Did the tax agenda deliver?

Written By: - Date published: 2:00 pm, May 21st, 2010 - 11 comments
Categories: budget 2010, class war, tax - Tags:

In what it seems to think is an act of benevolence and economic genius, National has decided to borrow a pile of money, cut key public services, put up GST, and give me an extra $1000 a year.

I’d rather the money was going to the education and health of the members of my community. What’s good for others is good for me.

Will it make me work harder?
Hell no. My partner and I are already paid plenty. If anything it will make us look at ways to reduce the amount we work. A week each of unpaid leave a year and we’re still as well off as before. I suggest the government look up a little thing called the backward-bending labour supply curve. Once you’re earning above a certain amount getting more per hour doesn’t make you want to work more; it makes it more worthwhile to work less, get the same money and have more time to yourself.

But I would feel kind of sh*t taking a week off on money that comes out of other people’s pockets, borrowing, and spending cuts. Since health and education are being cut by a National government, it seems fitting to give the money to some charities, the Greens, and Labour.

Either way, the one thing it certainly won’t do is boost my economic output or even my consumption.

Did it close the loopholes?
The funny thing is that National has actually made rorting the system more tempting. Before, you could get 5% off your tax on your income over $70,000 by using a trust at 33%, rather than paying 38% on the top rate. Now, you can set yourself up as a contractor (obviously this is a game for well-off) and, rather than pay 33% on your income over $48,000 you pay 28%. Stupid.

Of course, it’s not really stupid. They know they’re leaving a loophole open for their mates. And the long game is that in three years’ time we’ll be hearing how the top income rates have to be dropped to 28% to align the rates.

Is it fair?
The ultimate in fair is the same for everyone. The government could have introduced a $25 a week tax credit for every taxpayer. That would have been more than 2.3 million taxpayers are getting from National.

How about slightly less fair, the same percentage for everyone? No, they didn’t deliver that either. A part-time worker on $14,000 got a 2% cut. A CEO got nearly 5%. Actually, that’s the reduction in the tax rates. Look at the increase in net income. On $14,000 it’s a 2.2% increase in your net income. For Paul Reynolds it’s 8%.

Will it boost growth?
Ha! By 0.1% a year if you believe the Treasury’s optimistic assumptions (they assume I’m going to spend my tax cut, for example). 0.1% is margin of error stuff. This is National’s economic plan: 0.1%. It’s not even trickle down because it’s about the same as the top 10%’s increased share of the national income. Personally, I don’t accept the theory behind Treasury’s forecasting here. But we’ll never know either way they’re calling such a small impact we’ll never know if we saw it or not.

But, let’s face it. This tax bait and switch was never about any of those things. It was a wealth grab. And in that, at least, it has succeeded.

I hope the Nats enjoy their $340,000 of tax cuts.

11 comments on “Did the tax agenda deliver? ”

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  1. Outofbed 1
    21 May 2010 at 2:50 pm

    Marty Donate
    here

  2. Lanthanide 2
    21 May 2010 at 2:57 pm

    I’m probably going to bump my kiwisaver from 2% to 4%. Only seems fitting, this is essentially money that would’ve gone into the Cullen fund.

    Pity I can’t directly invest in the Cullen fund though – since setting up my kiwisaver account last year (a result of National’s last tax cut, using exactly the same reasoning) the gross balance on my kiwisaver account is presently 0.1% higher than the value of the money that’s been put into it. Damn share markets (and fees).

  3. Craig Glen Eden 3
    21 May 2010 at 3:10 pm

    Its the Higher purchase budget ” get cash now and pay with the loss of quality health and education later”.

    So thats it then according to National and its right wing economists mates this is a major step in the right direction the economy is going to boom, the pie is about to grow.
    Wow it was that simple,shit why was Micheal Cullen wasting his time paying of Government Debt.Why spend all that money on those little rug rats to, shit they don’t need to be educated/mentally stimulated from 2-5 cos we have National Standards.

    However the biggest problem is going to be immigration, yup what are we going to do with all those expat Kiwis as the storm home from around the World .

  4. pollywog 4
    21 May 2010 at 3:48 pm

    Not that anyone needs reminding, but in as much as Key rewarded his ‘rich prick’ mates with a vritual payrise, he also rewarded his colleagues on both sides of the house with one…

    …i guess it says a lot about the morals and ethics of politicians of all decriptions that none of that lot is talking about donating thier tax windfall to charity

    rah rah rah inequality for the few not the many say the opposition but thanks for the payrise anyway…what are ya drinkin, my shout ?

    captcha : pockets ( the cash and keeps ya mouth shut)

    • Indiana 4.1
      21 May 2010 at 4:22 pm

      In protest to the budget, perhaps the opposition should demand to remain on the current tax system post October…

  5. Robb 5
    21 May 2010 at 4:37 pm

    The other night (TV3 I think) Phil Goff was asked what he would do with any extra income due to tax cuts, his reponse was to put a bit extra on the mortage and help the kids out. Both worthy use of extra money. Didn’t get the impression he felt quilty about it.

  6. George.com 6
    21 May 2010 at 5:54 pm

    The Cheese Sandwich Budget

    A couple of years back John Key went on about a ‘block of cheese budget’. Yesterday he released his ‘cheese sandwich budget’. Thats it kiwis – a cheese sandwich for most of you. Caviar with cheese sauce if you are a high income earner mind.

  7. Herodotus 7
    22 May 2010 at 10:52 am

    :…your income over $48,000 you pay 28%. Stupid..” As I understand it when you distribute these funds back to the shareholders/owners etc then the recipients will have to declare this as income and pay the according tax rate on this. If theytry some scam as buying items that require FBT to be paid on, then the rate of FBT is based on the income rate of the recipient. I am sure thatthere are “marginal” ways of siphon funds, but is not the coy then open to IRD and their accountants honesty in turning a blind eye?
    I know there are some bebnefits in setting up a coy as there are some legit deductions you can claim, butthere are also costs as setting upo a coy and acting as a consultant the individual then does not get holiday/sick leave, redundancy (If applicable) has to cover their own ACC.
    Those who could have bebfited from hiding under a coy structure I think would already have set themselves up in this structure.
    When Lab regains power I am sure thatthere will be a new upper level tax say 39% on $150, $200 whatever so that will strengthen this, unles there is a plan as cunning as a ferret that Lab has under its wings.

  8. Gazza 8
    22 May 2010 at 11:12 am

    Well at least there will be a lot more new Nat voters deserting ship next year, and when the Kiwibank gets sold off to the Aussies the nats will never get back in power for at least 50 years.
    So lets just grin and bear it for the next 4 years then we will be able to move from our cardboard shelters & park seats back into warm homes & drink our nice and cold Tui’s “Yea Right”!!!!

    • just saying 8.1
      22 May 2010 at 11:29 am

      It does still look like we will be bearing it. Dunno about grinning though.
      What will NZ look like after four more years of NACT? I suspect all kinds of physical protection services for the well-off will have become become a big growth industry.

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