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Slippery John’s “after-tax incomes” line

Written By: - Date published: 10:29 am, June 18th, 2008 - 32 comments
Categories: john key, national, slippery, tax, wages, workers' rights - Tags:

You’ll have noticed that Key only ever talks about increasing ‘after-tax incomes’. Even when he’s asked about wages for government employees, like doctors, he responds that National would increase their after-tax incomes with tax cuts, not by increasing their wages.

But anybody can see that cutting taxes is only a short-term way to slightly increase the money in people’s wallets. Labour’s tax cuts will knock 22% off the tax the median person (earning $27K) pays but that will only boost their net incomes 5%. Those are expensive tax cuts; any larger tax cuts from National would need borrowing or cuts in the social wage. Large tax cuts can’t be repeated every year, even eliminating income tax would not close the wage gap with Australia, and indexing taxes to inflation would give no after-inflation income increase.

So, since tax cuts aren’t a way to increase after-tax incomes. Only wage rises can lift after-tax incomes sustainably. Why, then, does Key only talk about tax cuts and after-tax incomes? Because National is the party of big business. No National leader would say ‘we’ll raise after-tax incomes by raising the minimum wage and backing workers’ efforts to get pay rises’ that’s not what National stands for. Money spent on wages could be profits; business wants bigger profits, which is why Key says he ‘would love to see wages drop‘. But Key has to make people think National has something to offer on incomes. And, so, he repeats ad nauseam his hollow ‘after-tax incomes’ line.

32 comments on “Slippery John’s “after-tax incomes” line”

  1. Daveo 1

    I’d like to see a kremlinology on industrial relations at some point. It’s time they were flushed out on this, and on ACC.

  2. mike 2

    When the election proper starts Key will be pointing out that had Nationals tax policy been in place from the last election the average wage earner would be around $70 a week better off today.

    Cullen’s big mistake was leaving the tax door open so long for National to exploit.

    Can you blame Key for not accepting a gift like that.

  3. Tane 3

    Mike, who’s this average tax payer you’re talking about?

    http://norightturn.blogspot.com/2005/08/tax-cuts-for-rich.html

    And what cut to the social wage would an average wage earner have suffered to pay for their $15 a week tax cut?

  4. T-rex 4

    Mike – why is it that whenever anyone mentions the tax breaks that would have been delivered under national they fail to mention the minimum wage increases that wouldn’t have been delivered?

    In 1999 the minimum wage was $7.

    It’s now $12.

    Anyone earning the minimum wage has seen their after tax income increase HUGELY under labour.

    Their are two types of people who focus purely on tax:

    1) People who earn little, but are stupid and selfish and will get bitten in the ass by their principles in the very short term.
    2) People who earn lots, but are stupid and selfish and will get bitten in the ass by their principles in the slightly longer term.

    By all means whinge if you think the government is mis-spending your money, but the tireless focus on how they shouldn’t take it in the first place is just pure simplemindedness.

    If you don’t want the government to take your money, then please, spend some time in one of the countries where they don’t.

    It’s also frequently ignored that the “money hoarding cullen” is actually the reason we’re not horribly in debt right now – Nationals proposed massive spending of the surplus that only existed on paper would see us a lot poorer than we are right now. And for what? A few plasma screen TV’s and trips to the gold coast.

  5. SweeetD 5

    T-Rex

    there are many economic argurments showing the harm that min. wages cause. Also, while employment is high at the moment, the arguement for min. wage increase is lessened even more.

  6. T-rex 6

    “Also, while employment is high at the moment, the arguement for min. wage increase is lessened even more.”

    How do you figure?

    Also – define ‘harm’. Harm to employment? Harm to wage earners? Harm to wage payers?

  7. T-rex 7

    Anyway, there are many arguments as to the harm of running up considerable overseas debt, but they’re not usually considered when people are drawing their tax cut maginot line.

    Key just pushes meaningless platitudes like “ordinary kiwis are hurting and National would have delivered them tax relief earlier than this”. I’m pointing out that, while that may be true, ordinary kiwis would still have a lower after tax income under National DESPITE the tax cuts, and the country would be poorer as well.

  8. andy 8

    T-rex

    I too am interested in the cognitive dissonance from the tax cut crowd, who are usually the ones complaining about the govt not being tough on crime or some other authoritarian type scheme, you get the line good govt spending v Ministry of (insert minority group here) bad spending.

    How can we as a country get tough on crime, give tax cuts and cut govt spending. In the context of what this govt has done with increasing prison sentences and building prisons and the costs involved.

    I struggle to see how we can deliver this nirvana without more negative consequences. Poor get poorer, commit more crime, bang em up, rinse repeat and the cost of that socially and in dollar terms goes nuts.

    Underclass 101?

  9. T-rex 9

    Andy – more or less. Hence my classification of the two types of tax-cut-tunnel-vision sufferers.

  10. SweeetD. those arguments about the minimum wage harming employment are bollocks. They are wheeled out every time by BizNZ, promising economic doom if the poorest workers get 75 cents more an hour, and they never come to anything.

    And as for the argument that the minimum wage is not needed in times of high employment – how come 300,000 people got a pay rise last time it went up? If the market was taking care of wages itself, there wouldn’t be 15% of workers sitting on the minimum wage. You can bet if the minimum wage was never raised from the $7 an hour it was under Naitonal, many workers would still be earning that little – that’s what happened when National refused to raise the minimum wage in the 1990s, and that’s what happens in the US.

  11. SweeetD 11

    Harm, as in harm to those receiving with min. wage. In periods of high employment there should be no need for a min. wage as the need for staff would force employers to pay higher then normal to get staff. In periods of high employment, facing an artifical cost, that is a min. wage then low skill staff can be priced out of the market.

    Second point, not all debt is bad. Debt to fund growth is a good thing (ie, transport-roads, motorways). The money that cullen has been ‘hoarding’ is actually money that has been taken out of the economy, which again, would have, in part been used for growth by private enterprise.

  12. SweeetD 12

    Pierson, what should the min. wage be then? Lets make it $100 an hour eh? That’ll fix everything won’t it.

    Maybe 300,000 people get the min wage because they are unskilled and NZ is a low wage economy.

  13. T-rex 13

    SweeetD – I’ve heard the argument, but it doesn’t really seem to work (or have ever worked) that way in practise.

    Minimum wage isn’t an artificial cost. It’s a recognition that if you’re going to get someone to work for them then it’s reasonable for you to compensate them in a way which means they can enjoy a vaguely reasonable standard of living. It’s also a recognition that in any pay dispute the one with all the money is generally far better placed than the one without.

    As to your second paragraph – No, not all debt is bad. But, as evidenced by mortgage and credit card debt levels in NZ, the debt people tend to rack up when left to their own devices often is. Labour IS investing in infrastructure. They just also, thankfully, have the foresight to hedge themselves against rainy days in the future (unlike – at the risk of beating a dead horse – all the people who took out zero equity mortgages at the behest of the kind, honest, and in no way selfinterested REINZ)

  14. T-rex 14

    “Maybe 300,000 people get the min wage because they are unskilled and NZ is a low wage economy.”

    No doubt, which is why it’s hardly realistic to pay them $100/hr. But it does seem reasonable to at least pay them enough to live off… and minimum wage remains barely that.

    $12*40*52 = $25k/annum.

    $390/wk after tax (@19%).

    Work out how far that’d get you if you had a kid or something, then think about whether WFF tax breaks are still unfair and discriminatory.

    It’s not like your average supermarket shelf stacker is having their ferrari subsidised or something here SweeetD.

  15. “Pierson, what should the min. wage be then? Lets make it $100 an hour eh? That’ll fix everything won’t it.”

    That’s a stupid argument. No-one’s saying the minimum wage should be infinitely high.

    Cullen isn’t hoarding any money. What the hell? Do you think it’s in a vault somewhere? The surpluses have been spent – on paying down debt and on capital investment.

  16. T-rex 16

    “What the hell? Do you think it’s in a vault somewhere?”

    I know you’re kidding, but seriously, I think that IS what a lot of people think. A giant pile of gold coins in the basement of the beehive that he does laps in each morning.

    I think half of our problems would be solved if, before adopting an opinion, people went “hey, what could possibly be their motivation for that and would it make sense”.

    Clearly the likes of some kiwiblog posters are poorly equipped to make such judgement calls, but I live in hope that the majority of NZ’ers could probably see through the bullshit.

  17. dave 17

    Steve, youre getting really boring with your recycled arguments on after tax income. Lets see some solutions. That was a ‘nothing post”. Why dont you just do a cut and past on some of your other posts to save time?

  18. dave. I’m exposing the fact that Key has no solutions. I’m not running for PM, he is.

    Incidentally, stay tuned for my arguments on incomes tomorrow.

    t-Rex. “I think half of our problems would be solved if, before adopting an opinion, people went “hey, what could possibly be their motivation for that and would it make sense’.

    Agreed – it’s like the “there’s all this waste” argument, why the hell would Labour want to be carrying lots of waste?

  19. dave 19

    John Key is not the only one running for PM, Helen Clark is too. Whats her solutions? An announcement of a tax cut that takes effect years later….

  20. gobsmacked 20

    Meanwhile, National’s own income from John Key has been disclosed, thanks to the Electoral Finance Act:

    http://www.elections.org.nz/record/donations/returns-donations-exceeding-20k.html

    Money channelled through secret trusts not included, of course.

  21. jcuknz 21

    I just love this ‘after tax incomes’ which favours the rich pricks at the expense of the less well paid. The latest budget was all wrong and a fair system would have been to give a rebate of the same amount to all wage earners, Frankly I am sick of the current mob but nothing makes me want a National Government to replace the hopeless twits we have.

    I could add ‘Waht about the pensioners’ struggling to make ends meet.

  22. T-rex 22

    Steve – yeah, exactly! I dunno what the logic is. I think part of it is that people don’t like to believe that there tax is NOT being wasted, because if it’s not being wasted then they can’t expect a cut without a corresponding sacrifice. Truth hurts I guess… when it comes down to brass tacks I think people will probably realise this.

    Dave, Helen Clarks solutions are the ones she’s been delivering fairly consistently for the last 9 years – Steve has done so many posts on the increase in real incomes, especially at the low end of the spectrum, that I’ve lost count.

    jcuknz – I know this might shake your world view, but people who pay a lot of tax benefit from tax cuts to a greater degree BECAUSE THEY PAY A LOT OF TAX. They pay more tax in absolute terms, they pay more tax proportionally, and their proportional tax cut from labours most recent proposals are proportionally smaller than those of a low income earner. Before you label Clark and Cullen ‘hopeless twits’ you should probably consider what they’re trying to acheive, and the steps they’ve made towards it. Tell me – what ABOUT the pensioners struggling to make ends meet? Are those the same pensioners Cullen has heartlessly abandoned by creating a super-fund that might actually deliver?

    Try applying the logic above – What would Labour stand to gain by deliberately screwing over pensioners and poor people?

  23. Felix 23

    The image of someone doing laps in a vault full of gold coins is just ridiculous.

    You’d want a vault full of notes for that.

  24. T-rex 24

    A fair point well made.

    Scrooge McDuck always managed though… maybe the feathers gave him an edge?

  25. Felix 25

    I would have thought feathers would make it even more difficult.

    But yeah, it’s amazing how often the mouth-foamers actually imply this kind of behaviour with emotive language like “hoarding” when talking about the country’s finances.

    I too think some of them really believe this happens.

  26. dave 26

    Dave, Helen Clarks solutions are the ones she’s been delivering fairly consistently for the last 9 years
    At this point in the discussion can I remind you what a solution is. It is something that solves something, not merely something someone does to appear to solve something.

    So is it the appearances of doing something but actually delivering little that are consistent. Do tell.

  27. T-rex 27

    Ow Ow Ow My brain.

    I’m going to go and do some work, and if no one else has replied to this by later in the day then I’ll answer.

  28. r0b 28

    T-Rex, I wouldn’t bother. If dave chooses to be impervious to facts on this matter don’t stress too much. If we’re sticking just to incomes then Labour’s record after 9 years on improved employment relations, raising the minimum wage, and halting the growth in the wage gap with Australia (that opened up under 9 years of National) pretty much speaks for itself. And that’s before we even get in to WfF, tax cuts, KiwiSaver, and social wage stuff like free childcare, cheaper doctor’s visits, improved super and so on.

    But dave is one of those who hopes to whine his way to an election win, so he’ll never be convinced.

  29. Swampy 29

    “Money spent on wages could be profits; business wants bigger profits, which is why Key says he ?would love to see wages drop?. ”

    Actually he didn’t. Linking to your own post does not prove it either. Key is well known for verbal gaffes, and this was such a one.

  30. Swampy 30

    “By all means whinge if you think the government is mis-spending your money, but the tireless focus on how they shouldn’t take it in the first place is just pure simplemindedness.”

    Arguing that they should take less is not in that category at all. Big government pries and snoops into everyone’s lives. Small government doesn’t. Every party in Parliament and nearly all outside including the Libertarianz support some form of taxation.

    Labour is committed to building big intrusive government because
    (a) they like all the extra power they have over people
    (b) they like having lots of money they can throw around on their pet causes
    (c) they can funnel money into their members and hangers on in the public sector and in all sorts of other places so as to keep the Labour agenda going in civil society as well as government.

  31. Swampy 31

    “Labour’s record after 9 years on improved employment relations, raising the minimum wage, and halting the growth in the wage gap with Australia (that opened up under 9 years of National) pretty much speaks for itself. And that’s before we even get in to WfF, tax cuts, KiwiSaver, and social wage stuff like free childcare, cheaper doctor’s visits, improved super and so on.”

    Let’s look at a select few of those
    1. Employment relations – Labour has not rolled back the biggest changes that National made, namely voluntary union membership and removal of arbitrary right to strike. So which government produced the biggest improvement in employment relations, given that Labour would not have implemented those changes itself? National did.

    2. WFF is discriminatory, not just against beneficiaries, but poor single working people who aren’t part of a family. Also, people paying the envy tax are eligible for it – how weird? But basically, WFF is another welfare benefit. It ticks the boxes for Labour because they like the idea of paying an army of bureacrats to administer it and making more people reliant on welfare payments.

    3. Tax cuts – Labour has no credibility on this. Forget it.

    4. Free childcare – no such thing. There is cheaper childcare.

    5. Cheaper doctors visits – hugely expensive for what it delivers. Has more to do with generating a much bigger health bureacracy collecting people’s private health information. Remember that everyone gets cheaper fees including the wealthy and you’ll see what a strange policy it is.

  32. T-rex 32

    Swampy.

    Your first point is so retarded I’m not even going to respond. It’s not even internally consistent.

    2. It’s called targeted relief you moron. Who do you think is struggling more… someone on a low income WITH a kid, or someone on a low income without a kid? Yeah.

    3. It’s been put into LAW already.

    4. Yes. There is cheaper childcare. Which is good, right?

    5. A strange policy indeed – fancy trying to encourage good health and save money by early intervention.

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