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National’s lolly scramble tax cuts

Written By: - Date published: 8:34 am, September 19th, 2020 - 55 comments
Categories: covid-19, Economy, election 2020, health, Judith Collins, paul goldsmith, tax, uncategorized - Tags:

What a surprise!  What does a right wing party do when it is facing annihilation but promise tax cuts that favour the rich, even though a month ago it said it would not.

From Thomas Coughlan at Stuff from August 6 this year:

It has been an eventful week for Goldsmith. He’s faced down attacks from the Government over his goal of reducing New Zealand’s core Crown debt-to-GDP ratio to 30 per cent in a decade – attacks Goldsmith labelled as “scaremongering”. Then, on Wednesday morning, Goldsmiths’ leader, Judith Collins ruled-out tax cuts for National’s election platform

Goldsmith had been working on a tax package with former leader Simon Bridges. The part that got announced was a plan to index tax brackets to wage growth, stopping “bracket creep”, which saw people’s taxes rise as wage inflation put them into ever higher tax brackets.

The other part of that plan involved tax cuts and it’s been shelved for now. Goldsmith believes there’s simply too much borrowing to justify it.

“I’m sure we will have an opportunity to do that down the line,” Goldsmith said.

But with the Government slated to borrow $60b over the course of the next year, the Government needs revenue.

“These are eyewatering sums,” Goldsmith said of the borrowing, nothing that at the peak of the lockdown the Government was borrowing about a billion dollars – the equivalent of the Pharmac budget – every four days.

But while tax cuts may be off the table, its only for the time being.

“Once we get the economy up and running again, New Zealanders can be assured that the National party will always be looking for opportunities to reduce the tax burden,”

Fast forward to yesterday when National announced that it would bring in tax cuts.  It appears that sub 30% polling has persuaded National that it should reverse its former position.  Even if the promised cuts are temporary.  And it brought out a tax calculator.  This has been done before.  It worked in the past but we live in interesting times.

We are in the middle of a pandemic and the Government has already shelled out tens of billions of dollars to protect jobs and make sure the health response was up to scratch.

Which it has done, rather successfully.  With luck it may be that we have seen off the second community outbreak of the disease.  And the Government is getting ready for the next wave.   Future waves will occur.  We need to make sure we have the resources ready for when the next one happens.

And debt is piling up.  This week’s PREFU suggested that in the short term things are looking better than previously anticipated.  Unemployment is not as bad as Treasury thought and the rebound in growth is better than anticipated.  But longer term things look grimmer.  It will take the world longer to bounce back to business as usual.  Air travel and tourism will be screwed for longer than we thought.  The environment may thank us for this but the bean counters will not.

Judith described the PREFU as catastrophic.  You would think that she would stick to her earlier announced position.

So what does a responsible political party do?  Make sure that the state has the resources available so that it can meet the next wave and resource the health response or engage in a lolly scramble?

National chose the lolly scramble.  Even though previously it said it would not.

This is a sign of desperation, an attempt to preserve the support they have rather than put them into a position where they could win power.  I can confidently say that the average kiwi prefers that the Government continues to do its job, rather than have enough for a couple of cups of extra coffee each week.

It has worked in the past but this time I don’t think so.  Appealing to kiwi’s better sense is currently much more potent than appealing to their greed.

55 comments on “National’s lolly scramble tax cuts ”

  1. PsyclingLeft.Always 1

    In your Link…

    "His elevation to the coveted finance portfolio raised eyebrows in Wellington. He's possibly the most libertarian, or Right-wing person to hold the shadow finance portfolio. "

    Yea we've had those before. And his connections with Banks,Brash et al should raise alarms from all NZ (apart from the Few)

  2. Dennis Frank 2

    Election bribes are traditional. So are conservatives. So we expect this. JC's ruse of announcing National would not campaign on tax cuts was a momentary lapse into innovation. Then she remembered it's a woman's prerogative to change her mind – traditional saying. So back to the future again.

    Farrar: "This provides New Zealanders with a real choice – a Government that will help people through the tough times by temporarily reducing taxes, or a Government that will increase taxes." https://www.kiwiblog.co.nz/2020/09/national_promises_tax_cuts_for_16_months_to_help_families_through_covid_recovery.html

    Buying votes is a natural consequence of blending democracy & capitalism. Presuming pollsters are still sampling, closing off mid-week to enable public release next Friday, we'll find out how many centrists chose the money instead of the bag…

    • dv 2.1

      Farrar: "This provides New Zealanders with a real choice – a Government that will help people through the tough times by temporarily reducing taxes, or a Government that will increase taxes."

      YES Farrar those people earning over 180k pa (ONLY $3500 a WEEK Geez) will be REALLY struggling. Shame on Labour

    • mpledger 2.2

      They are not after centrists with this policy, they are trying to buy back the people who fled to Act.

      • Dennis Frank 2.2.1

        You could be right. I've been thinking since ACT approached the threshold that there's more going on than just tacit creation of a coalition partner that's not dependent on Epsom. Next poll shows ACT dropping back to 3% would prove it.

        • mikesh

          It seems to me that Epsom may consider voting for Goldsmith this time, thinking that ACT, on 6.5% will make it into parliament anyway, while Goldsmith may not get in as a list MP if National finishes with an overhang. In that case it would only need ACT to fall below 5% to find themselves out of parliament.

          • Dennis Frank

            Think you've got logic on your side but could go either way. Nats seeking to bolster ACT vs Nats seeking optimal brand strength via status quo. Next poll will probably show them close to the threshold, so waverers will require a tip from head office!

  3. Tricledrown 3

    Tax cuts for the well off Crumbs for the majority,National don't know the difference between the average wage and the median wage.

    National are targeting mainly National voters with a short term bribe.Much of that money will end up in speculative investments such as property as the well off don't need to spend all of their money.

    The best way to stimulate the economy would be a flat payment say $50 dollars a week then those on incomes under the average wage will spend that money in the economy.

    • Draco T Bastard 3.1

      Tax cuts for the well off Crumbs for the majority

      National will be looking for a way to sweep up the crumbs.

      National don't know the difference between the average wage and the median wage.

      And they don't want to know. All they consider worth knowing is who's rich and can be brought onto their side.

      The best way to stimulate the economy would be a flat payment say $50 dollars a week then those on incomes under the average wage will spend that money in the economy.

      More than likely. In fact, that's pretty much the reason why a UBI would work.

      But National sees money going out to poor people as being theirs and so, in their minds, it should all be going to them. So, they're supportive of the government borrowing/creating money and having it going straight out to businesses but not of money going out to poor people even though that money would then be spent at businesses.

  4. Jester 4

    I actually think its a smart move by National to finally address the 'bracket creep'. Nats should have done it back in 2015 or so, and I think Labour should too. The >$70k top tax rate has been there since at least 2009. I think this would have been better than raising the minimum wage rate even. Paying 30% or 33% tax on income over $48k is way too high.

    Labour should raise the brackets and bring in other higher rates for high earners. eg. 33% applies after say $100k, 36% after say $150k and 39% after $180k or something like that.

    • Tricledrown 4.1

      Jester we have some of the lowest taxes in the world let bracket creep work the country is in a crisis the well off have enough money the rest of us are battling.

      Taxes have been going down for 30 years inequality has grown exponentially as a result.

      NZ has the worst inequality in the OECD.

    • mikesh 4.2

      Bracket creep is a problem only if rates of inflation are relatively high. At zero inflation, progressive tax rates operate exactly as intended, moving taxpayers to a higher rate when their income increases. However, when the rate of inflation exceeds increases in 'real' income (as opposed to nominal income) then bracket creep can be a problem. At today's low inflation rates, though, it shouldn't be a major concern.

      • Foreign waka 4.2.1

        Except every one out there can tell you that the current numbers are BS. Perhaps we can take TV's, cars and washing machines out of the weekly basket?

        As far as I know and everyone out there buying the groceries for the family, the cost has increased in the time before Corona and now by at least 4% average. Fact.

        Rents are on the up, petrol has stagnated, but 55% of its price are taxes anyway. Fact.

        Can we please deal in facts rather than constantly getting some spreadsheet figures passed on with a lot of gobbledegook to hoodwink the wider population.

        My council rates have gone up 5%, in an area called one of the poorest in NZ. Fact.

        I have been told that there will be no increase but maybe some reduced hours or even restructuring at my company. Fact.

        Now all that means that I pay more but certainly wont have more income, in fact it could be less or nothing even.

        So, I think a lot of people are in a similar position if not already on the no income variance.

        I honestly do not care whether there is an increment at 50k or 80k or 180k. What I do care about is that the income is liveable. Any legislation has to look at min income needed to not just survive but to participate in society.

        Everything else is just navel gazing by those who make assumptions.
        There is a place for providing academic advise but if an abstract becomes a life philosophy for all one better get the facts straight.

      • Grafton Gully 4.2.2

        Moving taxpayers to a higher rate when their income increases penalises higher skill and higher productivity. Taxing capital gains from residential property speculation is another option, but not under Ardern's watch. She fronts a government that penalises higher income earners and gives free range to speculators.

        • Draco T Bastard

          Moving taxpayers to a higher rate when their income increases penalises higher skill and higher productivity.

          No it doesn't.

          Or maybe what we should be asking is when income goes from being about skill to just bludging from the other workers?

          • Grafton Gully

            A single person business painting houses makes more money the more houses they paint and they paint more because they paint them better, are reliable and a pleasure to deal with. Why should the state take more money from them than from an unreliable painter who earns less because they paint fewer houses ?

            • woodart

              if its a business the tax rate is capped at 33%? no matter how many houses are painted.

            • mikesh

              The only way around that would be to impose a poll tax. As far as I know that has only been tried twice in British history: Once by Richard II which, fortunately for him, was successfully put down and the ringleaders sent to the gallows. The second was by Margaret Thatcher, who also almost faced an uprising. Lucky for her we a little more civilized these days, but only slightly.

            • Draco T Bastard

              The unreliable painter is probably painting more houses.

              I have family in the building industry and the stories about unreliability all come down to the people doing it fast – which results in the job needing to be redone.

              And then there's the simple fact that, in physical jobs like painting, there's no real way to do it faster due to physical constraints. There's little difference in speed between an experienced painter and an inexperienced painter which means that their income would be about the same.

              And then it's a self-employed people that you're talking about which would mean that they probably don't even have an income equal to the minimum wage.

        • Incognito

          The steepest increase in income tax rate for individuals is at $48k pa, going up from 17.5 to 30% on any extra dollar earned above and beyond $48k (up to $70k, of course). They’ll still take home more so it is not penalising them, it is called progressive tax. Over $70k pa there are no extra or additional ‘penalties’. The lowest-paid workers are the ones who are penalised the most in our society as far as all taxes are concerned and they can barely make a decent living off their hard-earned income.

          • Grafton Gully

            They take home more, but proportionately less the more they earn, which is a disincentive to earning more and if earning more depends on skill and productivity then these qualities are undervalued (rather than "penalised").

            The hard earned income of the lowest paid would increase if they were unionised and the unions were powerful enough to negotiate an increase. The fact that they are not unionised tells me they don't know that a union can improve their conditions or, for whatever reason they can live with their current situation. Does employment law in NZ prevent unionisation ?

  5. http://www.stuff.co.nz/southland-times/news/454946/The-block-of-cheese-Budget-2008

    National leader John Key said after nine years of refusing to lower personal taxes, Dr Cullen had admitted he was wrong but delivered just $16 a week to the average wage earner.

    "That's the equivalent of a family size block of cheese a couple of weeks out from the election." Mr Key said it was a desperate and cynical move. "It was far too little and it was far too late."

    Desperate and cynical, you say, but now you'll have to earn over 50k to get just a $12 valumetric slab.

    • mikesh 5.1

      Did Cullen admit he was wrong to offer $16.00 p/w, or wrong to run surpluses. In a booming economy keynesianism suggests that surpluses would be appropriate.

      • The Al1en 5.1.1

        Just quoting from the article I linked to for context where it showed the $16 figure, but the pertinent point in relation to this topic is 'Mr Key said it was a desperate and cynical move' and 'far too little and it was far too late', so what does it make this tax bribe?

      • Pat 5.1.2

        The quote was from Key….so Cullen very likely admitted nothing of the sort

    • George 5.2

      So for an unskilled worker.. possibly working 2 jobs to make ends meet .. would that give them 2 blocks of cheese? Or would secondary tax reduce that to one block and a pack of cheese slices?

  6. barry 6

    Goldsmith will have to prove that he is not innumerate after failing to understand the Greens' simple tax policy earlier. After Joyce's howler last election, it is par for the course.

    Of course Goldsmith didn't write the Nats' policy himself, but it will be interesting if he can prove that he understands it. Might be some interesting debates.

    • mikesh 6.1

      Earlier on Goldsmith seemed to not understand how the GST system works. He wanted to refund firms' GST payments, not realizing that it is the customers who pay GST, not the firms themselves. It would have been better to suggest that GST be abolished altogether. Firms might then benefit indirectly by dint of the fact that their customers had more money to spend.

  7. Kay 7

    Benefits are taxed. So kind of the Nats to increase them by a few dollars, even briefly. Nah, just kidding. The system is rigged so the net benefit payments don't change with tax cuts…fancy that. Guess they don't want our votes?

  8. NZJester 8

    What National are going for tax cuts? I am shook.

    (Saying this with an extremely sarcastic tone in my voice)

    We know where that money would be coming from, they would start with a slash and burn of the budgets of the health system, police and other important public services again to pay for that tax cut. Then they will find some reason to raise taxes on just the poor people of NZ. Another increase in G.S.T. under National. Because even though the T in G.S.T. stands for Tax it is not a Tax increase according to what they said last time they increased it.

    Another term under National will see the numbers below the poverty line in NZ increase even faster.

  9. Draco T Bastard 9

    But longer term things look grimmer. It will take the world longer to bounce back to business as usual.

    Longer term we have to accept that things aren't going to bounce back to business as usual. Which means that international trade is going to decline and that means that we have to develop our economy beyond being a mere farm.

    National chose the lolly scramble. Even though previously it said it would not.

    This is a sign of desperation, an attempt to preserve the support they have rather than put them into a position where they could win power.

    And people are going to recognise it as a lolly scramble and that it only really benefits the rich. It may be that this lolly scramble of National's could lose National even more support.

  10. Foreign waka 10

    Talking about taxes, debt and monetary policies.

    Here is something to read, maybe of interests?

    The Degeneration of Capitalism into Neo-Feudalism” – Dr. Sam Vaknin

    Pandemic Slaves and Their Neo-feudal Lords: Envy-fuelled Global Insurrection

  11. Incognito 11

    Flippery-flop, that’s the sound of Judith Collins riding roughshod over promises made a month ago. What will she ‘promise’ next week or the week thereafter? It is obvious now that National’s tax cuts were never off the table and that only the press release had to be tweaked after the PREFU on Wednesday.

  12. ScottGN 12

    Amongst other things National are going to scrap the winter energy payment. They are actually going to campaign on taking money off pensioners in order to give it to the most highly payed NZers? I can’t wait to see Ardern hammer Collins with this in the debates.

  13. useful analysis:

  14. Here's another one. Deeply cynical, as even Fran O'Sullivan pointed out in her Herald piece.

    • Wensleydale 14.1

      The big end of town gets all the presents, and the grubby serfs get coal again (and probably a rent increase). Merry Christmas from Ebeneezer Collins. When was the last time the National Party had a new idea?

      • George 14.1.1

        National hasn't had a new or visionary idea since 1960 something. Which pretty much reflects the age of it's supporters. It's applying tired economic approaches to a world that needs future proofing. It's going to disappear in the near future "like a miracle" to use an expression of one of their idealised figures …in my personal opinion. They're old hat.

    • Graeme 14.2

      They're after donations to fund their lifestyle and ego, not votes

  15. George 15

    The tax cuts also don't seem to factor in the possibility of a serious outbreak of covid-19. So if by some miracle national get in and they have a serious breach or outbreak… and there's a need for a stimulus, support or recovery package…they have given a chunk of it away in tax cuts? Not exactly fiscally prudent. I am also gathering from them taking that quite significant risk financially that they aren't planning to go head on with lockdowns if there were to be any further outbreaks? Because they prepared to empty the war chest with tax cuts. Makes you think. I am assuming of course. But it looks like they are going to approach covid with a " suck it up" and carry on trading philosophy like the Brits…who are just now bracing for the second wave….

  16. PsyclingLeft.Always 16

    Inequality in NZ (not much change )

    "Between 1982 and 2011, New Zealand's gross domestic product grew by 35%. Almost half of that increase went to a small group who were already the richest in the country. During this period, the average income of the top 10% of earners in New Zealand (those earning more than $72,000)[1] almost doubled going from $56,300 to $100,200. The average income of the poorest tenth increased by 13% from $9700 to $11,000.[2]

    In 2013 over a dozen different reports were released which focused on the issue and the need to develop agreed ways of describing and measuring poverty.[24] However, the National Government resisted these attempts maintaining that "endless arguments about definition and measurement are a waste of time"


    Unequal NZ….

    "The richest 1 per cent of Kiwis have bagged 28 per cent — $42 billion — of the wealth created in a single year.

    Meanwhile, the poorest 1.4 million people (30 per cent of the population), got barely 1 per cent — $1.5b — of all the wealth created in 2017."


    "So the rich are getting richer." ( We know )

    "[The top 20 percent of Kiwi households surveyed in the past year] collectively holds about 70 percent of total household net worth. These net worth statistics tell us that wealth is unevenly distributed across the population, and this is unchanged from three years ago," labour market and households senior manager Jason Attewell said.


    Part of the problem… (37 properties …?! wtf)

    "Mr Goodwin, 74, has 37 properties in Auckland and Waikato generating $14,500 a week in rent."


    nats are NEVER gonna change. They are always about looking after the Few…at the top end of NZ Inequality

    • George 16.1

      Psychlingleftalways…The good news about that is there's fewer of them to vote the nats in. The rest of the voting public just have to see past their smoke and mirrors.

  17. ken 18

    The stench of desperation is hurting my nose.

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