Keith Rankin: Controversy over National’s Tax Cuts

Written By: - Date published: 2:18 pm, December 12th, 2008 - 5 comments
Categories: national, tax - Tags: ,

If you’re feeling lost in the discussion around National’s tax plans there’s handy analysis from Keith Rankin who point out:

… persons earning between $14,000 and $24,000 will receive annual tax cuts of less than $100. They will receive nothing before 2011. This contrasts with Labour’s already legislated for tax cuts, from 2010, which target this group of workers… The figures [table below] clearly show that, for low income workers on about $20,000 (most will be in part‑time, short‑time, or variable‑time work situations), National will give them a tax cut of just over $1 per week.


Further, workers who don’t qualify for the IECT will be worse off than they would have been under Labour for incomes up to about $45,000. National has been unable to enunciate any sound reasons for the exclusion of persons earning less than $24,000 from access to the IETC…

It is particularly important that the Government realises that, as unemployment rises next year, many people currently earning more than $24,000 per year will find themselves with annual incomes below $24,000 in the years to come. It will be cruel to give them an IETC, like giving a person an umbrella, only to take it away when the rain comes, when they most need it.

And he goes onto provide a policy solution (of changing the IECT). Let’s hope the round building pays attention and embraces the opportunity to make some improvements.

5 comments on “Keith Rankin: Controversy over National’s Tax Cuts ”

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  1. Lanthanide 1
    12 December 2008 at 3:49 pm

    I think the suggested changes are great, and frankly there is no reason for National not to do it.

    Except that the IECT is a tax rebate which means you have to apply for it at the end of the year. You don’t get the money during the year, but as a lump sum at the end, if you apply for it. By having this new rebate, National get all the praise for giving (some) people a tax cut, but underhandedly get to keep some of the money back from the poor sods who don’t know they need to apply for it to get it.

    So I doubt we will see the IECT removed in favour of a sensible tax scale. Why do you think it was made into a special, separate rebate in the first place?

  2. Ed 2
    12 December 2008 at 10:44 pm

    Pay in the hand is what people care about – I agree that a rebate is not as desirable, but isn’t that how Working for Families works?

    I’d be interested in what this change means for a pensioner – assuming say no other income, giving net payment now, and each of the next two years under the tax rates in legislation last week compared with the new tax rates after National’s change. Both married and single pensioners comparisons would be useful. Has John Key met his promise of not reducing New Zealand Superannuation payments?

  3. Lanthanide 3
    13 December 2008 at 12:18 am

    I believe working for families essentially gets deducted from your PAYE tax. If you end up earning significantly more later in the year than you did earlier, I believe you can end up in a position where you need to pay money back to them.

    I’m not sure though, not being elligible for it. Not elligible for this new IECT thing either.

  4. Swampy 4
    13 December 2008 at 3:00 pm

    Thanks for the info.

    I recall that Labour’s record on tax cuts was they promised some before, legislated for them, then abolished them in a later budget. Given that record, and the well known viewpoint on tax cuts of Labour until this year, I believe Labour if re-elected would have found excuses to abolish the future rounds of tax cuts not yet in force.

    National’s record on tax cuts, on the other hand, is well known, predictable, consistent and trustworthy.

  5. Matthew Pilott 5
    15 December 2008 at 11:21 am

    “National’s record on tax cuts, on the other hand, is well known, predictable, consistent and trustworthy.

    Mmm, for example when they voted against Labour’s cut to the corporate tax rate, Swampy. Given Labour cancelled one tax cut, and National voted against one tax cut, your comment is worthless.