The debate around whether we should go through with National’s tax adjustments (they’re only cuts for the rich, they’re increases for middle and low incomes) has re-ignited as the commentariat suddenly cottons on that they are unfair and unaffordable, thanks largely to Fran O’Sullivan. As always, we at The Standard like to try to inject some facts into the argument:
This is the only calculator anywhere that shows you how much you and your family gain or lose from National’s tax adjustments and Kiwisaver cuts. Try it out.
Some other facts relevant to the debate:
– 80% of National’s cuts go to the wealthiest New Zealanders.
– Anyone earning less than $44,000 who gets Working for Families or some other state payment (and that’s around half of workers, most families, plus the retired and beneficiaries) is worse off because National cancelled Labour’s movements of the bottom bracket from $14,000 to $20,000.
– The economics is clear: giving a tax cut to the rich paid for by increasing tax on the poor is going to take money out of the economy. Contrary to the voodoo economics of ‘trickle-down’, the rich don’t spend, they save. The most stimulus bang for your buck comes from increasing the incomes of people on lower incomes. That’s why Obama is cutting low income taxes and increasing them on the most wealthy.
– Because of the worsening economic situation, every dollar of any tax cut now made will have to be borrowed. Borrowing is not always bad – borrowing for a long-term investment like the Superannuation Fund makes sense since the long-term return on investment will exceed the cost of borrowing, borrowing to inject stimulus into an ailing economy to kickstart it out of recession makes sense (note to John Roughan, that’s the difference between macro- and microeconomics, between an economy and a household). Borrowing to give more money to those who already have plenty and who will just put it in their savings makes no sense.
These are the wrong tax adjustments at the wrong time. The only reason to go through with them is ideological. Let’s hope some of that legendary Key pragmatism shines through.