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National’s cruel hoax

Written By: - Date published: 10:10 am, May 23rd, 2008 - 52 comments
Categories: budget 2008, same old national, tax, wages - Tags:

Well the budget is out and across the country the public are looking at their tax cuts and asking “is that it?” and this is at a time that economists are very nervous about the inflationary impact of such a large package of cuts and anything bigger means cutting services or significantly increasing borrowing.

The only way to answer is “yes, that is all”. Tax cuts are not and never will be the answer to rising costs. While Key talks about a half a billion being available for more cuts if the public service is capped (effectively a cut in real terms) he knows full well that, as Steve pointed out some time ago, that means all of fifty cents more if it’s spread equitably. National can offer much more to the wealthy (and from Key’s talk about using cuts as “incentive” for people to earn more that may well be their plan) but that will come at the expense of the other 95% of the population.

For the last five years National has embarked on a cynical public relations campaign to convince people that everything will be ok if we just cut taxes because they don’t want to talk about the real way to raise incomes: higher wages. And given their determination to deny New Zealand’s workers higher wages I can’t really blame them for this approach.

I can only hope that now people can see the cruel hoax National has played on them they’ll start focusing on real ways to raise incomes.

52 comments on “National’s cruel hoax”

  1. Dave 1

    Labour does not have an answer on any ways to raise any incomes, let alone real ways.Labour could easily increase wages in the public sector but won’t, as higher wages lead to higher costs and it has no answer to how to increase productivity in the process. Its best bet is to play around with other factors, WFF, interest rates, tax cuts, etc. How much of new budget expenditure is earmarked for economic growth?

  2. Matthew Pilott 2

    Dave, dropping unemployment numbers by several hundred thousand is probably a good start for increasing incomes, yeah?

    How much of new budget expenditure is earmarked for economic growth?

    Why don’t you take a look and get back to us – I believe there’s even a list of expenditure on this site.

  3. IrishBill 3

    How much of new budget expenditure is earmarked for economic growth?

    Apart from a half a billion for broadband, $700 million for R&D, tax credits for R&D and hundreds of millions of dollars on infrastructure and training? Not much really.

    And while I agree Labour could do more to increase wages they are certainly better than the “love to see wages drop”, “take your work rights from you” attitude National has repeatedly shown.

  4. outofbed 4

    As economic growth is heavily influenced by the use of finite resources
    our growth model is unsustainable.
    I guess that’s not a very palatable fact but sooner or later….

  5. erikter 5

    The figures below are true, so IB, staunch Cullen defender, how can you argue against these facts?

    Total cumulative inflation between April 2000 – March 2008 runs at 23.8%.

    So, if Michael Cullen wanted to keep current tax rates he needed to adjust the 33% bracket from $38,000 to $47,000, and the 39% bracket from $60,000 to $74,000 on 1 October, 2008.

    He’s underachieved in this aspect.

    In fact, Cullen is not delivering any real gains to the workers the purports to defend. He’s merely returning only some, not all, of the money he took away from us over the last eight years through fiscal drag.

    It’s bloody obvious.

  6. MikeE 6

    And where do higher wages come from?

    Growth!

    And where does growth come from?

    Labour productivity (that means you guys working harder) and a better business environment for investment

    And how do you get a better business environment?

    Regulatory certainty, low, efficient tax system, low compliance costs etc

    The point being … that higher wages are the ends, not the means…. and should be everyones goal. But you can’t just raise them without havign the growth in profit to pay for them.

  7. “it has no answer to how to increase productivity in the process” Yep, 8 years under Labour and productivity has steadily fallen :Productivity Decline Any small tax benefits from the “8 litres of petrol” budget will be obliterated by home loan interest rates staying higher for longer. Though given Labour’s constituents live in state funded houses I guess it makes sense politically.

  8. Daveski 8

    Precisely erikter – I made this exact point yesterday and no one challenged it.

    Likewise, the fact that Labour and Cullen have used tax cuts as an election bribe – no more, no less – has also not been challenged.

    I’m not underestimating the impact that any tax “cuts” will have (and agree also that WFF makes a difference to some too).

    But no one here seems prepared to acknowledge the above points which are simply consistent with the view that Labour’s view is to tax MORE to redistribute for ideological reasons. These are NOT and were not intended to be genuine tax cuts.

  9. National disgrace 9

    BS…
    “Any small tax benefits from the “8 litres of petrol’ budget will be obliterated by home loan interest rates staying higher for longer.”

    And John Key’s “full tank of gas” promises will get around this very issue, how?

  10. Bryan you retard. You know full well that productivity is an input/output ration. No more no less. If I produce an out put of 2000 for an input of 1500 and then cut cost to output 200 for an input of 100 my productivity increases but my growth collapses. If you’re going to make sophist comments please try a little harder. Mike is a moron so I expect the productivity misdirection from him but you’re supposed to know what you’re talking about.

    As for the “just adjusting for inflation” argument? You are comparing PAYE to the cost of living. I’m not sure I see the connect. You’d be the first to argue that cpi has no economic relationship to how much someone’s wage should increase and yet you think tax should? I agree with the idea of shifting the brackets to keep the proportion of earners in each bracket the same but until these tax cuts came out I’d never heard anyone run the daft argument you are now spinning.

  11. IrishBill 11

    Reading through the complaints from the right I have to admit to pretty much agreeing with what ‘sod said but minus the abuse. I can’t understand why you would seek to attach income tax to inflation when wage rises should already be taking care of CPI.

    ‘Sod, you have been pushing the limits lately mate. I should warn you that if you continue abusing other commenters you’ll be up for a two week ban.

  12. IrishBill: the inflationary impact of Cullens spend up (taking Government spending to 50% of GDP in 08/09) will result in the interest rates staying higher for longer. That of course only impacts voters who have home loans and aren’t Labour core support.

    [lprent: I have a mortgage, therefore I don’t vote labour? Oh well I’m sure someone will comment on that. Clearly wrong in my case. That makes strange assumptions about rational economic behaviour by making the simplifying presumptions that people do not consider the future or people apart from themselves or their immediate family.]

  13. IrishBill 13

    Bryan, this may keep interest rates higher but given current inflation is being driven by external prices I’m not so sure about that. If you are really concerned about interest rates then I suggest you may want to consider the fact that single lever monetarism is stopping intervention in hot areas of the economy and effectively punishing everyone for the excesses of just a few sectors.

    Personally I would have spent less on tax cuts and more on infrastructure projects to counter the downturn as I think it is a better way to control stimulation of the economy and it builds capacity so that more advantage can be taken of the next rise in the cycle but I’m not the minister of finance.

    On a related note, you have been advocating larger tax cuts than the ones Cullen has provided and I have to wonder whether your sudden concern for inflation shows you are less interested in economic analysis and more interested in shilling for the right.

  14. IrishBill 14

    And Bryan, it does your credibility no good to make absurd generalisations such as your claim that people with mortgages don’t vote Labour.

  15. Daveski 15

    IB

    First, agree entirely – let’s leave the abuse out of it.

    The issue of bracket creep is not related to CPI indexing. It’s that as your wages increase (through CPI) the marginal tax rate at higher brackets kicks in hence your average tax rate increases – so you pay more tax even tho you’re getting the same “real” income.

    Happy to accept the WFF does address some of the issues for lower income workers but my point is that these aren’t tax cuts given that bracket creep has been allowed to gallop for the last 9 years

  16. National disgrace 16

    I have a mortgage, my own business, and a degree in economics, and think John Key is a blithering idiot.

  17. dave 17

    So what do you think ofthe Reserve Bank cancelling out most homeowner’s tax cuts?

  18. schrodigers cat 18

    I have a mortgage, a lot of income in the top tax bracket, (not income from the govt. but real private enterprise money) and would hate to see Key, Shirtcliffe, Boscowan and their mates anywhere near being in charge of more than their mouthes.

  19. Pascal's bookie 19

    Daveski, I’m not an economist but I don’t think you can go from the point you are making to the conclusions you reach.

    Plenty of people whose wages have only matched the CPI have not suffered from bracket creep, as they have not broken through the 60k mark.

    Lots (most?) of the people who did break through the 60k mark did so because they changed job, got a performance based raise or otherwise grew their income faster than the CPI. So not all of the increased tax they paid was of the nasty bracket creep thievy sort, surely? Without those details I don’t think your argument is as strong.

  20. IrishBill 20

    Daveski, Erik is making the argument that bracket-creep is somehow linked to inflation. This is not a bracket-creep argument. A bracket creep argument would be that when the top tax rate was set it included the top 5% of the population and now it includes the top 14% and should be reset upwards accordingly.

    Wages have gone up with CPI but that does not mean the tax brackets need to be adjusted for CPI because it does not give a measure of how many people are in each bracket.

    Erik is claiming that the brackets should be indexed directly to inflation but inflation (even more specifically wage inflation) doesn’t solely determine the number of earners in each bracket. If, for example, you have a heavy weighting of earners toward the lower end of a bracket then a 10% average rise in income will mean much less bracket creep than if you start with a heavy weighting of earners toward the upper end of that bracket.

    Erik’s measure is fundamentally flawed in this respect and as he is using it as the basis of his argument his argument is flawed. As is yours. I have not had a look at the stats but I would say that Cullen’s cuts more than realign the tax brackets to the original percentages of the earning population as they are much bigger than the proposed 2005 cuts that would have done exactly that.

  21. RedLogix 21

    And Erik is of course forgetting that in 2005 Cullen proposed to index the bracket thresholds to CPI… and the resulting modest tax reductions were widely derided as the ‘chewing gum’ tax cuts. In the end the political hysteria was so negative that Cullen simply dropped the idea.

    You could have had CPI indexation over three years ago, but for stupid political reasons you rejected them. Don’t come around here whining about it now.

  22. schrodigers cat

    That is interesting, may I ask why?( I have the same sentiments but I am sincerely interested in what motivates you)

  23. Sorry Bill. To be fair I do mix the abuse up with proper argument which is more than some of the righties manage…

  24. National disgrace

    Again you share my sentiment about John Key, may I ask why you think he’s an idiot?

    For those of you who feel that I contradict myself when I say that JK is part of the global banking elite and has a role to play in this country for them and not us but is also as thick as a brick the following:
    He is working for people who spend more than what he had to work for his whole live on a Yacht built in NZ. he is just a foot soldier. They don’t need some one with a brain, they need someone with a greedy little mind who wants to be accepted by his masters. This is not a man with original ideas, he is a yes man. Even Bill English is more of an original.
    Let alone Helen Clark whatever you may think of her she is a true original

  25. National disgrace 25

    Watching John Key on televison, or listening to him on radio, I am truly amazed that anyone takes him seriously. What’s that about? He is so embarrassingly shallow. I’ve gone past being shocked to just having a laugh now.

  26. Felix 26

    I’ve gone past being shocked to just having a laugh now.

    Me too.

    To borrow a phrase, if I were Nationals campaign manager I’d be kicking myself for not taking him out the back and shooting him a year ago.

    On morning report today he said that there’ll be no tax policy from National until a month before the election.

    This is his only election issue and he won’t even talk about it until a month out? With every journo in the country trying to put him on the spot about it for the next five months?

    No wonder his smirk is cracking.

  27. They used to say back home that you could put up a monkey in a suit as Labour’s candidate and he would win.

    I think after 3 terms National thinks they can get away with the same, just find a guy who won’t be scary and hope the ‘change’ meme take you over the line.

  28. Lew 28

    Bag him as hollow or shallow of whatever as you like, the polls speak for themselves. The electorate gets him, even if y’all don’t.

    If you sincerely want him to lose, I suggest trying to understand *why* the electorate gets him, and working on a strategy which takes that into account, rather than just dismissing it as implausible or irrational.

    You don’t have to fill out a justification form to vote; all you have to do is tick the box, and it looks like that’s what people are going to do for Mr Key and National.

    L

    Captcha: `11 elementary’. Yes, my dear Watson.

  29. Felix 29

    Lew I beg to differ – I don’t think the electorate “get” him. I think they kinda like the idea of him, but I don’t think they get him yet.

    If he doesn’t show some substance soon though, people will start to get him.

  30. National disgrace 30

    The best strategy to ensure he loses is to leave him there. Both TV channels are now baying for details on National’s cuts, and he’s now claiming miraculously that there’s more to life than tax cuts. With a look on his own face saying… “do I sound stupid saying this now?” It will get worse for him. We’ll look back on this week as the turning point..

  31. higherstandard 31

    National disgrace

    You are as deluded as those who get excited by each new poll that comes out – there are another five months until the election and a great deal more water to go under the bridge before anyone can call the number of seats that each party will win at the election.

  32. Lew 32

    National disgrace: Underestimate National at your political peril.

    It’s the perception that the government holds this sort of disregard for the expressed opinions of the electorate that is driving the electorate to National. People believe their own hype a bit too much, and think it’s self-evident. It’s not.

    L

  33. Felix 33

    hs

    Quite so. Five months is a long time.

    Even longer if you have to bluff for the first four…

  34. Lew 34

    Felix: Whether they get him or whether they only think they get him is irrelevant. Currently he’s the man to beat because he’s providing the electorate with something they can’t get elsewhere.

    National has under John Key commanded a substantial lead over Labour for at least the past year. WTF is it with you people just blithely disregarding the facts on the ground?

    Edit: Felix, second paragraph not directed specifically at you.

    L

  35. Felix 35

    Lew, I agree he’s the man to beat as you put it but that’s largely because he’s been banging on about tax cuts and nothing else – it struck a good chord so he kept strumming it.

    Now that Labour’s cards are on the table vis a vis tax, people are going to want a lot more info out of National. He’s going to be scrutinised much more closely by the public who I don’t believe have looked that closely at him yet.

    I think we’ll see a lot of the soft National support dissolve over the next few months if they refuse to engage – it’s a long time to smile and postpone.

  36. RedLogix 36

    Lew is right. As far as elections are concerned, symbols, perceptions and emotive reactions is all. Rational policy on it’s own has very little to do with.

    I’m NOT saying that the electorate is stupid. (Although God knows at times I’m tempted.) Some significant minority of voters really are informed and thoughtful about their choices. Another part of the electorate votes strictly along tribal lines. Fourth generation farmers from the Wairarapa for instance would sooner die than vote anything other than National. By themselves these two groups they constitute a bedrock of each Party’s support base, but alone they are not enough to win elections.

    The critical voters whom both parties must influence is that large grouping swing voters whose decision is largely based on intuition. It is here that elections are won or lost. (Sorry if all this is Polly 101 for most of us.)

    Intuition is not to be entirely sneezed at. In the normal course of events, it is a powerful human tool for synthesising diverse, conflicting and incomplete information into a decision template. The problem is that events are not normal.

    Over the last 60 odd years the professional persuaders have learnt a great deal about how to manipulate intuition. (The latest New Scientist has a useful article on the topic here). It means that our democracy has become vulnerable to outcomes that are a perversion of the process. The whole point of democracy is to hold power to account, but what if that very mechanism is broken?

    In this sense Lew is right. Emotion will trump logic everytime, unless the logic is also emotionally literate. But if there is one thing we are all guilty of (me worst of all) is that we are so fond of our ideas, that we believe that they will sell all by themselves. They don’t. What sells is stories. Look at the polls. National have been selling fairy tales and the electorate has been buying; because that was all that has been on offer. Where are the left wing narratives in the public discourse? Not many. This is why the “arrogant” label so easily sticks, it’s not reality, but it is a perception born of an aloofness, because we have failed to convey our ideas in a way the people can “get”.

    Let’s take the Standard to the next level. We can do elegant pure ideas and win arguments until the crack of doom, but that is not enough. There is a lot of talent lurking on this site. If we really want to win elections, we need to learn how to tell the kind of story that people really GET.

  37. Lew 37

    RedLogix is right on the money with this one, even if the call to arms is a little bit dramatic 😉

    L

  38. National disgrace 38

    hs… historically accurate (kidding) polls (are these ‘facts’ on the ground?), based on an electorate that has not yet seen anything substantial from National in the way of their frightening policy, have Labour the margin of error away from what they won with last election, and “Labour are history” . And I’m deluded?
    Not the only one it would seem.
    If you believe the current polls will be reflected in the election in 6 months, you’ll probably believe the fluff Key spouts. Off to celebrate Key’s high water with a cold one.

  39. RedLogix 39

    even if the call to arms is a little bit dramatic

    Yes.. a spot of self-restraint was MIA there.

  40. Lew 40

    ND: Then I’m glad you’re not *my* favoured party’s campaign manager.

    L

  41. schrodigerscat 41

    Travellerev – because John Key et. al are all just a starched shirt front for greed really.

    I agree when you are hungry getting ahead matters, but once you are fed watered and sheltered, helping others get there, and appreciating the wonder of life has a lot more appeal than speculating on some small countries currency. I think JK only ever learnt which numbers were bigger than other numbers.

    He is saying nothing about what he believes, he looks like he is a front for unpresentable greed.

  42. higherstandard 42

    ND

    If you’d followed my previous comments on the Std you’d realise that I take little notice of the polls apart from their general trend overtime – that trend over the last 12 months is however pretty clear.

    The thing that constantly amazes me is the posters on this site being surprised that National haven’t released substantive policies yet – why on Earth would they prior to the Budget and more importantly when the electorate have the attention span of a goldfish.

    Wait till 1 month out from the election and things will be clearer as to who will be forming the next government and at’ll have more to do with the general economic outlook in NZ at the time, the hurt being felt by the public and the third term blues of Labour than any brilliant policies from either of the two parties

  43. Felix 43

    Absolutely agree hs.

    But watching Mr Key last night and hearing him this morning I really got the sensation of witnessing someone who knows he’s overplayed his hand.

    And he will be called on it. The electorate, while happy to vibe it most of the time, do get strangely interested in policy as elections draw nearer.

  44. RedLogix 44

    How about this from Stuff this morning:

    Media undermining Cullen with Interest Rate scare. And then right next to it: Media uncritically sucking up to Key’s Big Promises.

    How’s the logic go? Labour’s measured tax cut is inflationary, but National’s promised much larger ones is not? Does ANYONE believe a damn thing they read in our papers anymore?

    [Tane: Links fixed]

  45. r0b 45

    Red, those links slightly broken (extra ‘ at the end), see:

    http://www.stuff.co.nz/4558633a11.html
    http://www.stuff.co.nz/4558610a10.html

  46. erikter 46

    “Let’s take the Standard to the next level. We can do elegant pure ideas and win arguments until the crack of doom, but that is not enough……..”

    Sop there or I’m going to wet myself.

    That is 100% pure comedy, red. You’re wasting your time here.

  47. you manage to bring a bit of malignant anger with you every time, eh, erikter?

  48. erikter 48

    Not really SP, but Red’s comic line was too much even for my dry sense of humour.

    The problem with Labour is arrogance. A good example is Michael Cullen, who, in today’s paper, criticises the currency markets for being “too touchy” and for increasing the NZD value against USD/AUD/GBP.

    No, he’s not wrong. The markets are!

    I believe that despite the best efforts of yourself, red and the staunch pro-Labour crowd around here, the die is cast already. Prepare to become the Opposition.

  49. ak 49

    Red: What sells is stories. Yep, nail on the head again: and Where are the left wing narratives in the public discourse?

    Well, without a vehicle for dissemination, safely tucked away here on the Standard (and in the likes of Gordon Campbell and Denis Welch’s repositories of wasted talent).

    As has been obvious since the heavy media abetting of the disgusting Orewa One racism, the blatantly vote-buying tory “tax cuts” of 05 and the lack of scrutiny of National ever since, it’s the media, stupid.

    I keep waiting for some bright young thing to analyse the media coverage of Orewa One (eg enormous and repeated editorial support in the provincial rag where I happened to be at the time) and am still intrigued by the Brownlee email (Hollow Men) alluding to the “work that was done…that forced them (the media) to write positively about the subject.” “Work”, ehhhh….

    Sadly, a handful of journalists are the “opinion leaders” to the bulk of the swinging voters that will determine our future: and they are hired by prime beneficiaries of tory policy. When we look at who pays these pipers, the tune shouldn’t surprise us.

  50. Lew 50

    ak: “it’s the media, stupid.”

    The general media business model and the sort of behaviour this drives have not changed significantly in living memory, so I’d argue the opposite: `it’s the media providers, stupid’. That is, it’s the communications departments, press release writers, PR people, the much-reviled spin-doctors and so on who haven’t been packaging their narratives up in the sort of ways which will resonate in the media.

    Don’t labour [verb] under the delusion that a news event is an intrinsically neutral thing which naive reporters dutifully cover in as fair and even-handed manner as possible out of professional pride – they get paid based on the audiences garnered by a piece of coverage or comment. Therefore, when picking a narrative line, they’re going to pick the one which is most resonant. This is a symbiotic process, so getting your own core narratives out there as orthodoxy not only gives media opportunities to run them, but raises the likelihood of similar narratives being resonant and therefore being picked up long-term or more frequently.

    While many people on both sides do, there’s no credible argument that the media is systematically biased against one side or other. The media is biased against stuff which doesn’t have intrinsic immediate news value, and a great deal of this news value is in the framing, packaging and symbolic content of news events, coverage and commentary.

    “Sadly, a handful of journalists are the “opinion leaders’ to the bulk of the swinging voters that will determine our future: and they are hired by prime beneficiaries of tory policy. When we look at who pays these pipers, the tune shouldn’t surprise us.”

    This is my point. You can’t change this fact. Don’t be emo about it: adapt or perish.

    “I keep waiting for some bright young thing to analyse the media coverage of Orewa One”

    A colleague is doing a MA on the Big 4’s framing of Maori issues between Orewa and the 2005 election, so this will fill that need. I guess it’ll be published later this year. My own MA is looking at a somewhat different matter (how the maori party’s discourse differed from that of other Maori MPs and non-Maori MPs), but takes Orewa as one of three case studies. This’ll be published late next year at earliest.

    L

  51. ak 51

    Lew: adapt or perish.

    Granted this is required: any ideas on how?

    (ps love your comments – in a totally non-emo way of course, not that there’s anything wrong…)

  52. Lew 52

    ak: Some of your comments are crammed full of wonderful symbolic stuff. As a propaganda geek they’re a pleasure to read. This one is an example.

    “Granted this is required: any ideas on how?”

    When I say adapt or perish I mean that understanding the way the system works is the key to formulating a useful strategy. I haven’t yet come up with the strategy, but when I do, I’m sure you’ll hear about it.

    I see a lot of people being emo about the `shitstem’, bleaters about bias and things being unfair and so on, or about how the electorate is irrational. If they accept that this is Just How Things Are they’d be in a position to mitigate against the systemic pressures which so frustrate them and potentially even change the dynamic of the system.

    L

    Captcha: `bum extract’. Which sums up my views towards the bleaters’ bleatings.

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  • Speech to University of the South Pacific students
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