Polity: Labour’s fiscal plan: B+

Written By: - Date published: 2:30 pm, June 25th, 2014 - 20 comments
Categories: Economy, election 2014, labour, tax - Tags:

polity_square_for_lynnReposted from Polity.

I’m a glass half-full kind of a guy, so I want to start by emphasising the parts of  Labour’s just-released fiscal plan that I like.

First, the commitment to paying off government debt during economic good times is laudable. In the past, some of our parties have been too quick to demand that any surplus be hocked off immediately in tax cuts or spending binges. Michael Cullen knew the value of paying off debt, and so does David Parker.

The other “fiscal prudence” commitments are also pragmatic and helpful, capping the size of the new spending allowance, and saving again for the future fiscal timebomb with resumed NZ Super Fund contributions.

Second, the tax rate changes are welcome. Everyone knows Labour’s commitment to a CGT which not only makes the tax system fairer, but more importantly it provides an incentive for investors to put their money into productive sectors of the economy, rather than just speculating on capital values of fixed assets. And it is good to see a new tax rate for top income earners, matched to the trust rate to limit opportunities for avoidance. (More on this below…)

Third, targeting tax avoidance by large multinationals is the right thing to do. I have heard some shrug-happy commentators decree that a global race-to-the-bottom on tax rates is inevitable, and that we just have to accept countries like Ireland pulling in tax revenue that should stay in New Zealand. I don’t agree, and I am really pleased to see Labour gearing up for this fight.

So what did I not like? Two main elements here:

First, the top tax rate is still too low. In Australia the top rate (including medicare levy) is 46.5%. In Canada it is around 50% (depending on the Province). In Ireland it is 41%. UK is 45%. USA is around 50-55% (again depending on the State). Ours is 36% + ACC levy, for around 37%.

I think there is room to increase it further, without risking the apocalyptic consequences predicted by the chicken-littles at the Taxpayers Union and other right-wing fronts. Here’s an example for a top-earner. Consider a person who earns USD300,000 (this is the standard KPMG comparison for top earners). In NZD that is around $350,000. How much tax do they pay overall in various countries? Here’s the answer:

Country Overall tax rate at USD300k income
Ireland 44.1%
UK 42.3%
Canada 40.8%
Australia 37.7%
New Zealand (with Labour’s changes) 32.6%
New Zealand (2014 rates) 30.9%
USA 30.5%

As you can see, top earners pay a lot more in most other comparable countries, before and after Labour’s changes.

Second, I am not convinced about the need to signal second term tax cuts. there is a lot of water to go under the bridge until that point, and I think building up expectations this early could be an error. There may also be competing priorities for the money, especially in the education sector.

Overall I would give this package a B+. The big positives are that it is moving in the right direction and is prudent. Smaller negatives is that there are some half measures and some needless populism.

This sets the stage now for a fascinating election campaign where both large parties have well signalled tax-and-spending plans, with pubic costings for people to pore over. That is a whole lot more productive than watching guys in suits excitedly scream “show me the money” at one another.

20 comments on “Polity: Labour’s fiscal plan: B+”

  1. Tom Gould 1

    Top marks to David Parker and his team. Now, where’s National’s fiscal plan?

  2. Ad 2

    Just great to see Labour in front of a policy story finally.
    And no, I would not change a thing.

    Some will quibble that the top tax rate, trusts rate and company rate should all be equalised. Fortunately Labour are not dumb enough to fall for making companies less competitive here.

    In fact it sends the right signal: it’s more tax efficient to start up your own company, and go out into the world and make something fresh happen.

    And as for there being lower taxes for the top rate than in other countries, well, welcome back you successful New Zealanders. Door is open, and bring all your savings with you.

  3. bad12 3

    Marvelous, simply marvelous, according to Labour it is the ”time-bomb” of aging in our country that sees it having to invoke raising the age of entitlement to superannuation,

    Is this Post correct, Labour have signaled tax cuts for the middle class in a second term of Government???

    The two go hand in glove, raising the age of entitlement to superannuation pays for tax cuts, its a pretty simply piece of riffmatic,

    i really enjoyed David Parker’s setting aside of a financial pile with which to directly attack child poverty, you know the stuff, the child poverty that Labour have waved about endlessly during the current Parliament, including in posts here at the Standard,

    Oh right, there is no such monies being budgeted for…

    • tinfoilhat 3.1

      @bad12….yes quite true I sometimes wonder why labour and national don’t give up the pretence and just have done with it and merge.

      • bad12 3.1.1

        Although the Post identifies Parker as having signaled ”second term tax cuts” i have yet to see confirmation of this,

        Having said that, IF true and ”second term tax cuts” are the agenda then we all are being gamed by Labour, especially so when we care to consider the elongated cries of 280,000 children living in poverty from the likes of Jacinda and (in a post here at the Standard), Phill Twyford,

        What happened in the Governments books last time we faced this so called financial crisis of an aging population time-bomb and resulting raising of the age of entitlement to superannuation, TAX CUTS, the first in the form of Working For Families, the second in National’s Tax Switch,

        i have been in Taiho mode in my comments opposing the raising of the age of entitlement for a while,(since it was pointed out that population expectations pointed to there being less workers in the economy, despite my pointing out that based on historic data GDP will double in dollar terms in the next 30 years),

        But, IF it is true,(and at present i only have this Post to base my comments upon), and Labour are now proposing ”second term tax cuts” then my opinion says we are being ”Gamed” by Labour, not only over its ”concerns” surrounding child poverty but also its ”claims” of unaffordable superannuation in the future,

        The alternative budget from David Parker to me smacks of something Sir(spit) Roger Douglas would have proudly proposed…

    • Colonial Viper 3.2

      bad12 you curmudgeon stop pointing out these inconvenient facts

    • Bearded Git 3.3

      More policy to be released on this bad12; give them a chance.

      • bad12 3.3.1

        The vows of silence are only dished out by the Mods thanks Bearded Git, if David Parker chooses to release economic policy which has no apparent component which directly attacks child poverty then He is asking for criticism…

      • lurgee 3.3.2

        “More policy to be released on this bad12; give them a chance.”

        Give ’em six more months, you mean?

  4. ianmac 4

    Great points for discussion thanks Polity. (But excluding your ” …..with pubic costings for people to pore over. “

  5. Ennui 5

    The devil is in the detail. Two bits I really like:

    1. Targeting to get unemployment down to 4%. Really good BUT full employment is a better goal, plus adding making wages livable.
    2. The Kiwi power plan. great to see a recognition that power is made artificially expensive by the current “market”. As it works as a cartel and avoids any “price discovery” it might as well be regulated.
  6. Colonial Viper 6

    First, the commitment to paying off government debt during economic good times is laudable.

    So…where exactly are these “good economic times” to be found for the bottom 80% of this country

    • Colonial Viper 6.1

      So as 300,000 Kiwi kids live in poverty day to day, and the retirement age just HAS to go up, we’re going to set aside money to pay back the Goldman Sachs and JP Morgans of the world.

      Shit its a hard compromise.

    • Lanthanide 6.2

      Looking at the detail, it’s a bit of a hollow promise.

      They are saying they will get to 3% net crown debt, including the superannuation fund, by 2020-2021. This compares to National’s 2014 budget which puts them at 3.7% net crown debt on the same basis in that time-frame. In otherwords Labour are barely doing anything different than National.

      Of course National has racked up such a massive debt the only way to combat it would be to massively cut down on tax fraud (apparently $7b per year) as well as restructure the tax system radically, the latter of which is politically unpalatable and the former of which they have very modest aims for ($200m per year by 2020).

  7. dave 7

    i also really like crack down on tax avoidance and since the farmers don’t pay any tax but use all the services the rest of us pay for its about bloody time they paid there share

  8. Herodotus 8

    Michael Cullen knew the value of paying off debt,- really citation required, as data below shows that debt levels slightly increased
    http://www.stats.govt.nz/browse_for_stats/snapshots-of-nz/Measuring-NZ-progress-sustainable-dev-%20approach/sustainable-development/economic-resilience.aspx
    http://www.rbnz.govt.nz/statistics/discontinued/
    1999 NZ Govt Debt $17.384b
    2008 Dec $18.86b. It marginally Increased !!!!
    “but more importantly it provides an incentive for investors to put their money into productive sectors of the economy, rather than just speculating on capital values of fixed assets” So if I had the available funds and invested into a business I pay …. 28% tax on the profits and if I invest into property I pay …. 15% CTG so how can being on a lower tax rate motivate me into changing any investment decisions. Especially given that should property inflation cause the RB to consider increasing interest rates I will be instead subsidised with rates NOT increasing but Kiwisaver rates being increased instead – “Instead of paying more interest on your mortgage, a similar amount of extra savings would go into your KiwiSaver,” Parker told an Auckland breakfast.
    http://www.nbr.co.nz/article/labour-use-kiwisaver-instead-interest-rates-drop-dollar-bd-155356
    perhaps a B- would be a more appropriate grade.

    • Lanthanide 8.1

      “Michael Cullen knew the value of paying off debt,- really citation required, as data below shows that debt levels slightly increased”

      The point is, Cullen used a lot of the ‘surplusses’ to pay back crown debt, instead of spending it or giving tax cuts, as he was hounded by National and latterly the media to do.

      If he hadn’t, we would have been up shit creek during the GFC and of course the Canterbury earthquakes.

      That’s all the proof you need – that he spent a significant portion of each budget ‘surplus’ on debt reduction.

  9. Jepenseque 9

    Hi, The proposed capital gains tax is projected to be earning $1.035B by fy20/21. What assumptions for asset price inflation is used to reach these numbers? That implies circa 6.9b in realised taxable cap gains in that year. Particularly interested in what this implies for house price inflation.

    Labours release says modelled by berl but cant find it anywhere. Cheers

  10. Sable 10

    Would be nice to see something emphatic from Labour on the TPPA and dismantling the spy laws/apparatus. Fiscal plan is a little bland but could be worse….

Recent Comments

Recent Posts

  • Labour will not resile from royalties
    Labour believes cleaning up our rivers so that they are clean enough to swim in is the most important freshwater issue for this election, but that it is also fair that a royalty should be charged where public water is ...
    17 hours ago
  • With friends like Hone, who needs enemies?
    With less than three months until the election, Hone Harawira has delivered another blow to the Māori Party’s flagship policy of Te Ture Whenua Māori reform and the already unstable MANA-Maori Party alliance, says Ikaroa-Rāwhiti MP Meka Whaitiri. “On The ...
    17 hours ago
  • Shifty Bill jumps the shark
    Bill English's claim today that it has never been established that Todd Barclay's recordings of his staff took place is bizarre and shows a complete lack of honesty and leadership, says Labour’s Finance spokesperson Grant Robertson.  "Todd Barclay told Bill ...
    2 days ago
  • Te Ture Whenua – gone by lunchtime?
    Māori Development Minister Te Ururoa Flavell has to front up about yesterday’s mysterious withdrawal of Te Ture Whenua Bill from Parliament’s order paper, says Labour’s Ikaroa Rawhiti MP Meka Whaitiri.  “Has he lost his way and has decided to run ...
    3 days ago
  • Bill English ignorance of law beggars belief
    For Bill English to claim he and others in the National Party didn’t realise the law may have been broken in the Todd Barclay taping scandal is simply not credible, says Leader of the Opposition Andrew Little. “The Prime Minister ...
    3 days ago
  • Government ignored advice on Pacific people’s superannuation
    The Government ignored advice from the Ministry of Pacific Peoples that raising the Superannuation age of eligibility would have a ‘disproportionately high impact’ on Pacific people, says Labour’s Pacific Island Affairs spokesperson Aupito William Sio.   “The Ministry for Pacific ...
    3 days ago
  • Bill English misleads Parliament on Police statement
    Bill English's attempt to restore his damaged credibility over the Todd Barclay affair has backfired after his claim to have "reported" Mr Barclay's actions to Police has proven not to be true, says Labour MP for Wellington Central Grant Robertson. ...
    4 days ago
  • Keep it Public
    The Green Party strongly supports the Tertiary Education Unions call to #KeepitPublic Keep what public? Out quality tertiary education system that National is trying to open up to more private for-profit providers with a new law change. The (Tertiary Education ...
    GreensBy Gareth Hughes
    4 days ago
  • This ‘technical error’ is hurting big time
    Jonathan Coleman cannot resort to his ongoing litany that the Ministry of Health’s $38 million budget blunder is an error on paper only, says Labour’s Health spokesperson David Clark. “He might keep saying it’s a ‘technical error’ but the reality ...
    4 days ago
  • Labour to invest in public transport for Greater Christchurch
    Labour will commit $100m in capital investment for public transport in Greater Christchurch, including commuter rail from Rolleston to the CBD, says Leader of the Opposition Andrew Little. “As the rebuild progresses, there are huge opportunities for Greater Christchurch, but ...
    4 days ago
  • Green Party will repeal solar tax
    It’s ridiculous for an electricity distribution monopoly to apply a charge on solar panels but worse than that, it’s harming our effort to tackle climate change. Hawke’s Bay lines company Unison last year announced a new solar charge for their ...
    GreensBy Gareth Hughes
    4 days ago
  • English fails the character test over Barclay
    Bill English is hoping this scandal will go away, but he is still dodging important questions over his role in covering up for Todd Barclay, says Leader of the Opposition Andrew Little. ...
    4 days ago
  • Government must apologise for Christchurch schools stuff-up
    The Ombudsman’s findings that the Ministry of Education botched the reorganisation of Christchurch schools after the 2011 earthquake are damning for an under-fire National Government, says Labour’s Education spokesperson Chris Hipkins. “The Ombudsman has found the reorganisation of schools in ...
    5 days ago
  • Government’s multinational tax measures weak
    The Government’s proposals to crack down on multinational tax avoidance, by its own admission only recovering one third of the missing money, means hardworking Kiwis will bear more of the tax burden, says Labour’s Revenue spokesperson Michael Wood. “The Government ...
    5 days ago
  • World Refugee Day – we can do our bit
    I’m really proud that yesterday, on World Refugee Day, the Greens launched an ambitious plan to increase the refugee quota to 5000 over the next six years. Of those places, 4,000 will be directly resettled by the government and another ...
    GreensBy Denise Roche
    5 days ago
  • PM’s leadership in question over Barclay affair
    The Prime Minister must belatedly show some leadership and compel Todd Barclay to front up to the Police, says Labour Leader Andrew Little. “Twice today Bill English has been found wanting in this matter. ...
    6 days ago
  • Another memory lapse by Coleman?
    The Minister of Health ‘couldn’t recall’ whether the Director General of Health Chai Chuah offered his resignation over the Budget funding fiasco involving the country’s District Health Boards, says Labour’s Health spokesperson David Clark. “In the House today Jonathan Coleman ...
    6 days ago
  • Bill English needs to come clean over Barclay
    Bill English needs to explain why he failed to be upfront with the public over the actions of Clutha-Southland MP Todd Barclay, following revelations that he knew about the secretly recorded conversations in the MP’s electorate office, says Labour Leader ...
    6 days ago
  • Minister, show some backbone and front up and debate
    Rather than accusing critics of his Te Ture Whenua Māori Bill of telling ‘lies’, Māori Development Minister Te Ururoa Flavell should show some backbone and front up to a debate on the issue, says Ikaroa-Rāwhiti MP Meka Whaitiri. “Te ...
    6 days ago
  • Equal pay for mental health workers
    Today, mental health workers are filing an equal pay claim through their unions. Mental health support workers do important and difficult work in our communities. But because the workforce is largely female, they are not paid enough. It’s wrong for ...
    GreensBy Jan Logie
    7 days ago
  • Nats’ HAM-fisted housing crisis denial
    National’s decision to knowingly release a flawed Housing Affordability Measure that underestimates the cost of housing is the latest evidence of their housing crisis denial, says Labour’s Housing spokesperson Phil Twyford. ...
    7 days ago
  • New Pike footage builds compelling case for mine re-entry
    New footage of the Pike River Mine deep inside the operation, revealing no fire damage or signs of an inferno, provides a compelling reason to grant the families of Pike River’s victims their wish to re-enter the drift, says Labour ...
    7 days ago
  • Labour will get tough on slum boarding houses
    The next Labour-led Government will legislate a Warrant of Fitness based on tough minimum standards to clean out slum boarding houses, says Labour’s Housing spokesperson Phil Twyford. “It’s not acceptable for New Zealanders in the 21st Century to be living ...
    1 week ago
  • Green Party tribute to Dame Nganeko Minhinnick
    Haere ngā mate ki tua o paerau; te moenga roa o ngā mātua tupuna. Haere, haere, haere. It was with a huge sense of loss that we learned of the death of Dame Nganeko Minhinnick yesterday. The Green Party acknowledges ...
    GreensBy Catherine Delahunty
    1 week ago
  • Urgent answers needed on DHB funding
      Jonathan Coleman must come clean and answer questions about what actual funding DHBs received in Budget 2017, says Labour Health Spokesperson David Clark.   ...
    1 week ago
  • Treasury puts Māori Land Service on red alert
    A damning Treasury report raises serious questions about the delivery of Te Ururoa Flavell’s proposed Māori Land Service, giving it a ‘red’ rating which indicates major issues with the project, says Ikaroa-Rāwhiti MP Meka Whaitiri.  “Treasury’s Interim Major Projects Monitoring ...
    2 weeks ago
  • Economy stalling after nine years of National’s complacency
    The second successive quarterly fall in per person growth shows the need for a fresh approach to give all New Zealanders a fair share in prosperity, says Labour’s Finance spokesperson Grant Robertson. ...
    2 weeks ago
  • Kiwi kids deserve much more
    All Kiwi kids deserve so much more than the impoverished picture painted by the shameful rankings provided by the UNICEF Innocenti Report Card, says Labour’s children spokesperson Jacinda Ardern. ...
    2 weeks ago
  • NZ Zone a precursor to a total nuclear weapon ban
    New Zealand’s nuclear-free zone, legislated by Parliament in 1987, is something we all take pride in. It’s important, however, that we don’t let it thwart its own ultimate purpose – a world free of nuclear weapons. That goal must be ...
    GreensBy Kennedy Graham
    2 weeks ago
  • English must confirm we still stand by our principles on UN resolution
    Bill English must tell New Zealand whether we remain in support of the UN Security Council resolution on Israeli settlements in Palestinian territory, says Labour Leader Andrew Little. “After Foreign Affairs Minister Gerry Brownlee’s evasive answers to repeated questions on ...
    2 weeks ago
  • Māori party drop the poi on Māori health
    The Māori Party have dropped the poi when it comes to supporting Ngati Whakaue and Māori interests in Bay of Plenty by allowing an iwi owned and operated service Te Hunga Manaaki to be brushed aside in favour of a ...
    2 weeks ago
  • Labour to invest in Whanganui River infrastructure
    Labour will work in partnership with the Whanganui Council to repair and redevelop the city’s Port precinct in advance of planned economic development and expansion. To enable Whanganui’s plans, Labour will commit $3m in matching funding for repairing the Whanganui ...
    2 weeks ago
  • Parihaka: an apology
    An apology only works for healing if it is sincere and if it is accepted. We teach our children to apologise and to be genuine if they want to be forgiven. On Friday, June 9 at Parihaka, the Crown apologised ...
    GreensBy Catherine Delahunty
    2 weeks ago
  • Survey shows many international students plan to stay in NZ after study
    Most international students in New Zealand at PTEs (private training establishments) who have a plan for themselves after study intend to stay in New Zealand to work. This shows how low-level education has become a backdoor immigration route under National, ...
    2 weeks ago
  • Councils step up as Nats drop the ball on housing crisis
    Phil Goff’s Mayoral Housing Taskforce is another positive example of councils stepping up where National has failed on housing, says Labour Housing spokesperson Phil Twyford. ...
    2 weeks ago
  • Time for a breather on immigration
    Labour will introduce moderate, sensible reforms to immigration to reduce the pressure on our cities, while ensuring we get the skilled workers our country needs, says Leader of the Opposition Andrew Little. “New Zealand is a country built on immigration. ...
    2 weeks ago
  • Inaction puts Māui dolphins at risk
    Conservation Minister Maggie Barry was at the United Nations Oceans Conference in New York last week, trying to convince the world that the New Zealand Government is doing a good job at protecting our marine environment.  Yet last week after ...
    GreensBy Eugenie Sage
    2 weeks ago
  • National unprepared as immigration runs four times faster than forecast
    National has been caught asleep at the wheel by record immigration that has outstripped Budget forecasts, says Leader of the Opposition Andrew Little. ...
    2 weeks ago
  • First home buyers shouldn’t carry the can for National’s failed policies
    The introduction of tighter limits on lending to first home buyers would see them paying the price for the National Party’s failure to recognise or fix the housing crisis, Labour’s Finance spokesperson Grant Robertson says. “Nine years of denial and ...
    2 weeks ago
  • Motel bill blows out as Nats fail to deliver emergency housing
    Minister Amy Adams has admitted at select committee that National has now spent $22m on putting homeless families in motels as it fails to deliver the emergency housing places it promised, says Labour Housing spokesperson Phil Twyford. ...
    3 weeks ago
  • Minister, how out of touch are you?
    What was going through Jonathan Coleman’s head in the Health Select Committee this morning when he claimed he was unaware that an estimated 533,000 people have missed out on a GP’s visit in the last 12 months due to cost, ...
    3 weeks ago
  • Divided we fall
    I’m getting pretty sick of the politics of division in this country.  The latest example was yesterday’s comments from NZ First leader Winston Peters having a good go in the House at driving up fear and loathing towards people of ...
    GreensBy Denise Roche
    3 weeks ago
  • Labour’s Electoral Amendment Bill to enhance democracy
    Democracy will be enhanced under Labour’s Private Member’s Bill which will have its First Reading today, says Labour’s Local Government spokesperson MP Meka Whaitiri. ...
    3 weeks ago
  • Police underfunded despite rise in crime
    As crime continues to rise dairy owners are scared for their lives and communities reel under a record increase in burglary numbers, it has now been revealed that Police received less than three quarters of their bid in this year’s ...
    3 weeks ago
  • Road pricing years off, public transport investment needed now
    With road pricing still years away, Labour will step up with investment in public transport to ease Auckland’s congestion woes, says Labour’s Auckland Issues spokesperson Phil Twyford. ...
    3 weeks ago
  • Call to protect Easter Sunday in Auckland
    Auckland’s Labour MPs are backing the community to protect Easter Sunday by retaining current trading restrictions in the city, says Labour MPs Aupito William Sio and Michael Wood.  “The Government’s weak and confusing decision to delegate the decision over Easter ...
    3 weeks ago
  • $2.3 billion shortfall in health
    The funding needed for health to be restored to the level it was seven years ago to keep pace with cost pressures has widened to a massive $2.3 billion, says Labour Leader Andrew Little.  “We used to have a health ...
    3 weeks ago