How would Nats cut tax? Where would the money come from?

Written By: - Date published: 10:54 am, September 16th, 2008 - 22 comments
Categories: election 2008, national, slippery, tax - Tags:

Bill English has confirmed that National still intends to give the average worker a $50 tax cut. That’s $18 a week more than they will get in Labour’s tax cuts after 2011.

If National’s would increase the cut for all taxpayers by around $18 a week it would cost nearly $3 billion a year. In reality, that won’t happen because Key has said there will be no additional tax cuts for low-income workers.

So, what form of tax cut could deliver $18 a week for someone on the average wage of $46,000? Cutting the 33% rate to 29% would do it. The cost would be about $600 million a year, the 1,400,000 million people with incomes below $20,000 would get nothing and the 230,000 people earning $80,000 plus would get $46 more a week. Basically, tax cuts for the rich. Of course, that does nothing about the dreaded 39% tax bracket and you would have the economic purists still in tears about the gap between top income tax rate and the corporate rate but it would cost a billion to bring it down to 33%.

So, where would the money come from for these tax cuts for the rich? Even the cheap option costs $600 million – hardly chicken feed. It’s not going to be funded from cutting waste. Just get the idea out of your head. For all their chirping, National has identified only 1% of the waste that would need to be cut to fund even their cheapest tax cut option. National hasn’t talked about spending cuts anything like $600 million a year; indeed, they have had to guarantee to maintain Labour’s spending in all major areas except education. There’s virtually more cash surpluses either. That only leaves one option… and it becomes clear why National is so desperate to borrow more and sell-off our assets.

[numbers from Treasury]

22 comments on “How would Nats cut tax? Where would the money come from? ”

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  1. Gustavo Trellis 1
    16 September 2008 at 11:02 am

    Maybe treasury made a mistake? You know…again.

  2. The PC Avenger 2
    16 September 2008 at 11:02 am

    One thing to keep in mind is that National appears to be driving towards making SOE’s (such as TVNZ) produce a profit. As Gordon Campbell suggests, it’s pretty likely that this is to generate the funds to pay for their tax cuts.

    http://election08.scoop.co.nz/%e2%80%98horse-race%e2%80%99-political-journalism/

  3. insider 3
    16 September 2008 at 11:09 am

    More pertinently, where will the money come from for the expected labour promises/bribes, given that the cupboard is apparantly bare and nothing more could possibly be spent that isn’t already being spent. More borrowing is apparantly reckless.

    So that leaves only one option to fund more spending – more tax.

  4. Steve Pierson 4
    16 September 2008 at 11:12 am

    insider. we don’t know the scale of the spending in those promises so we can’t make any serious comment about them. hasn’t stopped you though.

    There is basically no more money in the kitty for the next year, a bit more in the out years but not billions.

  6. kk 6
    16 September 2008 at 11:23 am

    Hey, insiders is onto something: “More borrowing is apparently reckless.” – you been following the financial turmoil in the US mate? It’s got Key’s philosophy written all over it

  7. Pascal's bookie 7
    16 September 2008 at 11:24 am

    “How would Nats cut tax? Where would the money come from?’

    That’s just an old political battle from the past Steve, that the National Prty doesn’t want to talk about.

  8. NeillR 8
    16 September 2008 at 11:33 am

    According to the link to treasury you provided, the top 15% of taxpayers (those who earn over $60k) pay 53% of the income tax. So if there were to be tax cuts it should go to those who actually pay the most – you say that those at the bottom get nothing, but they pay nothing so where’s the problem?

    [“The rich pay more tax so they should get the biggest tax cuts.” non sequitur. SP]

  9. Phil 9
    16 September 2008 at 12:05 pm

    Interesting…

    Barak Obama claims he will deliver a tax-cut package by going through federal spending line-by-line and cutting unnecessary or wasteful initiatives. The Dem’s cheer loudly, and the Indy’s nod approvingly.

    John Key claims he will deliver a tax-cut package by going through government spending line-by-line and cutting unnecessary or wasteful initiatives. Bloggers at TheStandard gasp in horror, and draw comparisons with cheese.

    What a funny world we live in.

  10. Matthew Pilott 10
    16 September 2008 at 12:27 pm

    Phil – the two are incomparable. If I were you, I’d just be thankful that we don’t have the US’ excess of pork-barrel spending that Obama is attacking. I can think of an example here – $1bn for home insulation, tacked onto the ETS. Not a real example, because it is relevant to the bill. In the US, you’d get $500m for a Senator’s pet project, like an industrial plant, tacked onto S59 or something equally ridiculous.

  11. Matthew Pilott 11
    16 September 2008 at 12:28 pm

    NiellR, the top 15% of tax-payers earn what percentage of New Zealand’s income?

    Hint: more than that percentage of tax you quoted.

    Think about that for a sec.

  12. Phil 12
    16 September 2008 at 12:51 pm

    MP,

    Fair point.

    But, how many voters in NZ are capable of differentiating the two?
    Probably less than you or I think…

  13. Felix 13
    16 September 2008 at 12:59 pm

    Well Phil, so far in my (not very statistically sound) survey it’s come out at about 2 to 1.

  14. gobsmacked 14
    16 September 2008 at 12:59 pm

    The big story on tax in the US campaign is Alan Greenspan – a hero to many conservatives, including John Key, who used to be on his team. Greenspan has attacked the McCain tax plan:

    “I’m not in favor of financing tax cuts with borrowed money”.

    It would be interesting to know what John Key thinks of his former mentor’s view.

  15. Stephen 15
    16 September 2008 at 1:00 pm

    The Rudd government made a similar commitment to cut waste, but it was in the form of something like a ‘all Ministries reduce your budget by 5%’ edict.

  16. Matthew Pilott 16
    16 September 2008 at 1:06 pm

    Phil – a good comparison would be comparing what, specifically, they’ve identified as waste – I wonder how many grams of mainland cheddar Obama would get for the average US citizen. I wouldn’t be surprised, though, if they are both as vague as each other – that is also something they superficially have in common.

    P.s. ‘fewer’ than you think! Don’t let those billboards corrupt you!

  17. Pascal's bookie 17
    16 September 2008 at 1:10 pm

    3-1

    Pile on 😉

  18. Policy Parrot 18
    16 September 2008 at 2:40 pm

    Well if National really thinks it can make enough fiscal room to cut tax, I suggest it start right now, as a show of good faith to the public of New Zealand, and “less bureaucrat” the Opposition researcher for a senior Nat who spends part of their day, while on the state payroll, digging up dirt on the left, and then blogging under the nom-de-plume “steady eddie”.

    Lest this person be unmasked.

  19. Jasper 19
    16 September 2008 at 4:13 pm

    Well, if it’s raining on November 8th, National will have a chance to cut funding across all levels.

    If it’s fine, they may not.

    Labour better be praying for fine weather. Their core voters seem to melt in the rain and don’t have cars.

    I wonder if any KFC’s or Maccas in South Auckland will be set up as Polling Booths… certainly be able to kill two birds with one stone there. Get a feed and cast a vote.

  20. insider 20
    16 September 2008 at 4:26 pm

    MP

    The home insulation fund IMO is classic pork barrelling. Getting taxpayers to fund a pet project that would otherwise not fly and questionable paybacks

  21. Matthew Pilott 21
    16 September 2008 at 7:37 pm

    I can see your point, but it is in line with what the greens stand for, and isn’t the worst type – it can benefit anyone, not a specific area or group. Since it’s also related to the bill being passed it’s not a clear-cut bribe for support!

    Questionable paybacks? I thought that the argument was very compelling actually, what about it didn’t work for you?

  22. Steve Pierson 22
    16 September 2008 at 7:53 pm

    insider. you don’t understand the definition of pork-barrelling.. it’s when a representative gets the Government to fund projects specifically for their electorate that is not logically or ideologically justified but will help them win re-election. If you think the Greens only want to insulate the houses of the poor to get more votes you’ve got a pretty distorted view of humanity and a frankly ignorant view of the Greens… maybe you should get along to a Greens event and meet these people.. then you could really start to consider yourself an insider