Even Granny’s patience can wear thin

Written By: - Date published: 9:47 am, May 26th, 2008 - 42 comments
Categories: election 2008, Media, national, slippery, tax - Tags: , , , , , ,

With a loving smack that would have brought a smile to Bob McCoskrie’s face, the Herald‘s editorial today rebukes John Key in the strongest terms it can.

Now that the Budget is behind us, the National Party has less excuse for indecision on most of the important economic issues facing the country at the coming election. As late as eight days ago finance spokesman Bill English could not answer a question as basic as whether National would keep the top tax tier, 39c in the dollar.

Of course, it’s patently ridiculous to think that the most serious economic problem facing New Zealand is the 39 cent tax bracket (off the top of my head: climate change, peak oil, food miles, low wages, water, the missing generation of trades people from the 1990s when National scrapped apprenticeships, the coming retirement of the boomers and subsequent housing market collapse) but, at least, the Herald is finally challenging Key to get serious about what he would do in government.

It goes on to dismiss the ‘tax cuts don’t lead to revenue cuts because people work harder’ argument as the wishful thinking.

If National promises to abolish the 39c rate, and realign the top personal rate to the company tax rate, it will claim that lower rates will keep high earners in New Zealand and improve their incentives to work, resulting in no loss of tax revenue. Conservative governments have seen their Budgets turn to grief on this belief.

New Zealanders are already among the most employed and longest-working people in the world – tax cuts won’t make them more so. But, being the Herald, the answer it finds is not ‘don’t cut the tax’ it’s ‘cut spending too’

the party will need to stick its neck out on expenditure cuts, too. It is not sufficient to say, as Mr Key did the other day, “National will direct spending away from low-quality programmes that push up inflation towards frontline services like doctors, nurses, teachers and police.” That sort of double-speak fools nobody. We need to hear serious policy soon.

The Herald‘s campaign platform would be less tax on high incomes funded by cutting government spending. That’s a wealth transfer from the poor to the rich, but at least it is a platform. Key is trying to get into government without one, and even his most ardent allies are getting sick of it.

[incidentally, the Herald says our tax system with higher tax in higher brackets is ‘progressive in Labour terms’. It’s progressive in mathematical terms; it’s not a values judgement, it’s a numerical reality]

42 comments on “Even Granny’s patience can wear thin ”

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  1. ghostwhowalks 1
    26 May 2008 at 9:56 am

    They wont come up with any details unless the polls erode for them. A 5% drop in polling will be like waterboarding for English, while Key just says any old thing and probably isnt allowed to mention specifics at any time. Note his ‘whishfull thinking ‘ speech before the budget

  2. Robinsod 2
    26 May 2008 at 10:24 am

    Yeah – when I read this this morning I was stunned. Talk about the mask dropping. It seems the Herald has decided to bypass its support for National and campaign directly for ACT!

    On a brighter note the SST editorial has a good take on the cuts and how higher wages are needed. It reads like Irish wrote it!

    [you’re through the looking-glass there, ‘sod. SP]

  3. Stephen 3
    26 May 2008 at 10:30 am

    Campaign for ACT? What about the second quoted paragraph up there?

  4. Lew 4
    26 May 2008 at 10:33 am

    I’m with Stephen. How do you lot read this as an ACTvertorial?

    L

  5. James Kearney 5
    26 May 2008 at 10:39 am

    Lew I don’t agree entirely with Robinsod’s analysis but the Herald obviously sees progressive taxation as driven by envy:

    “The top rate was established more out of spite than necessity, revenge of a kind for the flattening of the tax scale by Sir Roger Douglas and his acolytes in the previous Labour Government.”

    And it clearly wants to see National make spending cuts to pay for a flattening of the tax scale:

    “For credibility, the party will need to stick its neck out on expenditure cuts, too.”

  6. Robinsod 6
    26 May 2008 at 10:40 am

    Cut spending and remove the top tax bracket? Seems pretty Act-like (“actesque”? “actian”?) to me.

  7. Bryan Spondre 7
    26 May 2008 at 10:40 am

    “That’s a wealth transfer from the poor to the rich” , with 55% of income tax being paid by 15% of taxpayers it would actually be a reduction in wealth transfer. Unfortunately John Key has already said he won’t touch WFF: WFF is the worst mistake Labour has made creating a huge number of welfare dependant families with limited incentive to get ahead.

    [a) no, it would be a wealth transfer because we have a status quo in which different income levels keep different net incomes a proportion of their gross incomes, change that to increase the net income of the rich while cutting the social wage and that is a wealth transfer from poor to rich – we’re not living a theory, we’re in the real world and the question is who gets richer and who poorer from a proposed change to the status quo. b) WfF is a tax credit, not a benefit. SP]

  8. Tane 8
    26 May 2008 at 10:46 am

    “That’s a wealth transfer from the poor to the rich’

    Your fallacy Bryan is taking the distribution of property and income as some sort of natural law, then complaining about the redistribution necessary for a civilised society.

    That’s where all this “Why can’t we rich folks just keep what we earn?” rhetoric comes from.

    But it’s not that simple. Those with wealth and power benefit from an economic system that allows the private accumulation of massive amounts of the world’s resources, creating huge inequalities of wealth and power. Social democracy is about reducing these inequalities.

    Of course, if you don’t like redistribution then I’m more than happy to discuss changing to a more equitable economic system where such transfers will no longer be necessary. Which would you prefer?

  9. Lew 9
    26 May 2008 at 10:50 am

    Mmm, I read it strictly as a conditional, that the editorialist favours this course of action but wants to see what would be cut first, and seems pessimistic that such a cut could be forthcoming.

    But I take your point: `cut the top and middle tax rates and cut spending to compensate’ is very far beyond anything National have suggested.

    L

  10. sean14 10
    26 May 2008 at 11:07 am

    The Herald’s campaign platform would be less tax on high incomes funded by cutting government spending. That’s a wealth transfer from the poor to the rich, but at least it is a platform.

    Steve – Even if one accepts your argument about spending cuts transferring wealth from the poor to the rich, such a transfer would depend on what spending was cut. For example, what impact would cutting the Fast Forward Fund have on the poor? Why the working poor should subsidise research and development costs for farmers is beyond me. Business should pay for its own R&D.

    Come to think of it, why are the working poor helping to put money in to my KiwiSaver account and pay the interest on my student loan?

  11. Steve Pierson 11
    26 May 2008 at 11:08 am

    In case anyone’s wondering. It’s a progressive system because when income gets higher tax as a % of income gets higher too. In a regressive system, that relationship is inverted, in a flat system tax as a % of income is not related to income.

  12. Stephen 12
    26 May 2008 at 11:10 am

    Robinsod, that second paragraph says “it will claim that lower rates will keep high earners in New Zealand and improve their incentives to work, resulting in no loss of tax revenue. Conservative governments have seen their Budgets turn to grief on this belief.”

    I would see that as being very much against pretty much all that ACT stands for on taxes – that low tax equals more prosperity and riches for all. Seems rather contemptuous of removing the top bracket.

  13. Bryan Spondre 13
    26 May 2008 at 11:16 am

    SP: “WfF is a tax credit, not a benefit”. Part of WFF is a tax credit from the IRD, but the rest is a welfare benefit paid via the Ministry of Social Development.

  14. erikter 14
    26 May 2008 at 11:24 am

    “WFF is a tax credit, not a benefit’
    Semantics, pure semantics from SP.

    WFF is a benefit for which families have to apply. You can call it whatever you like, but at the heart of the issue is the matter of the state dispensing money to beneficiaries (families, in this case)

  15. Stephen 15
    26 May 2008 at 11:29 am

    erikter – that begs the question – how else to target families??!

  16. Bryan Spondre 16
    26 May 2008 at 11:30 am

    Tane: “Your fallacy Bryan is taking the distribution of property and income as some sort of natural law”. Given that in New Zealand everyone has access to high quality education and health resources an individuals financial success in life is determined by their own efforts and life choices. Socialist wealth transfers like WFF are envy taxes that punish those who work hard and make the most of their opportunities.

  17. Steve Pierson 17
    26 May 2008 at 11:32 am

    The Family Tax Credit is the bulk of WfF.

    erikter. The way you’re using beneficairy there means anyone who benefits from anything.

    WfF is a way of decreasing the tax take specifically by reducing the portion of income paid by families, so it goes where the extra money is most needed and has the best long-term effects… currently, 370,000 households (a quarter of all households, 70% of househodl with dependent children) get WfF and most people will be a member of such a household for significant periods in their life.

    The fact remains that there are 120,000 fewer New Zealanders recieving benefits (DHB, Sickness, Invalids’, UB, are the major ones and in that order) than when Labour came to power.

  18. Bryan Spondre 18
    26 May 2008 at 11:33 am

    Stephen: that begs the question – why target families ? All of these envy taxes have done nothing to improve productivity or given ambitious New Zealanders a reason not to head across the ditch.

  19. Robinsod 19
    26 May 2008 at 11:34 am

    erikter – by your logic depreciation and tax credits for R&D are also welfare because they need to be applied for (and guess what? Businesses apply to the IRD for them – the same place families apply for the WFF credits).

    Goddamn! Business as benefit bludgers! I tell you this bloody nanny state…

    Cap: “Mondays commandos” – there’s an apostrophe missing but hell it still works for me!

  20. Steve Pierson 20
    26 May 2008 at 11:36 am

    Byran. Please try to engage at a deeper level than this: “Socialist wealth transfers like WFF are envy taxes that punish those who work hard and make the most of their opportunities.”

    if you get some evidence to present that WfF is bad (say, in terms of it’s societal impacts), rather than just giving us naked and easily refutable assertions. You’ll be much more challenging and people might actually listen to you.

  21. Stephen 21
    26 May 2008 at 11:36 am

    You’re very right to ask that question Bryan, and i’m not even that sure what the logic is – maybe if you’ve got kids then you need more money than those who don’t…They might not improve productivity, but if you need money *now* to pay for kid’s clothes/education/health etc…? I dunno, really.

  22. Robinsod 22
    26 May 2008 at 11:36 am

    Bryan – “envy tax”? I can’t believe you are still pushing that stupid line. I guess that’s all you got now eh?

  23. Steve Pierson 23
    26 May 2008 at 11:40 am

    ‘why target families’ or ‘what are kids worth’ shows both the a-humane and short-sighted sides of rightwing thought.

  24. Bryan Spondre 24
    26 May 2008 at 12:10 pm

    Steve: “The Family Tax Credit is the bulk of WfF.” A year ago my wife applied for WFF. I found it distasteful to do so but under a Labour government it seemed the only way we were going to get any of our money back.

    It was an illuminating experience:

    a) Our application was ultimately declined because instead of wasting our earnings on cigarettes, pokies, recreational drugs, fast food and alcohol we had saved it and therefore exceeded the limit for savings. Messaage: under a Labour government thrift and personal responsibility are punished.

    b) The potential benefit was a $50 tax credit and a $150 accommodation benefit ie. 75% as a benefit paid by the Ministry of Social Development. Message: Labour likes to turn hard working people into beneficiaries.

    c) the IRD tax credit took a 10 minute online application. The WINZ application took several meetings with an ill informed WINZ employee, 100 pages of documentation, trips to the bank etc. Message: a lot of the money that could have been left in our pockets if we had just got a tax cut was being wasted in a bloated civil service.

  25. QoT 25
    26 May 2008 at 1:18 pm

    WfF has to be the weirdest “benefit” ever, seeing as the FTC doesn’t get paid to beneficiaries.

  26. Lampie 26
    26 May 2008 at 1:26 pm

    Put up or shut up key!!!

    Any dickhead can state I’m going to reduce taxes.

    SHOW ME THE MONEY!!!

    By the way Mr Key, you can spend $16 on cheese if you wish, try puting it straight on the mortgage, cuts nearly 3 years off it and saves you about $39k in interest (based on 25 year term on 250K)

    🙂

    So want’s it going to be New Zealand?, the mortgage or the cheese?

  27. gobsmacked 27
    26 May 2008 at 1:38 pm

    Scrapping WFF is a legitimate right-wing argument.

    But it’s not National policy, is it?

    In fact, I have never seen a blog comment from somebody saying:

    “I’m going to vote National, because they’re keeping Working For Families and interest-free student loans and Kiwisaver and nuclear-free and paid parental leave and Kyoto and the Ministry of Women’s Affairs and the Bradford Section 59 law and so on and so on …”

    Does anybody out there intend to vote National because they actually support National policy?

    Hello? Anybody?

  28. Stephen 28
    26 May 2008 at 1:53 pm

    Actually, back to ACT-vertising…

    The flatter the scale the better is the incentive to work and earn more, and the less reason there is to make tax avoidance arrangements. Investment is more likely to be influenced by real market returns rather than tax advantages

    How bout THAT?! I initially thought they were explaining the ‘Douglas rationale’ but it doesn’t seem to be so…

  29. roger nome 29
    26 May 2008 at 1:56 pm

    I agree that WFF should be received as a tax rebate rather than a tax credit. If only to shut up hyper-pedantic loonies that base their whole political analysis on one minor semantic point.

  30. roger nome 30
    26 May 2008 at 1:58 pm

    oh BTW Bryan Spondre – no use using personal anecdotes. You’re obviously slightly unhinged so no one’s going to believe your stories.

    [no need for that roger. SP]

  31. Bryan Spondre 31
    26 May 2008 at 1:58 pm

    Gobsmacked: I will be voting for Nationals published policy to reduce size of core state service.

    I would prefer to vote for an Act candidate but being in Auckland Central will be voting for Nikki Kaye in order to see Tizard ditched.

    [hilarious, the one policy Bryan identifies to vote National for and it’s not even National policy. National isn’t going to reduce the size of the core public service, it’s policy is to cap it and Key has already made several calls for policies that would involve more core public servants (the boradbnad plan, for instance). The savings from the cap would be worth 50 cents each a week in tax cuts. Incidentally, slashing the core public service from 36,000 by 10,000 would be worth a grand total of $9 a week each. SP]

  32. gobsmacked 32
    26 May 2008 at 2:03 pm

    Bryan

    Thanks for the reply. But why not party vote ACT? It’s not a loss to the “right” (unless you think Hide will lose Epsom).

  33. Stephen 33
    26 May 2008 at 2:12 pm

    I thought they were keeping the public service the same size, and then not replacing certain people who quit? Seems to me that’ll save the taxpayer…hundreds, no thousands of dollars. NOT really what I would base my vote on.

  34. Bryan Spondre 34
    26 May 2008 at 2:17 pm

    gobsmacked: Thanks, Yes I will be party voting Act.

    Roger nome: so are you saying that using WINZ to give taxpayers their own money back is more efficient than simply cutting taxes and not taking the money in the first place ?

  35. Bryan Spondre 35
    26 May 2008 at 2:21 pm

    SP: $9 a week ? I’ll take it. That would have made Cullens total tax cut worth $25 not $16.

    If I was a struggling blue-collar Labour voter $9 week would be $460/year or the insurance bill on my car paid. Might not seem much but every dollar helps.

  36. Bryan Spondre 36
    26 May 2008 at 2:23 pm

    SP: Nationals policy is to cap at 36,000 with the current size 43,000. That is a reduction of 7,000.

  37. Billy 37
    26 May 2008 at 2:27 pm

    SP: “no, it would be a wealth transfer because we have a status quo in which different income levels keep different net incomes a proportion of their gross incomes, change that to increase the net income of the rich while cutting the social wage and that is a wealth transfer from poor to rich – we’re not living a theory, we’re in the real world and the question is who gets richer and who poorer from a proposed change to the status quo.”

    Cute argument, SP. It is a wealth transfer from the status quo. But that ignores the original wealth transfer. It is a wealth transfer in exactly the same way as wealth is transferred whenever the police recover stolen goods (if, indeed, they still do that).

  38. Steve Pierson 38
    26 May 2008 at 2:35 pm

    Bryan. National’s policy is not to cut the core public service, I’ve seen both Key and English specifically say that, even correct interviewers on that point, in the last week.

    If you cut 10,000 core public servants, you would be gutting the government’s ability to upgrade policy and administer revenue, the courts, the public education and health systems, social welfare, defence, infrastructure etc etc.. you would probably have to fire some prison guards as well (they’re in the core public service as are social workers)… the remaining public service, over 250,000 employees would have to take over policy functions in addition to being nurses and teachers etc, and would not have even the flawed system we have now to ensure that money is spent effectively, so government waste would increase.

    Only a fool believes that a government would rather employ 10,000 doing nothing than spend that money on something useful or cut taxes.

    Billy.
    We’re not living in the original world. The question is what effects changes we make to the way things are now will have.

  39. Robinsod 39
    26 May 2008 at 3:12 pm

    Billy me old mate – I have to say you’re sounding more and more like a crazy libertarian every day. I know you don’t get out much but next time you do have a look around you. All those scary people? They’re society. Now what you might not understand about society is that it provides us with certain things throughout our lives such as public healthcare, free education and subsidised tertiary education (don’t get me started about that), access to libraries and infrastructure to ensure we can get to and from these things and to ensure that there is an internet too.

    That means that clever people like ourselves get to be born and looked after and then educated by other people. Now this doesn’t come free. This society asks us to return the favour by giving back a small share of the wealth we gather from being healthy, well educated clever people.

    Now I don’t know about your background but I can tell you the only reason I’m well in the top tax bracket and contributing productively is because of this whole society thing. I don’t come from a wealthy background at all but now I make a lot of money and I can talk in a well informed way about why James Joyce is overrated. Your way of doing things would have taken that from me.

  40. Billy 40
    26 May 2008 at 9:11 pm

    “All those scary people? They’re society.”

    And people only seem to sing its virtues when telling me I have to pay for it.

    “Now I don’t know about your background…”

    Course you do. I am a real estate agent. I look like a young Sophia Loren. I have a twitch, a stutter, an eye patch and an incontinence problem.

    “I can tell you the only reason I’m well in the top tax bracket and contributing productively is because of this whole society thing.”

    I suspect you are selling yourself short, ‘sod. A talented guy like you.

    “This society asks us to return the favour by giving back a small share of the wealth we gather from being healthy, well educated clever people.”

    I do not recall being asked, or having any choice at all in the matter. And if I’d known the result was that people would mis-read Joyce, I would have been objecting more violently.

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