Rich call for tax cuts for rich

Written By: - Date published: 10:18 am, February 11th, 2008 - 94 comments
Categories: tax - Tags:

Four associations representing wealthy New Zealanders are saying tax cuts should be in the form of making the top tax rate 30 cents in the dollar. Wouldn’t that mean that their wealthy members get huge tax cuts while the 85% of us earning less than $60,000 will get none or very little? Why, what a coincidence, yes it would.

This reminds me of what Warren Buffet, the legendary investor known as the “Oracle of Omaha’ who is one of the richest people in America and a thoroughly decent man, said of George W Bush’s tax cuts for the rich:

“When you listen to tax-cut rhetoric, remember that giving one class of taxpayer a “break” requires — now or down the line — that an equivalent burden be imposed on other parties. In other words, if I get a break, someone else pays. Government can’t deliver a free lunch to the country as a whole. It can, however, determine who pays for lunch”*

“I see nothing wrong with those who have been blessed by this society to give a larger portion of their income to the society than somebody that’s working very, very hard to make ends meet,”*

“There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.’*

Not only does Buffett argue that tax cuts should go to those most in need, he also points out that lower bracket tax cuts are more economically stimulating.

“tax cuts should go to lower-income people or others “who both need and will spend the money gained.”* “Putting $1,000 in the pockets of 310,000 families with urgent needs is going to provide far more stimulus to the economy than putting the same $310 million in my pockets,”*

UPDATE: No Right Turn has crunched some numbers, and it turns out “the total cost is over $2 billion a year, and more than 60% of it flows straight into the pockets of the 3% who make more than $100K a year”. Somehow I’m not surprised – Tane.

94 comments on “Rich call for tax cuts for rich ”

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  1. Robinsod 1
    11 February 2008 at 10:28 am

    But… but… but… what about “trickle down”??? It’s worked so well in the nineties…

  2. Steve Pierson 2
    11 February 2008 at 10:49 am

    I just ran the numbers on this tax cut:
    If you earn less than $38K a year (like 65% of the population) you 0, nothing, nada,
    if you earn 40K you get a dollar a week,
    50K you get $7 a week,
    60K, $13
    70K, $30
    80K, $47
    90K, $65
    100K, $82

  3. deemac 3
    11 February 2008 at 10:51 am

    thanks for this – once again The Standard is required reading!

  4. mike 4
    11 February 2008 at 11:07 am

    Are you implying that those earning over 60k are “rich”
    Get real – middle NZ want some of ‘their’ hard earned money back and are sick to death of Cullen thinking he can spend it better than we can.

  5. Tane 5
    11 February 2008 at 11:10 am

    I’m getting tired of your politics of envy Steve. How do you expect the domestic luxury yacht market to take off if you’re giving all the tax cut loot to people who’ll just waste it on $16 blocks of cheese?

  6. Steve Pierson 6
    11 February 2008 at 11:10 am

    mike.

    a) 85% of kiwis earn less than 60K, those who get above that are relatively wealthy. The average income is less than 40K and the median is less than 30K.

    b) even someone earning 60K gets little under this proposal. The ones who get the bulk of the money are the less than 5% with incomes over 80K.

  7. Santi 7
    11 February 2008 at 11:13 am

    Come up with a budget and see if you’re assertion that earning 60,000 dollars/year makes you rich. Ask any middle New Zealander.

    It’s risible to say the least.

    Let the money stay with the people who earn it instead of going to Cullen’s coffers to be disbursed as he sees fit (or politically convenient).

    Once a socialist always a socialist.

  8. Santi 8
    11 February 2008 at 11:17 am

    ” The ones who get the bulk of the money are the less than 5% with incomes over 80K.”

    Could they also be our most talented and entreprenurial people? Why not to aim for more if you can achieve it? Success requires hard work and rewards you handsomely.

    Are you preaching mediocrity and conformism?

  9. mike 9
    11 February 2008 at 11:20 am

    “a) 85% of kiwis earn less than 60K, those who get above that are relatively wealthy. The average income is less than 40K and the median is less than 30K.”

    The average income includes all part timers as well so this figue is a bit misleading

    “b) even someone earning 60K gets little under this proposal. The ones who get the bulk of the money are the less than 5% with incomes over 80K.”

    This gives me an incentive to do well at my job and earn more – at present the middle class welfare system makes getting ahead a disadvantage

  10. dancer 10
    11 February 2008 at 11:25 am

    i see the PM has conthat the PM has

    “assured critics that Finance Minister Michael Cullen’s preconditions for tax cuts will be met” and that

    “a balance had to be struck between tax cuts and spending in key areas such as health and education. The tax cuts also needed to be “fair” so that people on low incomes were able to live with dignity.”

    http://www.nzherald.co.nz/section/1/story.cfm?c_id=1&objectid=10491798

  11. Steve Pierson 11
    11 February 2008 at 11:28 am

    Santi. I can ask myself, because I’m one of the few people who would get any cut from this proposal.

    And yes I do feel I’m wealthy because I know that many people have it much harder than me. Just because I have a higher income does not make me a harder worker or a better or more worthy person.

    Mike. The average full time wage is in the mid 40K range. Still not enough to get more than a few bucks tax cut udner this proposal.

  12. BeShakey 12
    11 February 2008 at 11:33 am

    Was reading an interesting book (on American not NZ politics) highlighting the stupidity of the idea that the tax take is ‘my money’. In reality it’s the country’s money. The country invested huge amounts of tax dollars into the infrastructure etc that allows me to earn the money I do. Paying some of the money I earn back to the country for maintaining, improving, and expanding the country, is quite different to ‘stealing’ my money (as some on the extreme right like to paint it).

  13. dave 13
    11 February 2008 at 11:33 am

    Actually, as I have said A tax cut would be fine, but a third of working families get paid more in WFF than they pay in tax.

    So that would be a handout. No wonder Cullen wants employers to pay their staff more – he rather recieve more tax to help fund his tax cuts and let people chew up their WFF payments on higher interest rates.

  15. Tane 15
    11 February 2008 at 11:37 am

    Dave now you’re just repeating Fran O’Sullivan’s lines. Cullen wants employers to pay their workers more because he’s a Minister in a Labour Government. You know, that party that was founded on bettering the lot of the working man?

    In case you haven’t noticed we’ve got a wage gap to close. That seems to me to be a far more likely reason for Cullen to want to lift wages than any complicated conspiracy theory penned by the Herald’s resident right-wing blogger.

  16. r0b 16
    11 February 2008 at 11:46 am

    BeShakey – exactly!

    Dave – I’ve heard some pretty silly claims about Labour politicians, but that was one of the silliest!

  17. dave 17
    11 February 2008 at 11:50 am

    If Cullen wants employers to raise wages because” hes a minister in a Labour Govt” can someone tell me why he has been a Minister in a labour GOvt since 1999 and only made the call this year?

  18. Steve Pierson 18
    11 February 2008 at 11:54 am

    dave. The Labour-led governments have strengthened union laws and upped the minimum wage 8 times in 8 years. Real wages have risen 15%. Labour has a strong record on increasing incomes and calling on employers to raise wages further is just a continuation of that.

  19. Tane 19
    11 February 2008 at 11:58 am

    Time to trot out the links again:
    Median wages – http://www.thestandard.org.nz/?p=527
    Unemployment – http://www.thestandard.org.nz/?p=652
    Minimum wage – http://www.thestandard.org.nz/?p=883

  20. Tane 20
    11 February 2008 at 12:00 pm

    Oh, and inflation-adjusted minimum wage.
    http://www.thestandard.org.nz/?p=906

    Of course there’s plenty more to be done, as I’ve said elsewhere. But my point is Dave shouldn’t be so surprised about a Labour Minister calling for higher wages.

  21. r0b 21
    11 February 2008 at 12:06 pm

    Tane – I’d be amazed if Dave’s “surprise” is genuine. I suspect he’s just doing good foot soldier work, running today’s talking points up the mast to see who salutes.

  22. Billy 22
    11 February 2008 at 12:15 pm

    Steve, unfortunately tax cuts can only be given to people who are actually paying tax. Unfair, I know.

  23. Robinsod 23
    11 February 2008 at 12:22 pm

    So no tax cuts for multinational banks then?

  24. dave 24
    11 February 2008 at 12:37 pm

    No effective tax cuts for any average family on or under the average wage, actually.

    When Cullen cut the company tax rate, did he want employers to use it to increase productivity, leading to higher salaries and more tax for the Government?

    Didn’t work, did it?

    So instead the Government wanted to have more people on lower incomes rather than fewer on moderate incomes. Its called increasing the participation rate. More people are in work – collectively paying more tax on low incomes – but because interest rates are so high, these people were forced to work or increase their hours to make ends meet

  25. Phil 25
    11 February 2008 at 12:38 pm

    If the Nats went into the election with a tax platform of; “First $10,000 in income tax free” they would romp home. That would be about $40 a week for every income earner in the country, regardless of total income.

    I think that works out at about $3bln in ‘lost’ revenue. Add back GST and the extra tax from business profit if we all spend more, and you’d be looking at a net change in revenue of maybe $2.5bln, which is really not that much greater than the current Treasury estimate of “Structural Surplus” which is about $2bln.

  26. Matthew Pilott 26
    11 February 2008 at 12:39 pm

    “This gives me an incentive to do well at my job and earn more – at present the middle class welfare system makes getting ahead a disadvantage”

    Mike, this is a stupid comment and you surely know it.

    To explain for those who just glossed over it without taking it in – only income over and above the threshold of a tax bracket is taxed at the higher rate (to give you credit Mike, perhaps you did not realise this).

    For example, if you earn $50,000, the first $38,000 will be taxed at 19.5%. The rest of your income ($12,000) will be taxed at 33%. That’s not going to stop you wanting to be paid more than $38,000, one would imagine.

    Some on the right seem to want to imply that going from $59,000 to $60,000 will mean all your income will be taxed at 39%, not 30%, and that you will lose money. Either they are stupid or lying, I’m not sure which.

    Either way, to claim that higher tax rates are a disincentive is disingenuous at best. “I got a pay raise and now I’m getting $50,000 after tax, not $43,000. That’s so unfair!!”

  27. Sam Dixon 27
    11 February 2008 at 12:40 pm

    Billy. Your point is obvious but it does not follow that tax cuts must therefore go disproportionately to those with the most already.

    Dave. Tin foil hat?

  28. Tane 28
    11 February 2008 at 12:46 pm

    For those who are wondering, this is where Dave is getting his lines from:

    http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10491555

    Funnily enough, Fran O’Sullivan usually gets her lines from David Farrar.

  29. AncientGeek 29
    11 February 2008 at 1:08 pm

    Phil: couple of points.

    I think that works out at about $3bln in ‘lost’ revenue. Add back GST and the extra tax from business profit if we all spend more, and you’d be looking at a net change in revenue of maybe $2.5bln, which is really not that much greater than the current Treasury estimate of “Structural Surplus’ which is about $2bln.

    It’d be a bad idea to run the system dry. Who knows what comes up over the next year. Some severe flooding. Drought in canturbury. Wellington getting flattened (happy thought) – however we should have already paid for that.

    And you never know – the recipients might save it yeah that is unlikely.

    And dumping it off in one lump is going to be inflationary.

    I’d prefer to inflation index the tax brackets, playing catchup at the bottom bracket faster than the top brackets. But get it as a formula so it isn’t an election toy.

    cap: licked abandon
    one has to ask????

  30. East Wellington Superhero 30
    11 February 2008 at 1:22 pm

    This back and forth about Fran O’Sullivan and other sources is silly.

    The reality is that the Left are socialist and the Right are classical liberals (or neo-cons or whatever). Play the ball not the man (or woman).

    Just face it, Labour has failed. Failed failed failed.

    A small handful of Cabinet ministers now control 45% of New Zealand’s annual wealth – this makes your comments about the powerful controlling the money, a freakin’ self-righteously deluded joke.

    Billions and billions of dollars have been spent to, apparently, help ‘the poor’ from being screwed by ‘the rich’. We’ve had a welfare state for nearly 70 years but have we eliminated poverty? No! If fact it’s worse. We now have a society relies too much on the government and contains a huge cohort of intergenerational poor. We have a nation with the highest imprisoment of aboriginal people and the highest suicide rates.

    There is NOTHING to suggest that a welfare state improves anything except increasing interest rates and decreasing genuine civil liberties.

    Labour is a joke. Yes, the have the power for now but their underlying philosophy is a joke.

    The great socialist promise is joke.

    You might be proud to be socialist but you’ve gotta look at the evidence and ask yourself why. You might get a warm-fuzzy and that do-gooders self-righteous feeling as you lay in bed at night but it’s an delusion. Poor kids are still starving in Porirua and other kiwi-kids are still killing themselves and a poverty trap (both financial and moral) is a weaping sore on our society.

    Helen Clark – worst PM ever.

    Here’s another joke: China – the once marxist nation, working for the mythical ‘common man’ wanted to make everyone equal. That obviously failed because millions were slaughtered in the attempt to achieve something which never came about. Then the one-party state decided it needed to get richer so adopted capitalism.

    So now you have a one party state that achieves the very thing Marx didn’t want!

    What a joke.

  31. Policy Parrot 31
    11 February 2008 at 1:22 pm

    ”

    If the Nats went into the election with a tax platform of; “First $10,000 in income tax free’ they would romp home. That would be about $40 a week for every income earner in the country, regardless of total income.

    I think that works out at about $3bln in ‘lost’ revenue. Add back GST and the extra tax from business profit if we all spend more, and you’d be looking at a net change in revenue of maybe $2.5bln, which is really not that much greater than the current Treasury estimate of “Structural Surplus’ which is about $2bln.
    ”

    The main problem for you is … that the majority of people calling for tax cuts are those want considerably more than that per week. The only way that everyone can get more is through higher wages.

    Captcha “stride for” – indeed 🙂

  32. mike 32
    11 February 2008 at 1:25 pm

    Mathew, you are taking a simplistic view.
    My wife works 2 days a week and our 3 kids are in care for those days (we do not get any of the so called 20 hrs free) without her 20k or whatever on our household income we would get more WFF welfare. There is no incentive for her to work.
    Give the welfare to those who really need it and let the rest of us keep more of our own money.

  33. Tane 33
    11 February 2008 at 1:28 pm

    EWS, I’m not going to bother addressing the rest of your post because it strikes me as an angry ideological rant rather than a considered opinion.

    I would say though, that as much as I dislike the Chinese regime the following comment is rather uninformed:

    So now you have a one party state that achieves the very thing Marx didn’t want!

    Marx held that feudal societies must pass through capitalism before reaching communism. And while he was critical of capitalism he also recognised its dynamism and its ability to create great wealth. He just thought it was brutal and inhumane, and ultimately destined to be replaced by communism. I’m not saying I agree with the guy’s analysis, but you might want to read a thing or two before mouthing off.

  34. Robinsod 34
    11 February 2008 at 1:31 pm

    Um EWS, we’re the second best country in the world to do business in, poverty levels are better now (though still not great) than they was under the (more laissez-faire) National party government and China is a dictatorship. Given your inability to understand facts and your predilection toward delusion, perhaps Kiwiblog would be a better place for you?

  35. Robinsod 35
    11 February 2008 at 1:34 pm

    without her 20k or whatever on our household income we would get more WFF welfare.

    If you’d get enough from WFF to offset the loss of that $20k then bro, you’re a sucker. Somehow though I don’t think you do or you would have said so. I guess that means you’ve got no argument…

  36. mike 36
    11 February 2008 at 1:46 pm

    Rsod, when I pay 12k in child care for something that was promised to be free I guess I am a sucker.
    My wife would work anyway as unlike the Govt we believe in personal responsibilty.

  37. Robinsod 37
    11 February 2008 at 1:52 pm

    My wife would work anyway as unlike the Govt we believe in personal responsibilty

    So your answer is no. And that means your argument that WFF creates a disincentive to work is based on an untruth. Oh and just out of interest, why do you think you have a monopoly on personal responsibility and how come you’re missing out on the free childcare? Are you sending your kids to an unapproved organisation? Or are you telling another fib?

  38. East Wellington Superhero 38
    11 February 2008 at 1:54 pm

    A joke.

  39. Robinsod 39
    11 February 2008 at 1:56 pm

    Do you mean you were making a joke with all the reds-under-the-bed stuff? I’m not following…

  40. mike 40
    11 February 2008 at 1:59 pm

    “Are you sending your kids to an unapproved organisation? Or are you telling another fib?”

    My childcare centre offers a high level of service – not a good look under labour obviously.
    Are you serious when you say WFF is not a disincentive to earn more money???

  41. Robinsod 41
    11 February 2008 at 2:05 pm

    Are you serious when you say WFF is not a disincentive to earn more money???

    Dude, according to your story you and your “wife” are proof of that fact yourselves.

    My childcare centre offers a high level of service – not a good look under labour obviously.

    I take it from your answer that you have chosen to send your kids (although I’m starting to doubt you have any) to an unapproved centre. In which case you’re paying that $12k (supposedly) for a service you could have for free. I suggest you STFU before you make yourself look like even more of a dick…

  42. mike 42
    11 February 2008 at 2:12 pm

    Why start calling me a liar and getting offensive?.

    The whole point I am trying to get through is productivity is very low in NZ but our system makes it so by encouraging people to sit at home on their arses and live off the Govt

    Btw there are no “approved centres” in our area.

  43. dancer 43
    11 February 2008 at 2:17 pm

    mike – i’m sorry you haven’t gained any benefit from the 20 hours free programme. it’s saved our family about $70 per week – and that’s a lot more than we would have got under a tax cut.

    i had a quick look on uptake (of 20 hours) and it looks like the trend is for more centres to sign up – so maybe it might not affect you now but if you’ve got any pre-schoolers heading for age 3 it might have spread to your centre by the time they get there (Nearly 79,500 three and four-year-old children are now receiving up to 20 hours Free ECE – http://www.beehive.govt.nz/release/early childhood centres receive more funding)
    and just on WfF – isn’t one of the basic principles that having a parent stay at home a good thing not just for the kids and the family, but will hopefully benefit our wider society down the track? not to mention that children and $$$ are incompatible at any time.

  44. Robinsod 44
    11 February 2008 at 2:19 pm

    The whole point I am trying to get through is productivity is very low in NZ but our system makes it so by encouraging people to sit at home on their arses and live off the Govt

    And the point I’m making is that you have no facts to back this up and the facts you do come out with seem to disprove your prejudice.

    Just out of interest how much closer is your unapproved centre than the nearest approved one?

  45. mike 45
    11 February 2008 at 2:32 pm

    Dancer – yeah I’m going to hit up our centre again soon as I have 2 eligible now. The problem is top ups are not compulsary so centres like ours risk being out of pocket. National might change this so it works across the board.

  46. Matthew Pilott 46
    11 February 2008 at 2:47 pm

    Mike, I understand that there’s more to it than pure tax, but I don’t believe that there is any situation whereby an increase in income could be more than offset by a decrease in a benefit, credit or subsidy – are you saying this isn’t true?

    Given that WFF has a diminishing inverse relationship between income and credit, an increase in income will always more than offset any loss in the WFF tax credit so I don’t understand the situation you are trying to explain above.

    You are also giving a specific situation and applying it carte blanche to New Zealand’s taxation regime – I reiterate that the tax system does not promote mediocrity, the only ones doing as such are the right, in their attempted prepetuation of the aforesaid myth.

  47. Idiot/Savant 47
    11 February 2008 at 3:30 pm

    Here’s an analysis of the distributional impact of the BRT’s proposal, based on Treasury data:

    http://norightturn.blogspot.com/2008/02/who-benefits-from-brts-tax-proposals.html

    It’s pretty ugly. The total cost is over $2 billion a year, and more than 60% of it flows straight into the pockets of the 3% who make more than $100K a year. George Bush would be proud.

  48. r0b 48
    11 February 2008 at 3:39 pm

    Thanks I/S. Big fan of your blog – UI understand why you turned off comments there, but sometimes it feels like a pity, because you post some great stuff!

  49. Phil 49
    11 February 2008 at 4:49 pm

    Ancient Geek,

    I’m an little more free and easy when it comes to governments running deficits (maybe it’s a generational thing?) The interest rate they can borrow at is a great deal better than you or I on Credit Cards and/or mortgages.

    From an inflationary standpoint, I’m not convinced that the dire predictions are anywhere near accurate. Look at where the current inflation pressures are coming from; food prices and fuel. Both of these things are traded commodities, and the prices we face are far more a reflection of international markets and the level of the exchange rate than whether or not we have extra cash in our pocket.

    Policy Parrot,
    I’m being a little more strategic than that. Do you think those calling most loudly for tax-cuts would vote labour instead?!

  50. Dan 50
    11 February 2008 at 5:44 pm

    It is the ferreting out of such compelling articles that allow me to celebrate the fact I will be voting for a return of the Labour government. It is no wonder the large media groups are so biased against Clark and co; they dare not let the facts emerge!

  51. Santi 51
    11 February 2008 at 6:27 pm

    Good on you Dan for your blind faith in comrade Helen. With brainless people like you, whom appear deaf, mute and blind to the facts, the road to heaven is assured.

    Surely, you’d be voting for democratic Fidel in the next Cuban elections, wouldn’t you?

  52. Policy Parrot 52
    11 February 2008 at 6:48 pm

    hell Santi, I’d vote for Fidel before I’d vote for John Key.
    Least Fidel cares about the people.

  53. James Kearney 53
    11 February 2008 at 7:06 pm

    So Helen = Fidel?

    Your extremism is commendable Santi, nice job of internalising the Free Speech Coalition’s billboards and becoming a fully paid up member of the kiwiblog right.

  54. Dan 54
    11 February 2008 at 8:00 pm

    Santi, when the facts and the truth start hurting, you must attack ad hominem. I notice your mate Mr Farrar has pulled his head in lately. Clearly the powers that be are equally offended by extremism. When the logic of Buffet, and the facts put forward by Steve Pierson get to the wider NZ community, then the odds on Labour will shorten very quickly.

  55. Billy 55
    11 February 2008 at 9:08 pm

    “hell Santi, I’d vote for Fidel before I’d vote for John Key.”

    The least surprising thing I have read today, PP.

  56. Psycho Milt 56
    11 February 2008 at 9:42 pm

    The least surprising thing I have read today, PP.

    Well, I wouldn’t vote for Fidel before I’d vote for Key, because Fidel’s even more of a prick. But that doesn’t make Santi’s bizarre raising of Fidel Castro whenever people are talking about the NZ Labour Party any more sensible. Imagine if I started squawking about Pinochet every time a Nat supporter turned up here – would you admire my insight and perception? More likely you’d suggest I cut back on the medication.

    Santi, cut back on your medication.

  57. burt 57
    11 February 2008 at 9:43 pm

    Steve Pierson

    I respect the position of the left that tax cuts shouldn’t be delivered relative to how much tax is paid. IE: More benefit from tax cuts received by big tax payers is considered unethical because it gives tax relief to big tax payers.

    Lets examine the ‘least needy get the most’ scenario from another angle. Lets assume that a rich pricks salary and the minimum wage both increased by 8% last year. Against a CPI of circa 3% the govt would claim success for delivering a great benefit to the most needy… sounds kinda familiar eh.

    So the rich prick on $240K gets a cool $19,200. The minimum wage worker gets about $1,920 from the same 8% payrise. (based on 2,000 hours at $12.00/hour)

    Any communists that think the rich prick and the minimum wage worker should have had received $10,560 as their pay rise?

  58. AncientGeek 58
    11 February 2008 at 10:09 pm

    I’m an little more free and easy when it comes to governments running deficits (maybe it’s a generational thing?)

    I suspect it is. Probably because of the deficits that were run up before when I started working. Also inflation above 15%, interest rates at 20%, and the government racking up debts on my behalf for that bloody stupid Think-Backwards that were close to the salary I was earning in a year.

    A fair chunk of my income over the years went to pay for the relatively low interest rate from the debt accumulated in the big spend up in the late 70’s and early 80’s. You could say I’m a teeny bit sensitive about getting unrequired debt.

    Of course the tales from my grandparents and great grand parents about previous excursions into debt helped as well.

    My position is pretty clear – go and get up to 50% of the superannuation liability covered to 2050. Then start giving tax-cuts. I’m not really interested in passing debt on to my kids and grandkids.

    From an inflationary standpoint, I’m not convinced that the dire predictions are anywhere near accurate. Look at where the current inflation pressures are coming from; food prices and fuel.

    Yes, and neither is that likely to drop over the long term (they will flucuate), they are far more likely to keep increasing. Both are from resource constraints in their production (arable land area and reserves respectively) with increasing demand from a increasing and more affluent world population.

    Now when we see technologies that remove the constraints, say cost-effective hydroponics or the mythical 20 year time horizon for viable fusion finally arrives – I’ll change my view. Otherwise I’d say be fiscally prudent, those inflationary pressures should be treated as if they are here permanently. Alternatively we could look for something to reduce world population growth.

    Even if the effects of wage rises and tax cuts on inflation are less than expected = there will be rises from both. Since we are at the top of the reserve bank band already, wouldn’t it be prudent to let it drop before dumping the tax-cut effect into it? The wage effect will go in regardless.

  59. AncientGeek 59
    11 February 2008 at 10:15 pm

    BTW: before someone starts muttering about there being no oil shortage. I’ll say they are correct. However I’d also say that the costs of proving new reserves are increasing faster than the cost reduction from new tech. The cost of extraction is steadily rising in the same manner.

    The current high price will increase the rate of exploration, but the oil extracted from them will be more expensive than previously tapped reserves.

    cap: significance Tonight
    argggh the words keep getting longer…

  60. deemac 60
    11 February 2008 at 11:24 pm

    the idea that low productivity is the fault of the workers (are Kiwis lazy? I don’t think so!) is so economically illiterate it is hard to know how to reply to such drivel – productivity reflects primarily business willingness to invest in staff training, R&D etc and to plan for the future… not something NZ captains of industry are famous for

  61. Murray 61
    11 February 2008 at 11:24 pm

    Robinsod you have reached a new low. Mike is a guy who together with his partner are working hard to provide for thier children. All you can do is ask petty questions as to why he isn’t leeching off the 20 free hour 2005 election bribe. If I ever meet you I will firstly… [lprent- Deleted]

    [lprent: I scanned both Robinsod’s and mike’s comments. Their comments were caustic but rational. Your last statement was just offensive as well as being illegal. If you want to drop to that level – do it elsewhere]

  62. Robinsod 62
    12 February 2008 at 12:50 am

    Hey Muz, if you met me y’d call me Mr. I thought you were gonna fuck off to Aussie? Don’t take y’ time…

  63. Robinsod 63
    12 February 2008 at 12:54 am

    Oh and Lynn? Don’t delete the good stuff. It’s good for people to se Muz and his kin in their natural state.

  64. Santi 64
    12 February 2008 at 8:14 am

    “Hey Muz, if you met me y’d call me Mr. I thought you were gonna fuck off to Aussie?”

    What kind of crap is that Michael Porton? You, who claim to be an example of civility, are one of the worst offenders openly inviting this sort of behaviour.

    Is intelligent discussion beyond you? It appears to be so.

  65. Robinsod 65
    12 February 2008 at 8:25 am

    You, who claim to be an example of civility

    WTF? Santi, you’re an idiot.

  66. burt 66
    12 February 2008 at 8:42 am

    Robinsod

    You got any comment about how if we tried to level out pay rises we would be called communists yet some dim-bulbs think it’s just fine to level out tax cuts?

    Imagine – big tax payers, some paying more tax in a year than a minimum wage worker earns in a lifetime, might get more of their own money back from changing tax rates…. wow – ain’t maths amazing ! Who would have thought that a person paying say $100K a year in tax would get more tax back from a tax cut than somebody paying $4K a year in tax. I just can’t understand how such a thing could occur….

  67. Robinsod 67
    12 February 2008 at 9:20 am

    Sure I’ve got a comment Burt: “You’re a moron”. I think that just about sums it up…

    [lprent: Just name calling is unsubtle, you can do better. Better try.]

  68. Steve Pierson 68
    12 February 2008 at 9:25 am

    Burt. The tax cut proposal does tot give a same percentage cut to everyone.

    It gives a 0% cut to anyone with an income below $38,000, most adults, and a cut approaching 9% for a person earning $100K , 1% of the population.

    I presume you have excel. Try running the numbers yourself.

  69. Matthew Pilott 69
    12 February 2008 at 10:30 am

    I’m not sure what Burt’s angle is, I’m struggling to make sense of any of his math and logic, but I think I may be able to help.

    Burt, try to think of tax as a proportion of someone’s income. A $3,000 tax cut to someone on $30,000 p.a is 10 times a greater proportion than the same tax cut to someone on $300,000.

    So many of us ‘Communists’ think that there is an advantage of delivering a greater proportion of those tax cuts to people at the bottom end of the scale.

    Y’see Burt, if everyone got an equal percentage tax cut, then the rich person’s cut in my wee story would be 10 times greater than the chap on $30,000.

    I can understand how that could occur Burt, it’s fairly elementary math.

    What you seem to be struggling with is that there are people who wouldn’t want that to happen.

  70. burt 70
    12 February 2008 at 8:18 pm

    Matthew Pilott

    Excellent, you understand that a tax cut for a big earner (big tax payer) is likely to give the big tax payer more tax relief than a small tax payer. IE: A larger amount of their own money back, although the proportion is the same.

    But I think I understand where you are coming from. People paying piss all tax should pay even less (perhaps negative tax – IE get welfare as well as earning) while people paying massive amounts of tax should pay more.

    So just out of interest – how much tax is required on a per person basis to run the country?

    My opinion is all tax thresholds should be adjusted, there should be a zero rated bottom end (eg: The first $10K of earnings) and thresholds should be based on a percentage of earners and adjusted every year. You probably know what I’m talking about – like only the top 5% of all earners pay the rich prick top tax rate – not 17% as at the end of 2006. (probably 20%-25% of all tax payers by budget 2008).

  71. burt 71
    12 February 2008 at 8:44 pm

    I know I know – adjusting tax thresholds every year is like saying we have a tax policy rather than just fleecing the tax payers for as much as politically expedient.

    Madness to suggest such a thing I know – but I guess I’m a bit of a dreamer and I think govt should have a stated policy and stick to it.

  72. Matthew Pilott 72
    12 February 2008 at 8:52 pm

    Well Burt, how much it costs per person to run a country depends on two key variables:

    1 – how many people there are

    2 – how much you need to spend

    🙂 maybe ask Cullen, off the top of my head I think NZs govt spends $60Bn or so, which is roughly $13k per person. Not bad when you see what you get for your hard earned dough.

    Where did you hear that 17% of earners (why the ‘rich prick’ comments Burt, have they personally insulted you lately?) are taxed at the top rate? Last I heard it was 12%.

    Now if you want to base your thresholds upon a percentage of earners, apart from that being an administrative disaster, it would lend great uncertainty to the worker (i.e. which tax bracket should I budget for this year?). It would be difficult to pull off.

    I support a minimal tax take from the lower bracket, as I support Australia’s top rate of 45%.

    Just like you to chew on something though, you say that a tax cut will give your rich person more of ‘their money back’. Now, what mechanism allowed them to earn that in the first place? Would you say that the State, with the Government as its agent, is the enabler for wealth creation. Because that’s a conventionally accepted view, and it’s therefore a bit rich (so to speak) to say they’re getting their own money back – you think they owe the state nothing?

  73. burt 73
    12 February 2008 at 9:09 pm

    Matthew Pilott

    See here for base figures:
    http://www.act.org.nz/heather_roys_diary_14

    By the 2005/06 financial year, nearly 11 percent of taxpayers were being hit with the top tax rate when the threshold should have risen to $79,000 to keep his five percent promise. The figures for the year ended June 30 2007 aren’t available yet…

    By the 2005/06 financial year, nearly 11 percent of taxpayers were being hit with the top tax rate when the threshold should have risen to $79,000 to keep his five percent promise. The figures for the year ended June 30 2007 aren’t available yet, but it’s a fair bet the numbers being overtaxed continue to rise, contributing even more to the burgeoning surpluses.

    While it’s easy to talk in percentages, this sometimes masks the real extent of the problem. In 2000, when the new tax rate kicked in, 194,000 people were paying the 39 percent tax rate. By 2006 the figure had ballooned to 352,000.

    Now doing some maths on that:

    for 352,000 people to be 11% then the number of people being considered is circa 3,200,000 people. This is the number of working age people as at end of 2006 (potential workers). According to a discussion I had with Jordan circa Jan 2007 there was 2.2m actual tax payers in early 2007. Ignoring the fact that there were less than 2.2m working people as at July 2006, 352,000 / 2,200,000 = .16 ( 16% – not 17% as I stated above)

    So there were 16% of tax payers (actual workers – not potential workers) paying the top tax rate as at end of tax year 2006. 2007 saw quite large pay rises and the indications from this year is the same.

    That 1999 threshold locked and loaded for so long has been a disaster! Imagine if we touted the WFF statistics like we do the top tax bracket statistics. Dr. Cullen would never have been able to say 75% of families are eligible if he was talking about people of child baring age rather than actual parents.

  74. burt 74
    12 February 2008 at 9:35 pm

    Matthew Pilott

    Now if you want to base your thresholds upon a percentage of earners, apart from that being an administrative disaster, it would lend great uncertainty to the worker (i.e. which tax bracket should I budget for this year?). It would be difficult to pull off.

    Twaddle. As tax brackets would almost always go up, budgeting on the same take home pay would almost always provide a bonus that would be easily saved. Exactly the same as a pay rise. Take home pay would increase every year, due to pay increases and possibly fiscal push (if there is such a term – opposite to drag – reverse bracket creep).

    As for it being difficult to administer, there are rumors around that tax cuts could be effective as soon as October. Clearly changing tax rates is not that hard. (not in election years anyway) Almost certainly they will change as of 1st April 2009, so why couldn’t they do that every year? The changes could be published months in advance. No fanfare, u-turns, denials of a surplus etc would be required and no policy/election promises would be broken year on year as a giant surplus builds.

    It is not unreasonable in todays world to have a tax system managed to extract as closely as possible the correct amount of money for govt to deliver on it’s policies, build a prudent surplus and eliminate debt. Fiscal drag and massive surplus are a sign of either poor management or promises made in 1999 that could not be kept. (only top 5% will pay, nobody earning under $60K will pay a cent more income tax etc)

    If it was that the 1999 promises were bollocks, then what about 2008 promises should we take seriously?

  75. burt 75
    13 February 2008 at 8:48 am

    Matthew Pilott

    Now if you want to base your thresholds upon a percentage of earners, apart from that being an administrative disaster, it would lend great uncertainty to the worker (i.e. which tax bracket should I budget for this year?). It would be difficult to pull off.

    You had better not vote for Labour then – they are talking about cutting taxes over the next 3 years – imagine the chaos as workers have no idea how much extra money they will get. Clearly Labour will face an administrative nightmare to implement their promise….

    So do you want to reconsider the “administrative disaster” justification for Labour apathy over tax cuts ?

  76. Matthew Pilott 76
    13 February 2008 at 9:42 am

    Burt – Labour can easily spell out what the cuts will be in this years’ budget. I.e. the lowest threshold will rise to $x this year, $x next year, and so on.

    With your idea, since it is based upon the percentage of people earning at a certain level, the IRD would somehow have to calculate, at the start of each tax year, how many people fit into each category, based upon last years’ income, I suppose. Actually I can’t see how it would work in practice, but suffice to say it’s not quite the same as a pre-planned sucession of tax cuts.

    So… no.

  77. burt 77
    13 February 2008 at 10:03 am

    Matthew Pilott

    Lets see if Dr. Cullen gets his crystal ball out for the next three years and tells us all exactly what the rates and thresholds will be for the next three years out or if he announces stage 1 and outlines/defines the agenda for stage 2, 3 etc.

    Then we’ll know if you are pissing on your own party suggesting that their budget announcements are unworkable.

    The reason for (or the method of) reevaluating the rates is almost immaterial to the implementation of changing rates debate. If we are expected to accommodate a tax rate change announced in May by October then clearly as long as the new rates and thresholds have 6 months notice we can cope. The IRD clearly totaled up some numbers for the Budget in 2007 because Dr. Cullen was able to announce the percentage of people paying the rich tax, as discussed above. Therefore the issues of getting the IRD to “add up some numbers” is clearly a no brainer, it’s already being done for budgets and/or parliamentary questions.

  78. burt 78
    13 February 2008 at 10:23 am

    Matthew Pilott

    Actually I can’t see how it would work in practice, but suffice to say it’s not quite the same as a pre-planned sucession of tax cuts.

    Do you also trust share brokers when they give you a three year prediction of a stocks performance? Dr. Cullen was unable to keep the 1 year chewing gum tax cut promise, who in their right mind would take any notice of a three year projection with that pedigree behind it.

  79. burt 79
    13 February 2008 at 10:34 am

    Matthew Pilott

    Chewing on.

    Now, what mechanism allowed them to earn that in the first place? Would you say that the State, with the Government as its agent, is the enabler for wealth creation. Because that’s a conventionally accepted view, and it’s therefore a bit rich (so to speak) to say they’re getting their own money back – you think they owe the state nothing?

    The state takes my taxes, not gives me my take home pay. I earn my entire pay, the govt takes a deduction from it leaving me with my take home pay. (under laws written expressly to allow it to do so)

    I suggest that your ‘conventional view’ may be a conventional view to a socialist where the state is expected to own all means of production. For people less locked into a failed system the state provides law and order, social services, and an agreed level of public health and schooling. A monopoly never provides a quality product over the long term, govt is no different to private enterprise in this regard.

    I don’t owe the state, I have paid the state very well via my taxes, well enough for it to implement it’s agenda. The state owes me, it owes me health care – not a waiting list. It owes my children education – not mediocrity, I owes them a reasonable class size – not 31 kids! It owes me a lawful society and it owes me freedom of speech. These are the things the country voted for, have paid for and are owed by the state as the provider.

  80. Matthew Pilott 80
    13 February 2008 at 10:35 am

    Burt, perhaps I’m not understanding, nor am I dismissing your idea out of hand.

    However with announced tax cuts, someone on, say, $50,000, will know what they will get. As said above, I would imagine tax cuts will take the form of threshold adjustments, and are therefore easy to calculate for the individual.

    I don’t know what you mean by crystal ball-gazing – it’s not that difficult a matter to say what the cuts will be.

    If the individual (and IRD) had to second-guess which threshold they will be in based upon other people’s incomes, it would become a whole lot more difficult. I.E. you get a pay rise, and so does pretty much everyone else. Depending on how your pay rise compares to everyone elses, you may or may not be taxed at a higher rate. I don’t see that as workable.

    At present IRD need to simply calculate your tax rate based upon what you earn. Under your idea, IRD would need to calculate your tax rate based upon what you earn, what everyone else earns, how many people there are above and below you, how many new workers there are minus how many many have left the workforce and the number of people required in each bracket. Maybe that’s simple to do, but (to stereotype somewhat) I thought people on the right were for simplicty and minimalism in government. The number of people required to work such details out could rival those required for WFF!

    P.S do you think everyone on the right would be happier if a new tax was introduced, say 45% for over $120,000? All this pureile moaning about the ‘rich tax’ and all – it might shut the whingers up a bit aye?

  81. burt 81
    13 February 2008 at 10:40 am

    Matthew Pilott

    I don’t know what you mean by crystal ball-gazing – it’s not that difficult a matter to say what the cuts will be.

    I disagree, sure I could say this threshold moves from x to y as at dd/mm/ccyy. Easy indeed. But how do the govt project the economy and the conditions for the 4 way test three years into the future? How will surety be given against any announcement of rates when Dr. Cullen insists tax cuts must always meet the 4 way test.

    Currently I’m arguing Dr. Cullen’s position that tax cuts need to be planned against financial reality – you seem to be do a “National Party” thing and suggesting that we can just lay them down for three years into the future.

  82. burt 82
    13 February 2008 at 10:46 am

    Matthew Pilott

    Maybe that’s simple to do, but (to stereotype somewhat) I thought people on the right were for simplicty and minimalism in government. The number of people required to work such details out could rival those required for WFF!

    It’s not difficult information to derive, there is a database, it stores numbers (lots of them) and there are pointy head nerds to work out how to manipulate it.

    It’s already been done.

    See here:
    Cullen Over-Taxing 352,000 Kiwis

  83. Matthew Pilott 83
    13 February 2008 at 10:52 am

    Ah, wasn’t sure what you meant there. Yep buggered if I know how those four tests can be guaranteed to be met, if you’re looking at doing so for each sucessive year of tax cuts. If he only lays them out one-by-one at each budget, people will still know what they are getting several months in advance – with your idea I just can’t see how people will be able to do so.

    It’s interesting that you see nothing of the state’s enforcement of contact and property law, intellectual property rights and business rules, when you go about earning money, to say nothing of the vital infrastructure that allows people to exist in what we call a civilisation.

    It has nothing to do with state ownership of means of production – this much is clearly obvious by my use of the term ‘enabler’ as opposed to provider or similar – stop looking for reds under your bed when there’s a social democrat in front of you.

    You say you’ve paid the state very well through your taxes – this implies you’ve decided that you’ve paid enough for the serivces you get. This seems childish and irrational. How did you manage to unilaterally come to such a conclusion?

    Given your various complaints about the state, the obvious point is that you’re actually underfunding the state!

  84. burt 84
    13 February 2008 at 11:00 am

    Matthew Pilott

    If he only lays them out one-by-one at each budget, people will still know what they are getting several months in advance – with your idea I just can’t see how people will be able to do so.

    Yes correct, if he lays them out in the budget people can plan for them. This is very separate to how they are calculated. Dr. Cullen could pluck a figure out of thin air or he could get some of him policy analysts to give him the silver bullet for the next 12 months.

    As the links I have provided show the information is available, we have the technology, we have the mechanism (the budget) and we have reasons. I’m saying implementing tax rates against a policy is better than sticking your finger in the air, reading the political climate and shooting from the hip.

  85. Murray 85
    13 February 2008 at 12:52 pm

    Iprent, are you related to Margaret Wilson? Your bias and partisanship towards the left is so obvious.

    [lprent:
    I’m sysop of a labour movement, left leaning blog site. What do you think my opinions are likely to be?

    Of course I have an MBA from Otago, a background in management, and have worked in the private sector for most of my working life. I suppose you consider I’ve never thought about the issues and run on blind predjudice or self-interest? Grow up.

    However that doesn’t particularly affect my sysop role – I look at obnoxious behaviours and make sure they don’t destroy the site.
    ]

  86. Murray 86
    13 February 2008 at 1:53 pm

    I really can do without your life history. In my experience those with commerce degrees in management and marketing are generally wastes of spaces. Should have done a real degree and majored in accounting, like me.

  87. Matthew Pilott 87
    13 February 2008 at 3:08 pm

    lprent, you can see Murray’s bias showing through there aye, the accountant pushed around his whole life by those management and marketing types 😉

    [lprent: I was in operations. Did the MBA to understand accountants so I could argue with them. But discovered programming which seemed more productive.]

  88. Robinsod 88
    13 February 2008 at 3:11 pm

    Don’t lie Murray you don’t know shit about accounting.

  89. Matthew Pilott 89
    13 February 2008 at 3:17 pm

    “I’m saying implementing tax rates against a policy is better than sticking your finger in the air, reading the political climate and shooting from the hip.”

    Burt, you may well be right that an annually adjusted tax bracket threshold is a feasible idea. Those ‘pointy headed nerds’ (accountants??) might get it, but you have to ask yourself would the average punter? Less likely and you don’t want to turn tax into a lottery.

    As for Mr Cullen shooting from the hip, I guess that’s what those four criteria for tax cuts are all about right? Or did you forget about them in the space of two posts?

    You don’t suppose he’ll check what forecast tax take is, contrast it to projected spending, and take into account the systemic surpluses mentioned by treasury, before deciding what is available for tax cuts? No Burt, that would be too logical for the person who has managed New Zealand’s economy for the last eight years… Give me a break.

  90. burt 90
    13 February 2008 at 3:26 pm

    Matthew Pilott

    You don’t suppose he’ll check what forecast tax take is, contrast it to projected spending, and take into account the systemic surpluses mentioned by treasury, before deciding what is available for tax cuts?

    Yes that’s exactly what I think he will do – you were the one saying he could lay out the program with details for the next three years to justify your argument that annual adjustments based on policy objectives were unworkable.

    It was your idea of stipulating the next three years cuts that I was referring to as shooting from the hip…

  91. Matthew Pilott 91
    13 February 2008 at 3:42 pm

    Given my lack of experience as New Zealands Minister of Economics, I’m not sure how difficult it is to make predictions three years out 🙂

    However you were implying that not laying it out three years in advance would lead to uncertainty, but it can be done, say, six months in advance, to give people time to budget.

    I’m not so sure it could be done with a threshold pegged to a proportional basis of the population. Could the IRD tell every taxed New Zealander what they will be taxed at in the following year, when everyone’s tax rate is to change every year? Big ask… but if it could be done and still left enough money for the government to healthily operate (and increased the tax take according to population) then it wouldn’t be a problem. Might need the odd freeze if there wasn’t enough money though.

  92. Murray 92
    13 February 2008 at 4:46 pm

    So Robinsod is allowed to call me a liar and say I don’t know shit about accounting with no proof of his accusations whatsoever. I however am not allowed to say what I would like to do to him/her if I ever had the misfortune to meet him/her face to face.

    [Tane: Yeah, that’s about it. We draw the line at threats of violence. And honestly bro, harden up.]

  93. Robinsod 93
    13 February 2008 at 5:28 pm

    Hey Murray – you can come threaten me on my blog if you want:

    http://www.newzblog.wordpress.com

    We’ll have a good old time.

  94. Murray 94
    13 February 2008 at 5:56 pm

    Softcock lefties – all that bludging off the taxpayer has made you all a wee bit too precious.
    Robinsod will blog on your site tonight.

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