Labour is taking the fight to the government on its unfair tax plan. The “Axe the Tax” bus tour is covering the country.
We are campaigning against is whole tax package, which includes all of:
- GST going up from 12.5% to 15%, even though National said before the election they would NOT;
- The unfairness of the massive cut to the top tax rate, dressed up as “alignment”, which delivers windfall gains to the top few percent.
The government’s GST tax switch is really just cover for the massive shift towards top end tax reduction.
Politics is, at least partly, about who gets what – and guess who stands to benefit most from National’s plans?
Not the vast bulk of Kiwis, who are on middle and lower incomes and who have toughed out the recession.
Labour will release its tax policy before the next election. Labour’s tax plan will be fair to all Kiwis, not one aimed at delivering big cuts only to a few.
Good on you guys for taking this tour!
David – Since you are campaigning against the GST Tax Raise… is it likely Labour will reduce the GST Rate to 12.5% if elected?
You forgot to mention that the few who will be better off will counter balanced by everyone else being worse off.
What about the property tax changes? It may not seem to be core Labor turf, but ironically is one of the few areas the ‘working class’ can invest directly to improve their lot.
Ring fencing- See Sweden?
Depreciation- See Ireland? Not to mention its an illogical argument.
Personally I would have a single book value carried through the council property file for depreciation calculation.
Do we want either of these wealth destroying effects.
And exactly what does Key mean by no COMPREHENSIVE” CGT?
Why not just go after the tax cheats who don’t follow the rules we have now?
Which part of John Keys statement “the vast majority of taxpayers will be substantially better off” applies to just the small number of high earners who currently pay a disproportionate share of tax. The vast majority = the many.
Fisiani- I don’t believe that Mr Key can conjure the vast bulk to be substantially better off. I have seen the Treasury scenarios and under ALL of them the gains are at the top. At best the middle breaks about even.
Matt I agree the govt needs to act on property taxes of some kind. They have not left themselves much room. RFRM and Land tax are out (and both are clumsy). CGT is out – too proressive for this govt. All that is left is building depreciation, which does not net enough, and some kind of briht line test on speculation. I agree with you that Key and English have been strangely silent on nailing the tax rorts. Wonder why?
The ‘unfairness’ of the top earners getting the most back doesn’t seem to be so unfair if you think that they are also the ones PAYING the most in the first place. I mean, they aren’t getting a windfall – simply because it is their money you’re taking in the first place! They aren’t being delivered anything, they are just having less taken from them.
This is something I read the other day from an Australian economist and it seemed to make sense.
10 people go out to dinner and decide to pay the bill, to be fair based on the their respective incomes
The bill comes to $100, since two people earn very little, so they eat for free, the next two paid $15, the next two $20 and so on until the top earner pays $40 by himself and everyone enjoys a meal. Since they are such great customers, one day the owner says “tell you what, today you get 1/2 off and proceeds to hand back $7.50 to diners three and four, $10 to diners five and six and so on, until he gives $20 back to diner 10.. straight away, diners one and two see money being handed over and say ‘hey, that’s not fair, we’re all equal here.. ‘ diners two and three, looking at their $7.50 say.. hey, he got $10..
So they round on diner 10 and beat him up and take his $20 and split it all equally.
The next day, Diner 10 doesn’t come to the meal so Diners 1 and 2 don’t eat for free anymore.
So David will Labour (if elected…) lower GST back to 12.5% (or back to 10% being you raised it before) or even scrap it all together since you introduced it
Good answer David. But you, yourself, are strangely silent on Matt’s other question: is it likely Labour will reduce the GST Rate to 12.5% if elected?
Gooner – I doubt whether you’ll get a straight answer on this, because it’s too unpalatable for any of the MPs to give it.
The problem Labour has is that it knows it would be electoral poison, at least in the next election and possibly the one after that as well, to go into the campaign with a policy of reintroducing the 38% or 39% tax band, even if they promised to bring GST back down to compensate. It would just suggest to the swing voters in the middle that Labour is a high taxing party who knows better than they do how to spend their money.
The current Axe the Tax bus is just having a bob each way.
When it comes to the election my cash would be on them keeping their heads well down as far as any sort of wealth redistribution policy is concerned.
David – why is the taxpayer being forced to pay for this campaign? Why doesn’t the Labour Party pass the hat around its members?
Isn’t calling the campaign “Axe The Tax” being totally dishonest? Labour has no intention of axing GST – it introduced this horrible tax in the first place.
david, um which party introduced GST??? Also that party did not mention it in the campaign either. Are you guys going to drop it to 12.5% in the very unlikely as long as Phill In is leader that you get it elected?
In fairness David did point out that they don’t know what the fiscal position will be in a couple of years. (Still waiting for Phil to show that level of leadership…) however Labour are in a situation where they are actively campaigning against something, but wont say they are going to change it. Given that they know enough to justify a taxpayer funded but tour across the country, they should know enough to say where they stand on the issue. My bet is that David probably voted against this tour, but has to go with the party line.
“(Still waiting for Phil to show that level of leadership…)”
The anti Phil campaign continues.
It’s a statement of fact..
Phil hasn’t said anything… David has..
There’s probably a reason for this. Don’t worry about it.
if we axe the planned GST rise and maintain 12.5% we are still stuffed by +10% from the emissions scam. I spoke with national today. if we don’t vouch to get rid of ETS. they plan to use it as an election winner.
Who is paying for this campaign? Is it the taxpayer?
Yes. The issue we face is an embarrassing one. The campaign has been taken dimly by most. we will poll lower. we contradict ourselves. we refuse to say we’ll cancel the gst rise. we refuse to say we’ll offset the damage from ets. the public will just ignore us further
simon, it is ACT policy to oppose ETS and consult National on this. It is National government decision after all. And hardly one they can associate with Labour – when it is their idea to keep costs off business and fall on the conusmer or taxpayer.
simon, is it ACT policy to try and co-opt Labour on some need to oppose the ETS scheme, or does National need Labour to support an end to the ETS concept before they can agree with ACT?
@ Nick C – Yep, our taxes go into funding the government AND the opposition. It’s called democracy!
The opposition can do what it likes with its share of the pie 
Are you as excited as I am to be living in a freeish country?
One suspects that National is starting to feel the pain of voters – GST increasing costs for the people and only the rich and business getting large tax cuts, while the ETS bill keeps costs off business and places them on consumers or the taxpayer.
Nick should be reassured that most New Zealanders oppose national standards without trials first and most New Zealanders oppose the GST increase – so obviously they prefer their money being used to oppose the GST increase, rather than for the campaign in support of national standards. But democracy being what it is, they get billed for both.
SPC. reasonable question. some contradictions in that too. though it is not about political parties. that is self serving. the issue is the government know public object to ets. they will be using its cancellation as a device to stay elected. the public hold the key in this case. put simply national know we are contradicting ourselves with the bus trip message. national subdued ets. they will call to subdue further to get rid due to global warmings break down. simple.
Maybe Labour sees no point in raising costs on the many to fund a tax cut for the few, but see some need for some sort of Kyoto Acord policy. The current form devised by National keeps costs off business and hands them on to taxpayers and consumers – a criticism Labour has made already (sure any ETS will result to costs on consumers, the thing is to fund programmes to insulate homes and provide energy efficient heating to the poor).
The general problem with energy affordability, is that even if the government has no Kyoto policy energy costs will rise anyway. The same applies to food. The best thing that Labour could do is look at establishing two CPI’s – a general one for statistical purposes and another one on the necessities of the poor – so they get full compensation for the cost increases they actually face.
Disagreeing with Nationals proposed changes without coming out with detailed alternatives just means you are using our money to pull another exercise in PR. Waste of money. You won’t convince people like me who have families are in the top tax bracket unless you provide real solutions. Coming out with some grandiose statement just before the next election is likely to translate into too little too late. If you want people like us to swap back to Labour then show us that you have learned your lesson; that you overspent our taxes that were kept too high for too long.
Yeah, how dare they put money into health and education!
I think those people in this blog that are more inclined towards National will just have to concede that while we like to act on information and thought, others do like to act on impulse and have no problem spending tax dollars doing this. So we can respectfully disagree with that approach.
Yeah National want to spend money promoting national standards and implementing them without doing any trials first. Probably because the more thought that was done first, the less likely the idea would look any good.
While I acknowledge that this blog is merely for labour supporters to scratch each other on the back, I will mention a couple of things…..WFF (aka the ‘lets take your money then give it all back to half the population and less all the costs of setting it up and administering it’ package) and DHBs……!!!!!
The money was already being paid in tax but a budget surplus developed as during Labour’s term unemployment fell and revenue flows increased. Family tax credits had not been kept in line with inflation for a decade and thus most of the WFF increases was simply redress.
SPC if I hadn’t worked on the WFF policy myself I would have believed you however, even if what you are saying is true, why did they then have to go and create a whole new package at the cost of $1billion per year plus admin costs when they could have just increased the existing benefits and lowered taxes across the board. They allowed ordinary income earners like us to drift into the top tax bracket because of inflation. But I will leave it there as I have seen enough of the blogs and corresponding posts from labour’s supporters to know what I have to say will fall on deaf ears….
Bye Rebecca!
See ya spud – chat again after Labour loses the next election then uses more of our money to take yet another bus trip to “connect with the people” and find out why the keep losing….
P.s @ Paul 2.0 – I think we’re on the same page.
For the rest of you, I will leave you with something that I saw on another post a while back. The percentages relate to the American tax system, but the concept is universal:
The tax system explained in beer
“Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that’s what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. ‘Since you are all such good customers, ‘he said, ‘I’m going to reduce the cost of your daily beer by $20. ‘Drinks for the ten now cost just $80.
The group still wanted to pay their bill the way we pay our taxes, so the first four men were unaffected. They would still drink for free. But what about the other six men – the paying customers? How could they divide the $20 windfall so that everyone would get his ‘fair share?’
They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.
And so -
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.
‘I only got a dollar out of the $20,‘declared the sixth man. He pointed to the tenth man,’ but he got $10!’
‘Yeah, that’s right,’ exclaimed the fifth man. ‘I only saved a dollar, too. It’s unfair that he got ten times more than I!’
‘That’s true!!’ shouted the seventh man. ‘Why should he get $10 back when I got only two? The wealthy get all the breaks!’
‘Wait a minute, ’ yelled the first four men in unison. ‘We didn’t get anything at all. The system exploits the poor!’
The nine men surrounded the tenth and beat him up. The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!
And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.
David R. Kamerschen, Ph.D.
Professor of Economics
University of Georgia
For those who understand, no explanation is needed. For those who do not, or will not, understand, no explanation is possible.”
@Rebecca deal! Though you may need your walking frame dear as the next election Labour is going to lose will in in 2050!
Haha yes well perhaps; at least I will still be alive to vote….
It is true Rebecca, which is why you did not actually refute it.
Yeah it was a billion dollar increase in tax credits – and as for the administration costs, did IRD or anyone else propose a way of delivering such a targeted billion dollars in a way without this cost?
I am sure, if you worked on the WFF package, you would have some idea as to why the administrative costs were required to deliver it in that targeted way.
“They allowed ordinary income earners like us to drift into the top tax bracket because of inflation.”
So do all governments, only one government proposed to look at inflation indexing tax bands and it was not and is not a National led one.
An example of WFF with one income earner and one child..
Salary – $38,500 per year – net salary $704 per week after WFF and PAYE.
Salary – $42,500 per year – net salary $711 per week after WFF and PAYE
Salary – $50,000 per year – net salary $722 per week after WFF and PAYE.
Difference in weekly income between $38,500 and $50,000 is $18 per week.
So the sort of income for a couple to live and raise a child is about 2 times the minimum wage.
This is still the sort of GMFI scheme introduced by Roger Douglas with various tax cuts back in the 80’s, just now more targeted at those in jobs than on benefits.
The real problem is how our low wages are causing the problem not the ways which we use to help struggling families.
We need higher wages – now $15 an hour would be $30,000 and two incomes would be $60,000. That’s the way to solve the problem. Why does not National get it?
I think that these numbers indicate that WFF creates a ridiculously high effective marginal tax of something like 91% so that moderately off families have no benefit in trying to get ahead from $38,500 and $50,000.
Charles wrote “we like to act on information and thought,…”
and Rebecca musing that anything she says falls on deaf ears because the people here are just pandering labour panderers…
Sadly for the two of you, National is not always right. Sometimes I agree with them, sometimes I dont. Sometimes I agree with Labour sometimes I dont. Troubleis we are expected to vote foronly one or the other, then each uses that as a mandate for everything they want to do.
Charles your statement is arrogant and is precisely what so many Nats accused Labour of over their terms… talking down to people and assuming they knew what was best. Labour only started doing that in their final term. You guys are way ahead on that score.
Rebecca, you may object to the use of money to go on a bus tour. I assume you objected just as vehemently when National used almost its entire term in opposition last time building up to their campaign or campaigning? And to Rodney Hide announcing he will concentrate for the next 12 months getting ACT’s message out to the people (interesting priority of the Minister of Local Government and Cabinet member.
I am intrigued Charles, did you hold national’s feet tot the fire for their total lack of substantive alternatives in the previous 9 years, or were you happy for them to just nay say everything, start rumours about Clark and her husband and then come up with a “change” policy which supports the status quo?
People in glass houses kids
Oh really Charles – look at cause.
The reason for a GMFI is obvious.
If couples need about $50,000 to raise a family, they get help to get this.
The problem is the number of families on lower income levels, improve family income to above $50,000 and the problem of abatement goes away.
Reducing tax credit support to those on incomes between $38,000 to $50,000 to reduce abatement rates – all so one can give a larger tax cut to singles on the same pay is not going to deliver adequate support to families.
Tracey – Fair point well made and worth considering thank you.
SPC – I simply was highlighting the crazy things WFF does to NZ tax system.
@ SPC no only half of your statement was true – that is, NO ONE put any real capital into our public services including welfare, or at least, not enough to compensate what Muldoon obliterated. As for being left to drift into the top rate: but for Labour a family on $60 would not have been left to pay 30c or so tax on almost 2/3 of their income while struggling to cope with the effects of inflation and the rising cost of housing – whether that be rents or mortgages. It was under labour that many middle to high income families begin to struggle in times of an economic boom. Taxes remain high while their disposable income was negated with each passing year. All WFF was waste huge amounts of tax payer money and cause more families to become reliant on beneficiary assistance. Hardly a step towards growth. In terms of the cost of WFF versus just putting more money into the systems already in place – surely I don’t have to spell that out? Surely you understand that when a new policy is implemented this has a flow on effect in public service expenditure whereby more analysts, advisors, co-ordinators etc are employed who all get to enjoy the benefits of being flown/driven around the country for numerous training sessions, meetings about meetings and free morning teas? Not to mention all the new cars, laptops and cell phones purchased for these new roles – roles which often equated to nothing more than a bit of filing due to an over estimated of their need and the regional offices refusal to scrap the position as they did not want to lose the perks that came with it.
@ Charles you could not be more right – the way things are currently there is nothing in place to encourage people to earn more to get ahead. If the single person manages to scrape their way up from average to above average they are only marginally better off than the family with 2 kids on $20k less getting WFF. Then there is the lack of incentive for the top earners – just like the metaphor I have quoted above “The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier”! If this happens I wonder who will pay the bulk of the taxes then?