National’s Tax Cut Plan

Well, I’ve read a lot of posts on the tax cuts, but haven’t had time to fully digest. I looked at Farrar’s post and thought that there was no possible way of anyone calling this “for the rich”, but NRT disagrees.

I guess I’ve got to go over the numbers and calculators to work out who’s right, but I suspect that NRT is distorting his view with percentages to meet his predetermined ideas. I played with a calculator a few weeks back, and I was unimpressed with Labour’s provision for “the poor” myself.

But what I dislike with some intensity is this idea that we have a Working for Families for those who don’t qualify. But I guess that’s the “out” when you’re forced to promise WFF continuing. I predict that both will be converted into tax cuts after National’s first term to get rid of the extra bureaucracy. Good riddance.

Kiwisaver was always a joke, where Cullen “gave” us back our own money only to be locked away for 40 years, so I frankly don’t care that the employer provision has been cut back to 2%. Good employers will increase this. anyway. A lot of people need that money now, to pay for food courtesy of Labour’s carelessness with inflation.

(Speaking of which, a “Labour Supporter” was interviewed on the radio on Monday. He actually believed that Labour was wonderful and always fixed inflation after National blew it out. I guess he hadn’t paid attention to the last 18 years or so.)

Bozell Column

Heh. One thing about the left, they let their own rhetoric displace facts when it comes to tax, time after time, sure as the sun rises.

That, of course, assumes that President Obama will follow his plan to the letter, and that a newly elected liberal House and Senate will rubber-stamp his alleged tax cut for “95 percent” of Americans. That, by the way, is a serious math error. Please explain how it’s possible to cut 95 percent of Americans’ taxes when the Tax Foundation reports that 40 percent of Americans don’t pay any income tax. If you think you can, I’d like to interest you in a sub-prime mortgage.

Tax Cuts Cut Goverment Income, They Don’t Increase Spending

Hm.

Of course, this would be a little more believable if it wasn’t coming from a party promising everyone a $50 a week tax cut. But I guess its not a big-spending lolly scramble if you’re a tory.

I’m guessing that IS returns home after being given a pay cut and tells his wife that she spends too much of their income.

Just guessing.

Tax? What about collecting the fares first?

Well, Aucklanders now know that their regional council wants to slap a petrol tax on all Aucklanders.

This is to electrify rail.

I have a better idea. Instead of taking money off the motorist, why not collect fares from those riding on trains?

A simple idea I admit, but it’s my understanding that since petrol crossed $1.50 most peak time trains have been rolling into Britomart with half of passengers on board (specifically those getting on from the last few stops) not paying a fare. There is no provision to collect at the other end when the conductor can’t get through the carriages.

If the train is late, that figure might be more like 2/3.

Stinks doesn’t it. Legitimate revenue isn’t gathered and the poor motorist gets stung for the incompetence of others.

Income Splitting

Blair Mulholland’s blog is one I started reading recently.

His thoughts on income splitting are quite close to my own.

However, mulling over ACT’s proposed $10K tax free threshold has caused me to adjust my thinking.  If a man is earning money, not just for himself, but for a dependent wife and two young children, why is his income not assessed as supporting four people instead of one?  He is not just working for himself, but for three others.  With a creative accountant, you could wangle this anyway by making them “employees”.  So why not make it official?

This would mean that a man providing for such a family could earn $40k tax free instead of just the first ten.  He could earn $152k and still only be taxed at 19.5c/$ for anything above that $40k.  That would make a huge difference to a family, and would compensate for any reduction in the ghastly Welfare For Families scheme.

I think I’ve blogged before on the nonsense of comparing a man’s income vs a woman’s after marriage (mans goes up, woman’s goes down). The reason is that after marriage, a man and his wife, a wife and her husband are one economic unit – they both own the resources that either of them has access to.

Equally, it’s nonsense to point to women doing more unpaid work, when her husband gives her free access to his wages (if he didn’t, he wouldn’t be much of a husband IMHO). He works for the money, she does the work in the home*. Both benefit from the work done by the other.

So why would they pay more tax, just because one person does all the paid work?

*I’m using this as an example that feminists most often complain about, with the point that there is nothing to complain about. I’m not suggesting that mom should stay chained to the stove and dad has to work in the factory – it’s just that men tend to like to work for money, women tend to be more interested than men in a tidy home and good meals.

Labour on Tax Cuts

The PM says…

Helen Clark says tax cuts will help alleviate money issues for families

Prime Minister Helen Clark says tax cuts to be announced in next month’s budget will deliver timely relief for families, and she doesn’t think GST will be removed on food.

(I expect that’s the last time that photographer will be allowed near the Clarkvader!)

Jordon however, didn’t get that memo…

…The other is saying, actually we can’t cut it in the world, and the only way to improve our incomes is to slice away at the public sector, to give a small, short term boost to people’s pockets.

One of the most important debates this year is to work out how best to boost wages, so incomes can grow and New Zealand can be more successful. Tax cuts aren’t really at the core of that debate.

Oops. I guess there’ll be shortly a post explaining that a “small, short term boost to people’s pockets” is not a bad thing…

Tax is impossible to understand if you refuse to cut it

Here’s a good story.

Some Windy City restaurateurs are kicking bottled water to the curb all in the name, they say, of saving the planet, much to the delight of the Chicago Sun-Times. But it seems to me reporter Rummana Hussain may have washed over a juicier angle by burying a key fact eight paragraphs into her nine-paragraph March 27 article.:

Revenues from Chicago’s new nickel-a-container bottled water tax are coming in at a rate nearly 40 percent below projections.

Could it be that the new water bottle tax adds yet another paperwork and accounting hassle for restaurant owners, some of whom would just as soon ditch bottled water than deal with the headache of complying with the law? …

What’s more, there’s a huge story here in unintended consequences with tax revenue coming in well under initial projections. The bottom line: Chicago passed a tax — initially proposed at up to 25 cents a bottle — hoping to rake in cash from bottled water sales while doing so in the name of saving the environment to assuage voter anger over yet another tax hike.

One wonders how long it’s going to take for those on the left to realise the simple truth of tax.

If you tax something, you end up with less of it. “Something” includes income – people reduce their incomes to avoid paying tax, or they move to somewhere where tax is lower. The Bush tax cuts are a classic example, delivering more federal income than ever but still the liberals want to repeal it.

Why is that so hard to understand?

Arguing yourself out of existence – don’t mind the facts

No Right Turn missed his vocation, he should be a stand-up comedian, not a blogger.

Last election, National tried to buy their way to power by offering tax cuts for the rich.

National promised to stop taking vastly more in tax than the government needed.

Labour tried and succeeded in buying their way back into power by Working For Families and zero interest on student loans.

This election, they’re promising to do the same. But since Brash’s tax cuts (which Key helped design, and which would have been funded by borrowing)

“Borrowing more to finance some capital items like roads…” – I guess they might have used something like infrastructure bonds for that.

weren’t big enough,

to compete with Labour’s outright bribes

they’ve decided to up the ante: on KiwiFM this morning, John Key indicated that his tax cut package would be on the order of “2 – 3 hundred dollars a month”.

Firstly, I don’t believe for a moment that Key is promising this to every New Zealand taxpayer.

That’s a first – normally he believes anything Key says.

Yes, he’s deliberately trying to give that impression (“vote for National and you’ll be rich!”), but $3,600 a year is actually more tax than almost half of us even pay (Treasury: Who pays tax… and how much?).

Ah, so when convenient it’s admitted that most people don’t really contribute much to the tax burden.

And if it was distributed evenly in that fashion, the cost would be utterly staggering: $11.5 billion – almost half of core output expenses (that’s your basic government ministries in Wellington), or more than the entire health budget (Budget 2007 summary tables [PDF]). Not even ACT would be that insane. So what’s Key playing at?

And here’s where the stand-up routine really gets into full swing. Because last I heard, the budget surplus was about that size, and that’s not even including the money that will be freed up by cancelling Working for Families. (See this post where I previously worked out that we could afford twice what Key is offering here.)

Simple: the figures are for his base. One of the things that is clear from the right’s discussion of taxes is that they consistently show no interest at all in the 80% of us who earn less than $50,000 a year (see for example their criticisms of Kiwisaver, which are predicated entirely on its benefit for the richest 3.5% of the population). So, how much would you have to be earning to get Key’s “2 – 3 hundred dollars a month”? If this election’s bribe is anything like last one’s, then the answer is more than $75,000 a year. As for the rest of us – the 90% who don’t earn that much – we just don’t exist as far as National is concerned.

Actually as you’ve already admitted, it’s the tax man that doesn’t know you exist – you get a free ride off the rich and big business, who pay for your healthcare and education while you take no responsibility for either.

It’s like the story of the men who went to a restaurant every day and paid according to their income. Then the owner decided to lower the bill. Upon discovering that those paying the smallest bill got the lowest refund, they all turned around and beat up the richest, who then decided he’d rather not turn up next time leaving the rest with a far greater bill.

Yes, tax cuts do tend to favour the rich. That’s because the rich pay more tax.

However, there’s nothing like going to an authoritative source on these matters. So I’ve looked up the 2008 PAYE deduction tables. If we look at $75,000/yr that works out to $6250 a month before tax. That, on the IRD tables at the “M” rate is $1,790.70.

Um, rather more than $300 tax to cut there – many times more.

So how high would one’s income have to be to get the full value of the $300/month tax cut promised by Mr Key? The IRD tells us that’s $1,555/month or $18,660 per year.

For those interested, that’s about $390/week. At a 40 hour week, your pay would have to be $9.71 an hour in order to pay $300 a month in tax.

Less that the minimum wage.

We Need More Tax!

Ah, Tax. Bugbear of the left. Idiot/Savant opens up yet again with his own brand of hype mixed with desperation and a little chardonnay.

But this isn’t just true of Labour supporters, but of New Zealand as a whole. To point out an inconvenient truth, the vast majority of New Zealanders are completely unaffected by the top tax rate.

Ignoring the fact that many, many more are affected that Labour promised.

Hell, the majority of us aren’t even affected by the middle one. We pay 19.5% (or nothing, thanks to Working For Families),

I suggest you check the payslip of someone who gets Working for Families.

and the difference a tax cut would make to our lives is far less than the difference made by free schools,

which are really expensive to those who pay for their kids to be educated, not indoctrinated

free hospitals,

which are unbelievably expensive to those living without income and in pain for years while waiting for surgery

superannuation,

which the government is effectively doing away with through kiwisaver

and the security provided by a social welfare system.

“Security” is a grand choice of words, considering who ends up in court more often than not.

Our sole interest in the tax system is whether it collects enough revenue

…and we don’t care about any damage that may cause the country as long as we get our money!

to fund the public services which insure all New Zealanders, rich and poor alike,

us on the right would rather the rich paid their own way, and they would too.

against the vagaries of life.

…increasing state costs exponentially through people no longer having to take responsibility for their own lives. But don’t worry, those who still do will carry the burden!

And we regard it as only fair that those with greater means pay more.

Hm, he used to trot out the straw men much earlier than this…

To us, tax cuts are an explicit threat to government revenue, and an explicit threat to the core public services we depend upon.

Which is, of course complete bollocks – tax cuts often increase revenue. It can certainly reduce costs as people have more money to pay their own way.

And given that those services still have not been fully restored since the 90’s (hospitals still have long waiting lists,

Note he doesn’t complain about funding, just the poor results you get from pouring millions of dollars into public health…

schools want higher and higher “donations”,

Perhaps they should stick to teaching? That would save money!

benefits, while adjusted for inflation, are still at the sub-subsistence levels set by Ruth Richardson),

Yea, turns out those levels were ok – they’ve now been unofficially endorsed by the left for 9 years and no one is seriously complaining. One would think if the cuts were as bad as all that someone might have jumped up and down in the years since 1991.

cutting that revenue seems to be a fundamentally stupid idea.

Given there’s $10B/yr that the government can’t spend waste on vote buying, less revenue is not going to hurt. But of course, this idea is premised on the assumption that tax rate cuts will lead to tax revenue reductions – which does not necessarily follow as we have said earlier.

Instead, if anything, we should be raising taxes on the rich, not lowering them.

Yes, because that’ll stop them moving to Australia! One is constantly amazed at the left – the expound the disadvantages of being poor on instinct and at every occasion, but not once do they consider the advantages of being rich with regard to tax!

Against this, Labour’s promise of tax cuts seems like a betrayal, a pandering to the rich which actively undermines its core principles

Three words – “Closing the Gaps”. Labour’s first principle is staying in power, even if it means cutting core agenda items.

and the interests of its core voters.

The poor middle classes who are funding increasing surpluses, having their income eroded by inflation, and moving ever closer to the top tax rate?

But then, when the media reflects only the views of the rich,

middle classes, and principled poor

and refuse to acknowledge that most of us

chardonnay socialists

even exist, it’s no wonder they have a

increasingly true, if still slightly

distorted picture of electoral demand.

The panacea to all our wows

Let’s fisk Tony for a change…

Now this is refreshing, a media commentator who realises that Government (and this election) is not just all about tax.  I, for one, am pretty sick of the narrative (which Labour is part of) around tax cuts – as if somehow it is the panacea to all our wows.

I guess that would be like – wow – $800,000 is a lot of money to steal. Or, wow there are a lot of people being thrown off waiting lists.

Somehow tax cuts will magically improve wages,

Just let that sink in…

or allow our businesses to succeed,

That’s pretty much as bad…

or mean people can afford to buy a home, or pay off their student loans, or save for their retirement, or pay their mortgage and so on and so forth.

One assumes that Tony is unfamiliar with basic mathematics. Let’s give him the credit and assume he’s going to explain this later on.

It must be unprecedented the way the opposition and media (and now Labour) have created a national myth so out of touch with reality.

Any moment now…

It reminds me of those who put their money in dodgy high interests investments, only to have the investment fold.  People are looking for an easy way out.

Ah, an “easy way out”. Well, not having money taken is quite different to choosing a risky investment.

The reality is that there are no easy ways to save, or pay off debt, or increase wages, or grow your business.  They all take hard work, dedication, and discipline in an environment of educated, healthy, and safe people with 21st century infrastructure.

Um, maybe Tony. If people are over-educated, and there is an over-emphasis on safety then things get difficult and people have to work harder than they otherwise should have to.

And how to you create that environment – through increased public investment by local and central government.

So we have a government raking in surpluses that are vast by any measure, in spite of massive increases in public spending, and Tony thinks we still need to increase spending at government level.

Even by Tony’s own admission, the government can only provide the background for business to succeed. At some point government has to stop. That point is now.

Unfortunately that is now the prevailing narrative.

So we arrive at the end. I’m sort of disappointed that we still don’t have any real explanation to the simple fact of tax cuts – they put more money in the pockets of citizens and business. This means they have more money to spend where they like – which means businesses have more money to expand, new projects (which actually create wealth, unlike much government “investment”) become viable more easily, and tax avoidance becomes less cost-effective.

This this leads to increased revenue, as we have seen in the USA.

It also means that individuals can pay off debt of various sorts, and have greater flexibility to take on more in the form of mortgages.

This means better standard of living for citizens.

But there’s one thing Tony should think about: why do we still have “wows” after 9 years of Labour?