 2008 - 60 comments
Categories: budget 2008, families, tax - Tags:

The Press (Budget Doesn’t Impress Family) looks at the effect of the tax cuts on an average family with a combined income of $78,000 and two kids under 12 . They will have $42 more a week from tax cuts and boosted Working for Families tax credits come October 1.

That’s like getting paid for three hours extra work a week on their wages. Seems like a bit to me, and it’s only part of the picture. Here’s how this family’s tax bill is brought down by Working for Families and the tax cuts through to 2011:

Current Tax, per week: $280
WfF credits, minus $74: $206
Oct 1 2008, minus $42: $164
April 1 2010, minus $11: $153
April 1 2011, minus $25: $128

That’s a reduction of 55% on the tax bill for this family, worth $152 a week. More importantly, the Government has managed to do give those cut and put more money into public services, pay down debt, put away money for superannuation, and invest in infrastructure. These cuts have come without sacrificing spending and have targeted families on low to middle income.

I’m impressed.

[UPDATE (a_y_b) – Here’s a graph of what the Gormans’ tax reduction will look like. Figures on chart represent dollar savings. Total tax drops from $280 to $128, about 55%]

60 comments on “Cumulative Effect ”

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  1. Billy 1
    23 May 2008 at 1:57 pm

    I’m impressed.

    And you are notoriously hard to impress.

  2. T-rex 2
    23 May 2008 at 1:58 pm

    “We’ve gone from a situation where we were extremely well-off to trying to make ends meet every week. I think it’s time for a change.”

    How can you get through to these people?

    Newsflash for all those who just aren’t getting it: Labour has not caused the high price of petrol and groceries, and National cannot fix it.

  3. IrishBill 3
    23 May 2008 at 2:05 pm

    I disagree. I think National could help fix it by introducing legislation to empower working people to negotiate higher wages. Of course that would be a cold day in hell.

  4. djp 4
    23 May 2008 at 2:12 pm

    I don’t know Irish, how is that going to effect the fundamentals of our economy?

    Employers are always going to take a share of profits that matches the risk they take on capital investment.

  5. Matthew Pilott 5
    23 May 2008 at 2:24 pm

    “And you are notoriously hard to impress.”

    I’m sure Steve has noticed you trying, he’s just being coy.

  7. T-rex 7
    23 May 2008 at 2:54 pm

    Irish, that won’t change the cost of petrol or groceries, but you’re correct in that – if successful – it would increase the purchasing power of employees.

    Anyway, as you say it would be contrary to Nationals party line – and in fact entire free market philosophy

  8. Trader 8
    23 May 2008 at 5:33 pm

    Yeah i feel it’s about as big a tax cut as Labour could offer in the current economic environment. No doubt National will offer larger cuts but will be interesting to see what areas they cut spending on.

  9. burt 9
    24 May 2008 at 10:41 pm

    The questions that needs to be asked about these tax cuts, in the absence of any budget initiatives to increase real incomes.

    * Will $12/week make a big difference to a low income earner?
    * Will $16/week make a big difference to a average wage earner?
    * Will $28/week stop our Dr’s heading to Aussie?

    Fail, fail, fail. How hard would it have been for Dr Cullen to have not been blinded by ideology and at least succeeded for one group rather than failed all. I’m warming to John Key when he tells it like it is – “desperate and cynical”.

  10. r0b 10
    24 May 2008 at 11:14 pm

    Whining is easy Burt, and doing is hard.

    So tell us – what you have done different? Let’s see the figures for your budget in the categories above.

  11. burt 11
    24 May 2008 at 11:45 pm

    rOb

    2.3 million workers, zero rated tax to $20K. ($75/week tax cut for everyone) Total cost $8.9b.

    I don’t have sufficient data to calculate the effects of lifting the middle/top thresholds, that’s what govt employs so many pin heads to do in various depts. I also don’t have sufficient data to work out the savings in WFF payments due to increased net income, the effects on GRI etc. One thing is for sure, the benefits would be universal and fair.

    So I concede I can’t cost a tax rate structure sitting at my PC using my imagination, however one thing is for sure, $75/week buys a shit load more cheese than $16. Perhaps you could cost out the following for me to show me the folly of my ways.

    0% tax $0-$20K
    20% tax $20K-$80K
    30% $80K-$250K
    40% $250K and over.

    One thing I do know, a Junior Dr earning $80K under our current taxation pays $432/week tax at the moment. Under the scales above that would be $230/week. I’m not sure but a $202/week pay rise may do more than $28/week to convince them NZ is not such a bad place to work.

  12. burt 12
    24 May 2008 at 11:52 pm

    rOb

    The other key point, it’s not a cost, it’s a reduction in govt revenue. The govt is not spending on tax cuts, it’s reducing it’s burden on the productive people who make the economy work.

    Tax cuts should be presented as $x.xb reduction in govt revenue, not $x.xb spent by dear leader so be grateful.

  13. r0b 13
    25 May 2008 at 12:09 am

    2.3 million workers, zero rated tax to $20K. ($75/week tax cut for everyone) Total cost $8.9b.

    Ahhh Burt, you’re giving more to everyone and the total cost is less! That’s brilliant! And impossible! Drat!So – are you only counting costs for the first year, where Labour’s are costed over three years? You’re going to be borrowing to fund this Burt?

    Anyway, you’re going to drive the interest rates insane, they are already nervous about Labour’s cuts:
    http://www.stuff.co.nz/4558633a11.html
    http://www.nzherald.co.nz/feature/story.cfm?c_id=1501935&objectid=10512232

    Meanwhile, most of the public don’t actually want more tax cuts if it means cuts in services or interest rate rises (same link as above):
    http://www.stuff.co.nz/4558633a11.html

    …a Business Council for Sustainable Development poll immediately after the Budget showed 77 per cent did not want further cuts if they raised mortgage rates.

    So your cuts could do more harm than good Burt, and people don’t want that. Please try again.

    Labour’s tax cuts are not massive, but by the third year they rise to:
    * $22/week for a low income earner
    * $32/week for an average wage earner
    * $55/week for high earner?

    Even before the cuts NZ’s personal tax rate was third lowest in the OECD: http://en.wikipedia.org/wiki/Income_tax
    They are even lower now.

  14. burt 14
    25 May 2008 at 12:37 am

    rOb

    Ahhh Burt, you’re giving more to everyone and the total cost is less! That’s brilliant! And impossible! Drat!So – are you only counting costs for the first year, where Labour’s are costed over three years? You’re going to be borrowing to fund this Burt?

    Specifically talking about the $20K tax free threshold, I made it very clear the benefit was delivered immediately but perhaps I should have stated the cost would therefore be immediate. Would have saved you from that confusion over costing less but delivering more, because it was immediate and not subject to 4 conditions and political whim of the voters and the passage of three years.

    I can’t tell if borrowing is required till the WFF savings, misc low income assistance payments, accommodation allowances, GRI increases and the like have been costed into the equation to let us know if it’s even a cost. It could be a saving but may also put 1,000 people out of work in MSD & IRD as part of that equation.

    Have you costed these to make your decision it’s unworkable or was it simply because it’s not acceptable to muppet Cullen to have zero rated thresholds?

    Perhaps you would be more comfortable talking about a $10K tax free threshold, deliver $37.5/week to all workers and presenting a cost (before WFF/GRI etc adjustments) of $4.5b. $37.5 still kicks ass on the limp max of $28 offered by the tinkerer.

    [r0b shows that you don’t know how to cost tax cuts below, but let me just point out, once again that cutting a few core public service staff is not the path to tax cuts – say you could cut 1000 staff from IRD without losing any output and those 1000 staff earn the government average of around $50,000, well, you’re saving $50 million a year. Divide by 3 million taxpayers = $16, divide by 52 weeks in a year. You’re talking a 25 cent a week tax cut. You want another $25 a week tax cuts from public service cuts? Find me 100,000 public servants to lay-off without lost output, and without causing such a severe drop in consumer demand from all those unemployed people that you plunge the economy into recession. SP]

  15. r0b 15
    25 May 2008 at 1:01 am

    Burt, you seem to be missing some basics here. I’ll try and spell it out simply.

    Labour’s tax cuts cost $1.5 Billion in the first year rising to a total of $10.6 Billion over three years.

    Yours cost $8.9 Billion each year for a total over three years of $26.7 Billion.

    Labour’s tax cuts are already being criticised as TOO BIG – risking driving up interest rates and pushing the limits of government debt. Your tax cuts are much bigger, and would therefore create huge problems with interest rates and massive government debt.

    So it’s a lovely idea Burt – $75 for everyone – but it’s a fairy story. You might as well believe in Santa bringing you a big sack of money.

    Goodnight Burt, sweet dreams.

  16. burt 16
    25 May 2008 at 1:03 am

    rOb

    About these tax cuts. Using the reserve bank calculator.

    $38K in 1999 equates to $47,496.02 today.
    $60K in 1999 equates to $74,993.71 today.

    Cullen has not even reversed the effects of fiscal drag with these tax cuts (this years cuts – the only ones that are certain before the election).

    We are still worse off today than we were in 1999 as far as how much tax we pay. This is the problem, the govt are rich and the people are poor.

  17. Steve Pierson 17
    25 May 2008 at 1:27 am

    “the govt is rich and the people are poor”

    – false premise. The government is not something seperate from the people, it does not take the money and spend it somewhere else. It spends its revenue on public services that form the social wage for the people (health, education, infrastructure, police, social security, superannuation etc etc). Through taxation, we collectively pool our resources to purchase goods and services, we get the benfit of those goods and services – the social wage.

  18. Dominic 18
    25 May 2008 at 4:11 am

    Steve. Don’t ruin the right’s spin. The government is a greedy monster that sits on top of a mountain of our stolen money, squandering it on Swedish embassies and hip-hop tours. The monster has stolen our money so is rich; because of this, we the people are poor. The gallant knight John Key just wants to get it back for us.

  19. r0b 19
    25 May 2008 at 9:20 am

    So that was it was it Burt? I am afraid you have embarrassed yourself here. You just love shooting the messenger (Dr Cullen, whom you call “muppet Cullen”, “blinded by ideology” “the tinkerer”). But you clearly don’t understand even the very basics.

    We can all make up dream world budgets that give away endless gobs of imaginary money, but Dr Cullen’s budget has to work in the real world.

    Let’s hope that John Key understands this better than you do Burt. Some times I fear that he doesn’t.

  20. burt 20
    25 May 2008 at 10:21 am

    rOb

    How silly of me, I should have realised that the tax structure that Dr. Cullen has held in place for 9 years was perfect, the absolute optimum and that the tinkering he’s just done is perfect as well. How absolutely silly of me to even think that there might be a better, fairer, more efficient way to tax people. I’ll go and sit in the corner for a few days and think about how foolish I am to even think that Dr. Cullen and the Labour-led Govt might not have the perfect revenue collection and redistribution agenda in place.

    BTW Can I say Labour-led govt without breeching the EFA?

    F##K you are as much of a muppet as Cullen, blinded by the status quo. Labour good – National bad. If you’re not a muppet like Cullen then perhaps you might want to explain why anything other than status quo is always wrong in your eye?

    captcha: Douglass hungry ( just how Labour would like to see him so he needs a benefit to feed himself – state good – people bad)

  21. burt 21
    25 May 2008 at 10:26 am

    rOb

    Looks like the some economists have also embarrassed themselves.

    Scope for tax cuts even in downturn – economists

    Deutsche Bank chief economist Darren Gibbs said a future National government could accelerate – as well as improve – tax thresholds and tax relief ahead of the April 2010 date set in the Budget.

    What are these people thinking, rOb and Cullen know that what has been done is perfect – fools – Perhaps you could explain to them why if it’s not Cullen’s plan it’s wrong.

  22. burt 22
    25 May 2008 at 11:35 am

    Steve P.

    I didn’t realise that cutting public service numbers was such a simple equation, no overhead costs, no building costs etc. Likewise with tax cuts, rOb won’t answer or engage on the costs/benefits from decreasing WFF payments, misc allowances etc so clearly this isn’t even a factor. Here was me thinking there was more too it than just a few simple calculations. I foolishly though I would need more data to form a full opinion.

    I’ve got it all sorted now though, it’s realy very easy. Just nod and agree with Labour and I too can claim that any other suggestions are folly.

    Thanks also for showing me how $0.25 x 52 = $16.00. My calculator tells me it’s only $13.00 so perhaps this is where I’ve gone so far wrong.

    [you’ll note the previous equation was rounded down and that one was rounded up. if you add overhead to salary costs you might double you cut to 50 cents a week. rough calculations but it stands that slashing 1000 staff deliveries bugger all tax cuts. Any savings from WfF payments arising from a tax-free bracket are not going to be huge relative to the lost revenue from that bracket, 75% of taxpayers don’t get them. SP]

  23. randal 23
    25 May 2008 at 12:19 pm

    its just as well master magician cullen has positioned the country to be ready for the next take off while national would have squandered everything.

  24. burt 24
    25 May 2008 at 12:21 pm

    Steve P.

    So reducing perhaps $2b from the annual cost of WFF and other low income benefits is nothing. Great so add that nothing onto the tax cuts planned for later this year and double them!

    I’m getting the idea of this tax cut calculation stuff, just slag off the things you don’t want to talk about as irrelavent and slam the stuff you don’t like as stupid – follow the line that Dr. Cullen can do no wrong and WOW – How easy is that – it’s just perfect as it is.

    Oh I almost forgot, justify taxing 75% of people to support the lifestyle choices of 25% and wow – there is an election winning strategy right there. Easy peasy lemon squeezy.

  25. Lew 25
    25 May 2008 at 12:39 pm

    Rather than bickering over the details of implementation, I’ve got a couple of observations in principle.

    1. It’s a bit unreasonable to ask `so what would you do then?’, expect someone to come up with actual numbers, and then hold them to it. Anyone can pull numbers out of a hat, anyone can set up a scheme which looks good in principle, and anyone else can tear such a scheme down. It doesn’t really tell us anything. Unless Burt is going to be the next finance minister it’s unfair to take his back-of-the-envelope figures as representative of reasonable National-supporter policy.

    2. Burt, leaving aside the actual numbers, it seems you’re arguing for a revolutionary change to NZ fiscal policy – a sort of Rogernomics of taxation, rather than a gradual, measured approach. This is also what Rodney Hide is proposing, On the basis that markets like things to be done gradually and carefully, that they like certainty and predictability, my question is: how would you prevent markets from responding savagely to such a significant shock in a time of economic difficulty? How would you reassure NZ Inc’s creditors and trade partners that we aren’t in for a decade of stagflation hell while the reforms bed in?

    3. Burt, you accuse SP and r0b of being `blinded by the status quo’. But the point I think they’re trying to make is that when you’ve got something that’s mostly working, or even only sort-of working, the onus is on those who want to change it to demonstrate how and for what reasons it should be changed, and specifically how it will improve matters. This is simple due diligence: if you plan on making revolutionary changes to a system, you’d better have some bloody strong stuff on which to base your changes. Case in point, the argument from National is that additional tax cuts will be funded by cuts to the public sector, but there’s no information as to explicitly what will be cut. I understand that this will likely be announced later, but at present we simply have to take it on faith. Are you THAT convinced there are billions of dollars per year in fat which can be cut from the public sector without significantly impacting upon essential services? I know I won’t be convinced until I see some hard analysis. Faith is not a basis for due diligence.

    L

  26. randal 26
    25 May 2008 at 1:21 pm

    i think people shuold just save their money and go to church on sundays

  27. burt 27
    25 May 2008 at 1:25 pm

    Steve P.

    Over on this thread: Tax cut speculation

    You said:

    The simplest option would be to cut the bottom tax rate, which would deliver a tax cut for everyone. As a percentage of income the tax cut would be largest for those on the lowest incomes, while the actual monetary value of the cuts would rise until the end of the first tax bracket, and then remain constant. That would satisfy Cullen’s desire to deliver more money to those on middle incomes without giving massive cuts to those on high incomes.

    Whats changed since then Steve ? Was it that I have suggested a zero rated threshold is a good idea so therefore you need to argue I’m wrong? Muppet!

  28. burt 28
    25 May 2008 at 1:31 pm

    Lew

    Thanks for adding some balance, I don’t think rOb really expected me to come up with fully quantified numbers and supporting reasons etc. I think he was just trying to shut down the debate that Dr. Cullen hasn’t even addressed fiscal drag, hasn’t delivered F-All to the lowest paid, won’t make a difference to middle earners and won’t stop higer earners from leaving for Aussie for better take home pay.

    Status quo is always and option – however it’s usually not the only option or necessarily the best option. Debate about this subject requires all parties to leave their “what we have is good – what we have is bad” ideologies at the door. I’m prepared to do that, Steve P was prepared to do that a few weeks back but it appears that now Dr. Cullen has delivered his option it’s the best option.

  29. burt 29
    25 May 2008 at 1:51 pm

    Steve P.

    In your post on tax cut speculation.

    The 16.5% option would cost roughly $2.3 billion and give a $23 a week tax cut for people earning $38,000+. The 14.5% option would cost $3.7 billion and deliver $38 a week.

    You must be disappointed that Cullen has delivered so little compared to what you thought would be a good idea?

  30. r0b 30
    25 May 2008 at 3:34 pm

    F##K you are as much of a muppet as Cullen, blinded by the status quo.

    Do you think so Burt? At least Cullen and I can count.

    Actually, I’m not at all happy with the status quo. There’s lots I wish Labour was doing different.

    Thanks for adding some balance, I don’t think rOb really expected me to come up with fully quantified numbers and supporting reasons etc.

    No I didn’t Burt, but I expected you to do a little bit better than you did. I can make up a pretty neat budget too if I can have imaginary Billions to play with.

    I think he was just trying to shut down the debate that Dr. Cullen hasn’t even addressed fiscal drag,

    Don’t worry, I know full well that you can’t shut down the Burtster. What I was trying to get you to do was confront at least some of the real world difficulties in making these kinds of decisions (tax, budgets, government spending). You whined about Cullen’s budget, I asked you what should be done differently, you went off into fiscal la la land. So it goes, so it goes.

  31. burt 31
    25 May 2008 at 9:48 pm

    rOb

    The issue with fiscal drag is that it’s not just the top threshold effected. A person earning $38K in 1999 was paying $7,709.25 (20.2%) of their income. Using the reserve bank CPI calculator $38K in 1999 equates to $47,496.02 today. The tax paid today for that amount of money ($38K in 1999 CPI adjusted to first quarter 2008) is $10,543.68 (22.2%).

    Labour’s core voters, the ones promised that nobody earning under $60K would pay a cent more income tax are being robbed an extra 2% in tax. 2% of $47,496.02 is $949.92 – thats $18.26/week (today) taken off them via fiscal drag. What has Cullen given them back? According to the tax cut calculator on their web site – $17/week from October. Tut tut.

    Labour – growing their share of your CPI adjustments since 1999. It’s a disgrace that Labour didn’t at least sort out the fiscal drag for their key supporter base and it’s a disgrace that the workers rights advocates here at the standard support this. I expect Labour to slap the rich pricks and scoff at fiscal drag in that context, they are socialists and proud of it, but slapping their own the same way is appalling and I guess starting to be reflected in the polls.

    [all this rubbish about the threshold moves not keeping up with inflation ignores the fact that all taxholders are also going to benefit from the drop in the first tax bracket from 15/21 cents to 12.5 cents. Any competent analysis would be asking whether the percentage of income paid in tax is the same after these tax cuts for someone on today’s equilivant of $38K or $60K in 2000 dollars as it was when they were earning 38K or 60K back in 2000 – A person on 38K in 2000 was paying 19.5% of thier income in tax, after Oct, the person, now on 47K will be paying 19.62%, in 2011, the nominal salary equa to 38K in 2000 will be about 51K and paying 19.6% of their income in tax. Someone on 60K in 2000 was paying 24.5%, in 2011, someone on 80K will be paying 24.5%. Also, Burt, the Reserve Bank calculator is based on long-run inflation, not actual inflation in the years in question, a competent analysis would be using the real figures – easily found on RB and Stats. SP]

  32. ak 32
    25 May 2008 at 9:52 pm

    rOb: Don’t worry, I know full well that you can’t shut down the Burtster.

    Aye rObbie, but if I may divert your good self and assembled citizens momentarily from the thread on a matter that has occupied me this little while: has it never occurred to you all, that on the many depressing occasions that our erstwhile burtillian friend assumes full flight on yet another exercise in indefatigueable obtuseness and syntactical torture, that another certain denizen of this noble establishment is often conspicuously absent in a fashion simultaneous with young burt’s excruciating efforts in fumbling quasi-logical effrontery? A certain denizen who, (to point your respected cognizances in the desired direction), exhibits a wholly inferior understanding and facility for even the most basic elements of the English language to that which one might expect from someone pretending to the status and abilities of a senior surgeon? A denizen who, might I add, also exhibits some utterly remarkable similarities in all of tone, style, grammar, and a near-identical argumentative credibility and vocabularic lacuna (pray pardon the neologism) to the commenter whom we have thus far recognised under the apparently unambiguous appellation of “burt”?

    But as fair adherents to the enduring virtues of progressive left-wing social justice, let us observe the presumption of innocence, and should we thus not let burt refute, if he can, my little intrigue? What say you burt?

    Or should I ask, in the interest of accuracy, what say you…..(drum roll…swivel from hips….unakimboed arm at full extension… eyes narrowed)….. burtHS!!!!

    [lprent: Unlikely from where I sit. Are you sure that you don’t have a conspiracy fetish?]

  33. burt 33
    25 May 2008 at 10:07 pm

    ak

    No connection at all.

  34. ak 34
    25 May 2008 at 10:15 pm

    Ah. ok then, nigh night.

  35. r0b 35
    25 May 2008 at 10:20 pm

    ak, has anyone ever told you that you have a perfectly lovely turn of phrase? You have you know, ’tis a pleasure to read your missives.

    As to your Burt = HS speculation, that is intriguing. I have certainly pondered at times that as a medical professional (I believe HS has been rather careful not to actually claim outright to be a surgeon) HS is rather, shall we say set in his ways, and rather potty mouth, and seems to have rather too much time on his hands (for posting).

    But I doubt me that they be the same person. Burt is after all Burt, a true original, I’m sure they broke the mould!

  36. Dean 36
    25 May 2008 at 10:46 pm

    r0b:

    “Do you think so Burt? At least Cullen and I can count.”

    I’d think twice about saying that if I were you, given the even bigger bill for buying back the Rail that’s only recently been revealed.

    “Anyway, you’re going to drive the interest rates insane, they are already nervous about Labour’s cuts”

    Didn’t you see the memo from on high? Clark claims that the tax cuts won’t raise interest rates: http://www.nzherald.co.nz/section/1/story.cfm?c_id=1&objectid=10512232

    What’s it to be, r0b? Is this another one of those Labour party missives which claims that their tax cuts are magically outside inflation yet everybody elses – ESPECIALLY the evil, USA bagman employing, cancerous and/or corrosive National partys – are?

  37. r0b 37
    25 May 2008 at 11:36 pm

    I’d think twice about saying that if I were you, given the even bigger bill for buying back the Rail that’s only recently been revealed.

    Clumsy management I agree, but not exactly a failure to add. Alas that Rail needed buying back, after it was flogged off for peanuts by an ideologically driven National government.

    Didn’t you see the memo from on high? Clark claims that the tax cuts won’t raise interest rates

    Indeed she does, and she is making that claim publically because the markets are nervous, as I said.

    Interesting isn’t it, that Labour’s tax cuts are being portrayed by some as too big. What do you think those same people will say about National’s proposed tax cuts Dean, if they are even bigger?

  38. Steve Pierson 38
    25 May 2008 at 11:46 pm

    Also, Burt.

    “it?s a disgrace that the workers rights advocates here at the standard support this. ”

    the best way to raise workers’ take home pay is buy raising wages, tax cuts can only ever have a marginal effect and cannot be a continuing source of growing income.

    Moreover, the workers, the bulk of them, earn between the minimum wage and the median wage (that’s what 50% of employed people earn less than). That range is $25K to 38K. Currently, they pay 18.72% to 19.5% of their incomes in tax. From October 1, they will pay 16.24% to 17.87%.

  39. higherstandard 39
    26 May 2008 at 8:06 am

    Interesting that I’m now supposedly Burt, I’ve also been accused of being someone called DS.

    I can assure you Burt is his/her own person and not me.

    Fascinating … I wonder who I’ll be accused of being next.

  40. Lew 40
    26 May 2008 at 9:02 am

    HS: I dunno. Rod Deane maybe? Sir Bob Jones?

    L

  41. burt 41
    26 May 2008 at 9:24 am

    Steve P.

    The first comment I made in this thread.

    The questions that needs to be asked about these tax cuts, in the absence of any budget initiatives to increase real incomes.

    So… Yes the best way for people to earn more money is for incomes to increase and what are Labour doing about that? So now that muppet Cullen has implemented a new threshold there is a whole new income range to be effected by fiscal drag. Cullen’s not happy with only taxing middle and high earners more via stealth, he wants to get the lower earners as well.

    This is why people who are not consumed with the policies of envy (read – supporters of progressive taxation) think taxes should be flat. Flat taxes don’t have the effect of extracting proportionally more income from people as their income increases.

    A few months back Dr. Cullen said it was up to business to find a way to increase incomes, he’s got the increased govt income thing sorted – just let fiscal drag do that – pity the workers don’t have the same ability to just take proportionally more of their employers profits over time.

  42. Steve Pierson 42
    26 May 2008 at 9:53 am

    Flatting the tax system would involve a wealth transfer from poor to rich. To take less tax from the wealthy you would either have to take more from the poor or cut the social wage.

  43. burt 43
    26 May 2008 at 12:40 pm

    Steve P.

    Please explain how a person earning $20K paying a flat rate of 20% ($4,000) is supporting a person earning $200K paying a flat rate of 20% ($40,000).

    People earning more pay more under flat taxes, just not proportionally more. I think you understand this.

    Had I said – people pay a “set amount of tax” then your argument that low paid people are supporting high paid people would make sense.

    However your point about low paid people supporting higer paid people is one of my issues with WFF, do you agree it’s wrong as well?

  44. Steve Pierson 44
    26 May 2008 at 12:49 pm

    I’m not sure where you’re getting this ‘supporting people’ line from. I’m talking about the impact on wealth that would result from changing from the status quo to a flat tax system – the rich would get wealthier (less tax), the poor would get poorer (more tax or less social wage) – that’s a wealth transfer.

  45. burt 45
    26 May 2008 at 2:21 pm

    Steve P.

    Well that’s how a socialist might see it, just ignore the fact that big earners already pay way more tax than the cost of the public services they consume and that a low paid earner is not and therefore relies on the higher paid people to contribute toward their requirements. (support them)

    I don’t see pay rises being calculated in that way though. EG: The PM gets a 10% increase and a Junior Dr. gets a 10% increase. The PM is getting more of a pay rise than the Junior Dr. . IE: The same 10% is disproportionately increasing her income compared to the Junior Dr. We know this is a fictional example because although the PM might get pay rises of circa 10% every year it’s simply not acceptable for junior Dr’s to get this big an increase under Labour’s policies of not increasing the disparity of low and high earners.

    Pay rises are exactly the same as tax cuts, you know the situation that is unacceptable big earners benefit more from the same percentage change.

    Perhaps all pay rises could be a set amount and then we could claim that the ideologies of progressive taxes are valid and that Cullen’s tax cuts are rational rather than ideological BS.

    Just imagine

    Dear Min Wage Worker your pay increase this year is $2,400/year.
    Dear PM your pay increase this year is $2,400/year. Apologies you are not receiving an additional $30K like last year, it’s because the govt don’t want to be seen as being hollow with regard to their policies on tax cuts.

  46. r0b 46
    26 May 2008 at 2:31 pm

    Steve, you might be interested in this great analysis:
    http://www.publicaddress.net/default,5051.sm#post5051
    No Right Turn also has some comments:
    http://norightturn.blogspot.com/2008/05/illustrating-difference.html

  47. Robinsod 47
    26 May 2008 at 2:59 pm

    Burt – I pay a hell of a lot of tax a year and expect to get very little of it back in services but I would say that once I retire I’ll be paying vary little and will expect a lot of free healthcare and the like and guess what? For the first 14 years of my life I payed no tax whatsoever and I got free schooling, free health, free dental care and my parents got a family allowance. I figure It’s probably my turn to put some money in the pot for a while…

  48. r0b 48
    26 May 2008 at 3:16 pm

    Why Robinsod – it sounds like you have a – a social conscience! How terribly quaint and socialist of you!

    Of course in the real world it’s all about maximising personal gain. No room for sentiment. “He who dies with the most toys wins” – right?

  49. all_your_base 49
    26 May 2008 at 4:09 pm

    I’ve just added a graph to show the amount of reduction.

  50. Robinsod 50
    26 May 2008 at 4:13 pm

    Why Robinsod – it sounds like you have a – a social conscience! How terribly quaint and socialist of you!

    Nah bro – I’m just spending all my money on hookers and gin and hoping the state looks after me when the wheels finally come off! Of course by that time (with any luck) I’ll have contributed a couple of million in tax so they can’t complain too much when I ask for a new liver…

  51. Steve Pierson 51
    26 May 2008 at 4:14 pm

    burt. I’m not ignoring that fact that high income earners are net contributors to the social wage and low income earners are net recipients. In fact that’s explicit in my analysis of who loses if upper income tax cuts are funded out of social wage cuts.

    The PM doesn’t set her wages. MPs don’t even vote to approve them.

  52. Dean 52
    26 May 2008 at 5:46 pm

    r0b:

    “Clumsy management I agree, but not exactly a failure to add. Alas that Rail needed buying back, after it was flogged off for peanuts by an ideologically driven National government.”

    And buying it back was no less idealogical? r0b, I don’t think you’re in any kind of position to criticise National about being idealogical.

    It wasn’t just clumsy management though. It was a spend up of epic proportions right when we can afford it least. Same as the tax cuts really – Labour has had 9 long years of much better conditions, but they only do it now, when they’re facing the prospect of losing an election.

    How idealogically sound!

    “Indeed she does, and she is making that claim publically because the markets are nervous, as I said.”

    So you’d agree with the statement that Labour’s tax cuts aren’t inflationary?

    “Interesting isn’t it, that Labour’s tax cuts are being portrayed by some as too big. What do you think those same people will say about National’s proposed tax cuts Dean, if they are even bigger?”

    They’re likely to say the same thing. As I’ve said to you before r0b, I don’t believe the country can afford tax cuts right now or for the short term forseeable future.

    However, unlike you, I can also see when Labour do something stupid (as well as National). If only you weren’t so idealogically motivated by your party membership perhaps you could too.

  53. Dean 53
    26 May 2008 at 5:48 pm

    “The PM doesn’t set her wages. MPs don’t even vote to approve them.”

    She’s certainly not refusing any raises and instead ploughing them back into the social wage though, is she?

    Talk about a rich prick. Sorry, I meant hypocrite.

    [lprent: I seem to remember that she tithes/donates quite a lot of it – to a certain political party.]

  54. r0b 54
    26 May 2008 at 7:03 pm

    Dean: And buying it back was no less idealogical?

    Seemed fairly pragmatic to me Dean, the country needs a rail network, and the previous owners were letting it fall apart.

    Same as the tax cuts really – Labour has had 9 long years of much better conditions, but they only do it now, when they’re facing the prospect of losing an election.

    This is tired old nonsense Dean. There are sound economic reasons to accumulate surpluses when the economy is running well, and spend them when it is faltering. Pascal’s bookie wrote about it at some length here:
    http://www.thestandard.org.nz/?p=1989#comment-46652

    So you’d agree with the statement that Labour’s tax cuts aren’t inflationary?

    No one knows yet Dean. They might be, or they might not. They are being phased in over three years precisely to mitigate potential inflationary effects.

    However, unlike you, I can also see when Labour do something stupid (as well as National). If only you weren’t so idealogically motivated by your party membership perhaps you could too.

    Dean you seem to see everything Labour does as stupid, as well as having some deeply unpleasant options about some of them (and their families) as individuals.

  55. Dean 55
    26 May 2008 at 9:29 pm

    “Seemed fairly pragmatic to me Dean, the country needs a rail network, and the previous owners were letting it fall apart.”

    Then why did it cost so much? Oh, wait. According to you, it was just bad math.

    “This is tired old nonsense Dean. There are sound economic reasons to accumulate surpluses when the economy is running well, and spend them when it is faltering. Pascal’s bookie wrote about it at some length here:
    http://www.thestandard.org.nz/?p=1989#comment-46652”

    You can cut and paste what you’ve written in other comments all you’d like, r0b, but as with all economic theory, you’re only representing the side you’ve paid good money to subscribe to.

    “No one knows yet Dean. They might be, or they might not. They are being phased in over three years precisely to mitigate potential inflationary effects.”

    How about that. Whereas any tax cuts National have proposed – without any actual data on the amounts and to whom – have automatically been completely and utterly inflationary.

    And as for phasing them in over 3 years, is that the magic figure for not making tax cuts inflationary? Such economic genius from the Labour party. Just a question though, would the same apply if it were National phasing in tax cuts over a 3 year period?

    “Dean you seem to see everything Labour does as stupid, as well as having some deeply unpleasant options about some of them (and their families) as individuals.”

    No, r0b. I challenge you to show me one single thing I’ve ever said which even goes halfway towards proving your assertion that I think everything Labour does is stupid.

    Just one. The time for you to make sweeping statements about people’s political beliefs based solely on what you’ve seen them post on limited subjects is over, because if you’re going to make utterly ridiculous statements like that then you should be prepared to back them up. Otherwise you’re just making yourself look like a fool.

    It’s not about individuals and their families. I think you’re grasping at straws here. I would again ask you to provide me with quotes of posts I’ve made which you’d construe to be as such.

    But feel free to go ahead and call me a hater and/or wrecker if you’d like. Hell, I’ll wear a scarf if it makes it easier for you to denigrate my opinion and throw out a straw man now and then.

    I only call you out on your Labour party membership because you have previously trumpeted it from the rooftops. I’m not sure how that equates to “having some deeply unpleasant opinions about some of them (and their families) as individuals” but if that makes it easier for you then I suppose you’re in very good party company.

  56. r0b 56
    27 May 2008 at 12:23 am

    No, r0b. I challenge you to show me one single thing I’ve ever said which even goes halfway towards proving your assertion that I think everything Labour does is stupid.

    Dean, anyone with a memory or access to the search function knows that you post a continual stream of attacks on Labour and Labour supporters. Here’s one at random, accusing the government of being a dictatorship:
    http://www.thestandard.org.nz/?p=1053#comment-16963

    Unlike the Labour party, who have decided that 130 odd MPs know better than 80% of New Zealanders regarding the anti smacking bill. Not even a referendum will sway them – they know best. I guess if elected dictatorships are your bag then it’s definitely democratic.

    It’s not about individuals and their families. I think you’re grasping at straws here. I would again ask you to provide me with quotes of posts I’ve made which you’d construe to be as such.

    The thread where you dredge up Wishart’s allegations about the PMs husband Dean, and sign up to his hate campaign:
    http://www.thestandard.org.nz/?p=1454#comment-24177

    Of course it’s what I believe.

    Having earlier observed in that thread:
    http://www.thestandard.org.nz/?p=1454#comment-24082

    Watch then froth when Peter Davis is introduced into a conversation. Highly amusing.

    Drag vile allegations about politicians families into it for your own amusement eh Dean. You’re a real class act.

    [lprent: I see you’re having fun with the search function. Still looking at why safari 1.3 doesn’t like the new edit function. But it has gotten caught behind other code]

  57. r0b 57
    27 May 2008 at 8:25 am

    Thanks Lynn, yes, nice to have search! Don’t worry about Safari 1.3 on my behalf, I should get my real laptop back this week, and there are other machines I can use (if I fight off various family members first!).

  58. burt 58
    27 May 2008 at 9:18 am

    rOb

    Was that fight off various family members first OR fight off various family first members?

  59. r0b 59
    27 May 2008 at 10:36 am

    Burt – heh! No worries, none of the latter types around here.

  60. Dean 60
    27 May 2008 at 4:37 pm

    “Dean, anyone with a memory or access to the search function knows that you post a continual stream of attacks on Labour and Labour supporters. Here’s one at random, accusing the government of being a dictatorship”

    This is proof of your claim that I, in your own words, think everything Labour does is stupid?

    I’d invite you to check the meaning of the word “everything” and get back to me. Or continue to play the wounded drummer boy, because that would be kind of amusing too.

    “The thread where you dredge up Wishart’s allegations about the PMs husband Dean, and sign up to his hate campaign:”

    I don’t care what Wishart said, r0b. Now, I realise this will be an eye opener for you, but here goes – not everyone who has a problem with Labour, Clark, her husband, or any other manner of things your party says or does is automatically a menber of either the Business Round Table, National, ACT, the exclusive brethren or some sort of baby eating top hat wearing ultra conservative capitalist Illuminati first XV.

    All I was saying in the quote you provided was that watch how people from your neck of the woods froth and foam at the chops when Davis is mentioned. I don’t care if he’s straight, gay, transgendered or a martian in disguise. What I do care about is the involvement of a certain branch of Government at a certain airport, and for you think that this makes me a hate of their family unit is simplifying it to such an extraordinary degree that it makes me wonder how you managed to work this out in the first place.

    Actually, I take it back. I know how you worked it out. According to you, Labour = Good, National = Bad.

    “You’re a real class act.”

    Pot? This is kettle. Black.

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