Kremlinology: Nats’ tax plans

Written By: - Date published: 3:24 pm, May 26th, 2008 - 11 comments
Categories: election 2008, kremlinology, national, tax - Tags:

National is still refusing to give us any detail on its tax cut plan, indicating it doesn’t have one. But let’s do a bit of Kremlinology to work out what we might expect from them when they eventually get their act together.

The size of Labour’s tax cuts has spooked National. Key’s speech in reply to the Budget was a mess, and the Nats have been all over the place since. National continues to say its tax cuts will be larger but Key is now saying other things matter too (what other things and how he would somehow magically fix them, he doesn’t say). Key no longer talks about $50 plus for the average worker. Now, he says the Nat’s package “may be” bigger than Labour’s. This indicates that National has looked at the Budget numbers and seen there really is nothing left.

There are vague mutterings from National about cutting spending but they have openly pledged not to cut funding and inbuilt increases for health, education, welfare, superannuation, defence, and infrastructure. Working for Families and Kiwisaver are also protected although National hasn’t ruled out reductions. That’s most of government spending ruled out. There is nothing left for big cuts.

So, National’s cuts will not be much larger than Labour’s (or, if they are, they will be offset by WfF or Kiwisaver cuts for many families). Additionally, National says they will target their cuts to those on upper incomes. With the same limited pot as Labour’s cuts and more of the money going to the rich, less will go to most people.

The October 1 cuts will already be in place by the election. So, we’re looking at what National might do differently after them. It could raise the 39% bracket to 100K and the 33% bracket to 55K , and off-set that by not raising the start of the 21% bracket to 20K as Labour intends but keeping it at 14K.

As ever with National, this can only be a vague suggestion of what they might do but it is clear that if National wants to prioritise cuts for the rich, it will mean smaller cuts for those on low and medium incomes.

11 comments on “Kremlinology: Nats’ tax plans ”

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  1. mike 1
    26 May 2008 at 3:54 pm

    “National wants to prioritise cuts for the rich”

    SP – How much do need to earn to fall into your “rich” bracket?

  2. Lampie 2
    26 May 2008 at 3:58 pm

    damn, thought this was about cheese

  3. Ari 3
    26 May 2008 at 4:04 pm

    Bill English did mention that they’re keeping kiwisaver “in some form”. I have a feeling that there’d be some cuts to the government contributions to make more room for tax cuts.

  4. Steve Pierson 4
    26 May 2008 at 4:05 pm

    I’m not setting a definition but tax cuts that go to the upper bracket or rates deliver the most for those on high incomes, people known as ‘rich’.

    Whether you’re ‘rich’ obviously depends on cirucmstances other than just your income (do you have a partner, do they have an income, dependent children? etc). And we know that many rich people avoid tax and so appear to have zero incomes when they’re rolling in it.

    But, normal definition of poverty is below 60% of the average income, 60%-140% of the average ($28K to 50K) is usually seen as middle class, then you would the well-off and rich somewhere above that.

    given that wealth is relative, mike, what portion of the population do you think should be considered ‘rich’ the wealthiest 1%? 5%?, 10%?, 20%? I have the income levels to match those percentages if you want to give your take on how much of the population is ‘rich’.

  5. Tane 5
    26 May 2008 at 4:14 pm

    Does this mean… John Key is cutting the cheese?

    (Sorry.)

  6. Steve Pierson 6
    26 May 2008 at 4:29 pm

    Umm, I just realised that on IE my income distribution bars from this series of graphs look distinctly cheese-coloured… coincidence or prescience?

  7. T-rex 7
    26 May 2008 at 4:52 pm

    These graphs are good steve, but I think it might be worth changing the presentation. At the moment you have to look at the rate, the income bracket, and do some mental arithmetic. I realise it’s a pretty simple matter to find your income level, see two rates posted, and work out who’s offering you what, but it might be even clearer if you graphed “dollars/week compared to the status quo”.
    Or it might not – just a thought.

    The titling of the graph at present doesn’t sit well with me is all. People will get an accurate impression if they go to the effort of reading the left vertical axis, but if they don’t there’s a risk that national will be seen as offering a greater ‘Tax cut’ than labour in the $15k – $50k bracket, whereas clearly the opposite is true.

  8. T-rex 8
    26 May 2008 at 4:55 pm

    For example, it would clearly illustrate that – in the case of the scenario you describe above – Nationals tax package would offer no relief at all to anyone earning below $39k/annum.

  9. Steve Pierson 9
    26 May 2008 at 5:03 pm

    points taken. This is about comparison of the level of tax across incomes, not how much people get in dollar terms from tax cuts but rest assured, when (if) National announces a tax cut policy there’ll be dollar comparisons across income levels.

    That said, I don’t think we should concerntrate on tax too much and I will be turning to other issues after my next post

  10. Ari 10
    26 May 2008 at 5:07 pm

    Yeah, I’m tired of talking about National’s ephemeral tax policy. Let’s talk about their non-existant social policy instead! 🙂

  11. T-rex 11
    27 May 2008 at 8:54 am

    Absolutely agreed – until National fronts up it’s pure speculation, and in any event I’m far more interested in their other policies. Although they’re equally speculative.

    Key had been just laughable to watch lately. Complete inability to improvise.