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Tax cuts for the rich

Written By: - Date published: 1:12 pm, October 8th, 2008 - 29 comments
Categories: election 2008, national, tax - Tags:

National has released its tax policy. At first glance it appears the top rate will be reduced to 37% by 2011, giving the rich thousands of dollars in tax cuts. People earning $24-50k who aren’t getting Working for Families will get $15 a week rebate by 2011. Working families will basically get nothing, except for a 1% tax cut in three years’ time.

The package will be paid for by gutting Kiwisaver – the employer contribution will be essentially scrapped as Key halves the minimum contribution and forces workers to pay for it out of their own wages anyway. This will obviously have a huge impact on the savings rate and the future domestic capital base New Zealand businesses need to grow and pay higher wages. Stunningly, the research and development tax credit will also be scrapped.

Medium-term, Key says he wants to reduce the top tax rate to 33c for people earning $50,000 or more. This will lead to a massive growth in inequality in a country already marked by obscene disparities of wealth.

I honestly can’t believe this policy. I knew National were right-wing, but I thought they had more political sense than this. With today’s tax announcement, the ‘sensible centrist’ facade is over.

29 comments on “Tax cuts for the rich”

  1. Simple (renamed RC) 1

    This is rubbish from national, a more half arsed tax system could not be conceived of. tweedle dee and tweedlge dumb

  2. Scribe 2

    Tane said: Working families will get nothing, except for a 1% tax cut in three years’ time.

    The Herald’s story says: Mr Key said the bulk of the cut would come on April 1 2009, meaning a worker on the average wage of $48,000 would be better off by an additional $18 a week above Labour’s cuts from that date.

    Who’s telling the truth?

    IrishBill: Key’s figure includes the $15 rebate that families on working for families will not get.

  3. milo 3

    Tane: You must have read a different article to the ones I read in Stuff and the New Zealand Herald. Your claims bear no resemblance to what they actually reported.

    And simply saying “eat the rich” is exactly the policy that led to the awful recession and shocking PREFU in the first place. And remember, these happened before the effects of the financial crises are taken into account. The only way out of these 10 years of Labour deficits is productivity growth. You can’t just keep slicing up a reducing pie. You’ve got to grow the pie.

    What’s Labour’s policy on productivity growth?

  4. Spider_Pig 4

    Obscene disparities is wealth? You left wingers are unbelievable.

    Someone earning $100,000, who pays 6 times more tax than someone on $50,000. Now that is obscene. Unfair. And downright wrong.

    National’s tax policy will provide the incentives for that person to work that extra hour of overtime, try to unskill to get that promotion, etc.

    Their policy to reduce the minimum contributions to Kiwisaver to 2% is excellent, because it will allow lower income earners, many of whom who cannot afford to tie up 4% of their salary, to join and benefit along with those of us that can afford to join.

    Gutting Kiwisaver? Far from it. Making it more practical more like.

  5. Patrick 5

    Scribe – learn to read. Tane is talking about people who qualify for Working for Families. They will “benefit” from their extra block of cheese from Key, but will be getting no additional tax credits from working for families until 2011.

  6. Tane 6

    Scribe. I could be wrong, but according to Stuff the $15 a week rebate for a worker on the average wage “will apply for those with personal incomes of between $24,000 and $50,000 who do not receive any form of financial entitlement.” That includes Working for Families.

    So tell me, what do the hundreds of thousands of Kiwis on WFF get?

    Other than a 1% tax cut in three years and John Key pillaging their retirement funds to pay for tax cuts for his rich mates, that is.

  7. Scribe 7

    So tell me, what do the hundreds of thousands of Kiwis on WFF get?

    Well, apparently the same as what Labour is giving them. Should National be pumping more that Labour into WfF?

  8. insider 8

    Hang on, I got almost three times the tax cut than someone on $24k this week. Does that mean Lab is giving tax cuts for the rich?

  9. milo 9

    Wasn’t this blog crowing about how people on WFF were effectively paying no tax at all a few months ago? And supporting that gross distortion of incentives and the economy a good thing?

    Now you want them to pay less than no tax? In the middle of an unprecedented financial crisis?

    That is a view that is disconnected from reality.

  10. vidiot 10

    Tane – might be time to get out your MS Excel and do the math.

    Currently an employee on $48K per annum would take home $733 per week, under the proposed changes they would now take home $752 a week (so +$19). They would only be paying 21% tax on the 48K income vs paying 33% on the 8K over 40K that they are currently paying. And this is without any rebates, WFF, etc.

    Currently it’s
    $0 $14,000 12.5%
    $14,001 $40,000 21%
    $40,001 – $70,000 33%
    $70,001 and over 39%

    From 1 April 2009
    $0 $14,000 12.5%
    $14,001 $48,000 21%
    $48,001 – $70,000 33%
    $70,001 and over 38%

    From 1 April 2010
    $0 $14,000 12.5%
    $14,001 $50,000 21%
    $50,001 – $70,000 33%
    $70,001 and over 37%

    From 1 April 2011
    $0 $14,000 12.5%
    $14,001 $50,000 20%
    $50,001 – $70,000 33%
    $70,001 and over 37%

  11. Hamish 11

    You are so clueless.

    By 2011, top-income earners will get $69 more a week. That’s just $15 a week more than the $55 Labour has already promised.

    I’m not saying that that $15 is money spent well, but the tax cuts are definitely not aimed at rich voters. The tax rates at the top were always going to be brought back down. Even Labour’s policy reflected this fact.

    But the rebate of $15 on the one hand is only available to those earning up to $50,000. National have blockaded rich tax payers from recieving that crucial extra money which inidividuals under $50 grand need.

    I’m sure National would love to give money to those families with working for families but simply there is not the money in the coffers to do so. If they did give more out, it would be financially and economically reckless. They have still included all the extra finance Labour gave to those families however in their May budget, so those families will still be much better off with this package.

    Someone else deal with the “gutting kiwisaver” comment. I really can’t be bothered with that.

  12. Matthew Pilott 12

    Heh, I called it a week ago:

    Hey SP – what would it cost to can the 39% rate (and how many people would that benefit)? I reckon that’s going to be in the gun – 38% by April next year, and incremental adjustments thereafter.

    Some of us knew that sensible centrist facade would slip sooner rather than later.

    What’s Labour’s policy on productivity growth?

    Might have something to do with an R & D credit National want to scrap, milo.

    Just out of interest, with this policy you actually lose money if you go over $50,000 don’t you, by losting the $15 a week tax credit (i.e. according to the right you stop being a beneficary, because if WfF was a benefit, National are merely extending it so every New Zealander under $50,000 is a beneficary).

  13. Scribe 13

    Tane,

    I would have thought you would have been crowing about how wonderful the independent earner rebate is. It’s delivering an extra $780 per annum to low-income workers and an extra $520 per annum for people on the average wage (assuming they’re not already receiving WfF).

    All those young people on minimum wage you rightly fight hard for are going to get that extra cash. Isn’t that a great policy for them?

    insider,

    Hang on, I got almost three times the tax cut than someone on $24k this week. Does that mean Lab is giving tax cuts for the rich?

    Of course not.

  14. Rakaia George 14

    Pillaging their retirement funds v “Keep their current KiwiSaver entitlements”

    Spin any faster and you’ll drill yourself into the floor.

  15. milo 15

    The R&D tax credit? That’s it?

  16. Go The Right 16

    I can understand the Left being a little peeved at the moment because this Tax cut policy by National is very clever.

    Its aimed at Labour Heartland not the Rich its aimed at people between 12000 and 30000.The only addition I would make is get rid of Secondary Tax those that work harder get rewarded.

    They will swing towards National for this. Yes the top end get some relief but so they should they earn good money, and they deserve it time to do away with Envy Politics lets keep the brains in New Zealand.

    I think this has gazumped Labour and the timing is brilliant at the moment. I dont know how many have noticed but National are controlling the Media airwaves at the moment Helen is hardly getting a look in which is great.

    This must crosby Textor and their meticulous planing maybe time for Helen to ditch Heather Simpson and get someone else.

    [lprent: Rob: Could you stop plagarising comments that you don’t understand. It isn’t very clever.

    One really BIG group that this ‘tax cut’ is going to hurt is the 12k-30k group. They get quite a lot less under this than they do if the current legislation is left alone. The only group that does really well out of it are the really rich. Dropping the top tax rate really helps people earning well over 100k. The more you earn the better your taxcut is.

    So what you said was pure unadulterated crap.]

  17. LawGeek 17

    Couple of points.

    1) Do you actually object to people on lower incomes with no kids getting a tax break?

    2). “Tax cuts for the rich” and implying that this is far right policy is unhelpful rhetoric. I’m certainly not a Nat voter and I earn somewhere around the top tax rate. And I still have rent to pay, bills, etc, etc. Just because someone earns over the average wage. Don’t get me wrong, I don’t need a tax cut and I’d actually be willing to pay more. But you know, people who earn over the average wage aren’t always eeeeevil right wingers – implying they are is kinda stupid

  18. Matthew Pilott 18

    That’s it?

    No, but it does happen to be one policy initiative more than National announced. Oh, Labour’s kiwisaver would have provided a good fund for investment in NZ. National has made sure it’s going to be smaller.

  19. AndrewE 19

    Working families will get nothing…

    I have a working family and we’ll be getting plenty. Just because you are well paid doesn’t mean you don’t work.

  20. vidiot 20

    MP – “Oh, Labour’s kiwisaver would have provided a good fund for investment in NZ. National has made sure it’s going to be smaller.”

    Ummm burst your bubble time… None of the Kiwi Saver funds are under government control, all have been farmed out to ‘independent’ providers. Now on the other hand the Government controlled NZ Super Fund (aka teh Cullen fund) that’s a different story.

    In the policy document it states “In the longer term, National’s plan for the economy aims to generate the sort of investment opportunities that may enable more of the fund to be invested here in New Zealand.” – So I guess we might see some of these funds put to use locally to fund long term & needed infrastructure projects that will benefit NZ. Should also reduce our exposure to the foreign capex markets that the fund currently has.

  21. milo 21

    That’s wishful thinking Matthew. Like the Cullen Fund, kiwisaver would chase the most productive portfolio of balanced investments it could find. Inevitably, most of that would be international.

    Meanwhile, to balance that Labour creates a distortion against private international share investment, by adding a capital gains tax. This, of course, merely encourages further investment in property, due to the myriad of tax breaks property enjoys, and the tax penalities for other types of investment.

    Frankly, Labour are so blinded by ideology, they can’t follow a rational argument anymore. They wind up distorting the economy every which way, hugely reducing efficiency and thus wealth.

  22. Draco T Bastard 22

    Hehe, it’s amusing that the data sheets that National have in the PDF are actually wrong.

    Just out of interest, with this policy you actually lose money if you go over $50,000 don’t you, by losting the $15 a week tax credit.

    National’s Tax PDF:

    It abates at 13 cents for each dollar of income above $44,000.

    The independence benefit abatement rate is rather extreme. In 2009 the rebate won’t apply after $44076.92 ($10/0.13=$76.92). In 2010, after the rebate increases to $15/week, that increases to $44115.38 ($15/0.13=115.38). I have NFI where they get $48000 from never mind the $50000.

  23. Greg 23

    Take it from a right winger – I assure you National is still boringly centerist. As for the R & D tax credit; Have you talked to any business owner about that? Biggest tax cut for the rich I’ve heard about.

  24. randal 24

    its cheeze tommorrow and cheeze next year but no cheeze today!

  25. Vanilla Eis 25

    Rob: do you even understand the secondary tax rate? (Does the person you stole your post from?)

  26. randal 26

    vanilli…do you understand cheeze?

  27. averagemum 27

    Here’s a specific example.

    My pretty average family: two part-time incomes each $40k, two kids, small WFF tax rebate.

    Under Labour’s tax plan, we will be $52/wk better off by 2011 (tax only, not WFF).
    Under National’s tax changes we will be $43/wk better off by 2011 (tax only, not WFF), but we will also lose $30/wk in Kiwisaver matching funds.

    I haven’t included WFF because I assume any future WFF adjustments will be the same for Labour or National, as National has promised not to change WFF.

    So net $39/wk worse off under National compared to Labour.

  28. Matthew Pilott 28

    vidiot – ‘available for investment’ – here’s hoping some of it will be invested in NZ, if we won’t invest in ourselves who will? I know that it is not under Government control, that would be a hell of a thing for me to not know, trust me!

    milo – Labour has a capital gains tax? WhatdidImiss?! I thought it was a lack thereof that was encouraging investment in housing? Perhaps i’m thinking of something entirely different…

    Frankly…

    Ahh, don’t know if you missed the memo, but you’re not to talk about the market and how Wonderous it is for the next few months.

    Vanilla Eis – I didn’t understand why secondary tax was so high until I worked out that it was because the lower marginal rates were excluded, having been factored into your primary job. So I can see how a poor soul like Rob wouldn’t get it. I think he wrote that one, there is that Random capitalisation throughout. Felix said it was probably to help us Understand his Thoughts.

  29. Vanilla Eis 29

    MP: Exactly, and you can claim a rebate for any extra tax you pay under the secondary rate. Frankly, I’m amazed that Rob can get one job, let alone two, so maybe we should let the poor dear have his tax the way he likes it and the IRD can send him a nice fat bill at the end of the financial year (for which I doubt he can budget).

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