Small not too focused group, majority from the right, but not involved in politics, tongues loosened had a discussion on their expectations of tax changes. I listened.
No real interest in threshold changes. Their consensus was while they wanted more, but thought English and Key didn’t have it in them, the budget in May will drop the top rate to 30c (from 38) the middle income rate to 25c (33) and the under $48k rate to 15c (21). A couple of people thought that Key would phase the top rate change in over two years to make him look less personally greedy. But that it would be announced this May.
Would make for some interesting modelling.
You hanging out with Righties now Trevor. I believe the Government has done a poor job to date in communicating the need for the restructure of the tax system.
I understand why the message has been confused – but the reality is that the current tax structures with 10% paying 75% of income tax are unsustainable. Maybe National has been hamstrung because until the budget is delivered there is only speculation about what the new tax and GST rates will be.
Regardless – the message needs to explain the marco-economic benefits – not the micro-economic distraction that Labour focuses on. Regardless and if the latest polls from TVNZ and TV3 last night – the country does understand a restructure of the tax system is well overdue.
Small not too focused group, majority from the right, but not involved in politics, tongues loosened had a discussion on their expectations of tax changes. I listened.
What are you talking about?
the budget in May will drop the top rate to 30c
English has given pretty firm indications that it’ll be 33c.
A couple of people thought that Key would phase the top rate change in over two years to make him look less personally greedy
I’m pretty sure Key gives all his salary to charity so I don’t think greed plays a huge role in his decisions around marginal tax rates.
What’s to stop them announcing in May but phasing in the changes so that the top rate doesn’t hit its valley until 1 November 2011, which is after the 2011 election. For a change, that’ll make the election about…….tax.
*Snore*.
Danyl says “I’m pretty sure Key gives all his salary to charity so I don’t think greed plays a huge role in his decisions around marginal tax rates.”
Does Key actually gives his salary to charity? Is there any confirmation of it? I’ve tried googling for it, but so far have not found any information that verifies it. The idea that he gives his salary to charity do also help “to make him look less personally greedy”.
Is there any confirmation of it?
The closest I’ve seen is a promise given to donate a ‘good chunk’. This was given at around the same time as promises of ‘north of fifty dollars a week’ in tax cuts for the average wage earner.
But it’s a helpful and persistant meme no doubt.
I’m guessing these folks are going to be disappointed. The 38 rate will go, the 33 rate will stay, and there’ll be a small movement in the lower rates to figleaf over the ‘tax cuts for everybody’ promise.
Perhaps it’s all about making the cut to 33 cents look moderate, by posing more extreme options to be rejected?
The thing is National
1. claimed they could make tax cuts without cutting government spending
2. then said they had to defer tax cuts they promised because of the deficit – the moderate option was then to cut spending instead because of this deficit
3. now it’s have the top rate part of the tax cut while we are still in deficit within some new maxim of a budget neutral tax change – that is all new tax revenue gains (from outside the income tax part of tax revenue) become available for income tax cuts.
This (3) means that priority is given to stimulating the economy by delivering more money to those who have existing wealth (property ownership, savings and capital investments), rather than directing it to the productive sector of the economy. This allows only growth in the domestic service and retail to big spenders sectors of the economy and otherwise investment managers. Such cannot deliver a sustainable economic growth and longer term full employment. Thus as a policy course, it is absurd.
So are we going to get 3 -4 months of tease.
They sure are masters of the sell. Its all about tax cuts but their mouths are taped shut on the GST increase
Good move on Labours part to run their campaign on this so it gets some air as well
Is it a good idea to run a campaign when they don’t even know the details of the budget? Doesn’t sit right…
And the 12.5% rate just doesn’t exist eh? Despite the fact that half of taxpayers pay at least half their income in that bottom bracket.
Danyl wrote: “I’m pretty sure Key gives all his salary to charity so I don’t think greed plays a huge role in his decisions around marginal tax rates.”
Yeah and he also told you he was going to build you a cycleway, sucker.
And the PM’s salary is a small part of his income. Don’t hear him saying he gives the rest away, eh?
Trevor,over at KiwiBlog, Craig Ranipa asks the question “WILL LABOUR GO TO THE POLLS NEXT YEAR ON A COMMITMENT TO REPEAL ANY CHANGES TO GST AND PERSONAL INCOME TAX?”
For all your objection to the GST increase I think this is a very good question – Maybe one Phil Goff or David Cunnliffe may care to answer in this forum.
The reality is that I doubt very much Labour will campaign on this – so does you concern about GST increases therefore seem somewhat hollow?
I suggest all your rightie mates may well be enjoying the benefits of lower income tax enev although the trade-off will be increased GST and less deductions on their rentals.
Cuts of 8c, 8c and 6c to these three rates would be hugely expensive, and much more than could be raised by GST at 15%, removing building depreciation and ring fencing. We can model it out but my initial impression would be that it could not be fiscally neutral without another major tax source – and having excluded land tax, RFRM and CGT, that leaaves National with very few options.
I guess the underlying point is that it is highly unlikely that National can achieve fair tax reductions while compensating a gst rise and remaining fiscally neutral – which is why so few New Zealanders believe them.
So, If the point of taxes is to pay for all the govt and social expenditure etc, why would you raise gst and compensate by lowering taxes, maintaining its fiscally neutral? (we seem to be hearing this alot lately – Roys education system and now taxes…) Whats the point? Esp if it runs at a loss (because that would be silly).
Which leads me to ask these (I admit possibly silly) questions:
1. If its fiscally neutral, why do it unless its a carrot – or actually not fiscally neutral – in which case you would expect the govt to tell us how much money they would expect to get that is more than it is now – would you not?
2. What are the working costings (these must have been done)and where does the joe/joess public get to see them?
3. What are the other real options that could be done and what kind of money would that bring into the govt coffers?
4. What are we not being told? Surely fiscally neutral is pointless – is there a point I am missing? (quite likely)
I think most people are perfectly happy paying their taxes as long as you see the benefits to all aspects of our society – but I can’t see how being ‘fiscally neutral’ is going to benefit those who need it most, let alone provide appropriate social policy that upholds what it is to be kiwi – those things we expect – quality health, justice and education for a start (let alone roads and infrastructure). Not unless you privatise, mine conservation land (which means you know there are resources there but just not telling the public) and cut significantly those areas above. (ah ha moment – think I have answered my own wonderings…)
My understanding of the “fiscally neutral” aspect is to change where/how the money is spent/controlled as opposed to giving more or taking more away? Getting it saved or spent in ways to keep the economy circulating?
“10% paying 75% of income tax” Monty can you post back up to this? Today I heard M Hooten say 10% pay 65%. Someone must have the actual figures?
My understanding was that Key gives away his salary increases to charity, the ones the Higher Salaries Commission doles out and so many MP’s feel obliged to take.
This is heartening. NZ Herald reports that TVNZ/Colmar Brunton poll today reveals strong opposition to GST increase.
As I write, I can’t find the poll at TVNZ yet, but here’s the NZ Herald report – http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10627825
http://tvnz.co.nz/business-news/kiwis-sceptical-aussie-catch-up-3377895
Only if you keep blowing it out the other end with the force of a socialist spendfreak.
Seriously dreamer No one likes a rise in GST
boring Trevor
This is only a guess, but it seems pertinent …
The reason why the top rate of tax reduction could not be delayed till the budget improved (and some new paridigm was required to rationalise doing this now – as part of a “budget neutral tax reform”) is that National wanted some of the people to have $100,000 (2 or 3 years tax cuts) or so to buy shares when state assets are part privatised in the second term.
It seems the government intends to give some of the people the money to buy up state assets – if they just handed over our assets to a certain few it would be a corrupt cronyism of the worst kind, this way it’s more like what happened in Russia in the 1990’s, just another right wing economic reform.
Paul, see any talk of ‘tax system efficiency’ and ‘tax avoidance’ and ‘family trusts’. You could do worse than googling them in various combinations.
@Monty – wait and see
Spot on SPC “This (3) means that priority is given to stimulating the economy by delivering more money to those who have existing wealth” And this is exactly what the proposals seem to me to be about.
What I cannot get is anyone to explain why our tax system is “fundamentally flawed” as we keep hearing. I believe it has flaws, but find a system that doesn’t. All I hear is rubbish to justify holding the wealth for the few.
For example, from the TWG property invested $200 Billion, Loss $150 million. No mention this was 1 extreme year or that property has been a net taxpayer for 26 out of 28 years.
Also why do we have different tax treatment of foreign shares through managed fund vs direct investment?
Why don’t we have sales taxes on luxury goods, or environmental taxes rater than blanket GST (and why not on financial services)
And I heard somewhere (probably this blog) that for every $1 given to IRD to chase tax cheats we return $10. Is this how we are going to get ‘tax neutral’?
All the carry on about tax rates & GST, Labour introduced GST and put it up. Prior to National winning the last election what did labour do about tax rates, yes you guessed it.
When Labour were in power it was a non issue, Now they are in opposition Kiwis are over taxed and something has to be done about it (Pot-Kettle)
GST itself is not the problem – it is the ideological baggage that is the problem.
Ideological purity is the rational for a single rate GST – except that financial services are excluded – (some exclude educational and health services and public transport, and nearly all food except for us because of our foolish pride in our pure and clean include all system – clearly other nations take more pride in food being affordable to the poor).
I prefer a higher rate GST – one at 20%, but of course I would exclude food and public transport and focus compensation on the lower income levels too a fault. Something that possibly distingusihes Labour from National on GST, if to a lesser degree.
Key is still saying 30 or 33c on the top rates are in the mix, as are the others.
As for his income, any donations made to registered charities above a certain value reduce your taable income by the same amount, I don’t think he missed that one if he is donating.
Increases in GST in isolation, as Key says, will be negative… they’re looking at a package so it doesn’t feel so bad. The Budget will have it’s lollies, Key isn’t stupid enough to just raise GST on it’s on, its the balance of the advantages created that will a) be missed by most and b) favour those least in need of it.
By the way Gooner, those socialist spendfreaks were more conservative than the neo-con liberals running the treasury benches now, remember all those surpluses everyone wanted Michael Cullen to spend up? yeah.
If GST rises, Labour shouldn’t reverse it as it’ll impose further unnecessary costs on business.
Better thing to do would be to impose a tax free threshold of around $2 – $5k if you earn under a certain income. Perhaps phase out the threshold from $50 to say $55k, at which point you’d have no tax free threshold, and would pay tax on every dollar earned.
Equitable? Yes. Fair? Yes. Provides benefit to lower income earners? Yes.