Reaction to Tax Cuts package

October 9th, 2008 at 6:59 am by David Farrar

In no particular order.

The Herald Editorial compares the parties:

There has been a striking contrast in the response of the two main parties to the disturbing news that after 14 years of budget surpluses the Treasury now calculates the public accounts are set for a decade of deficits. …

Finance Minister Michael Cullen merely congratulated himself again on having saved previous surpluses for a “rainy day” and looked forward to the problems it would cause for ’s intended .

There was evidently nothing he thought necessary to change, either in his own programme of reluctant tax cuts that started this month or in the Government’s spending programmes that might have seemed affordable in better times. If Labour’s “rainy day” could last 10 years, as the Treasury forecasts, Dr Cullen and his colleagues seemed strangely relaxed about it.

In other words Labour has no plan at all.

The fiscal crisis is indeed the first real test of the mettle of leader John Key and his team and it is rare that voters get such a measure before an election.

National could have taken the easy option of confirming its previously indicated tax cuts, offering no specific savings in public expenditure and pretending that tax cuts would actually cure the deficit in quick time. Conservative parties are prone to that belief.

Instead, National has faced the need to balance its tax cuts with specified savings, notably the removal of business tax breaks on research and development and employer contributions to . The wisdom of reducing the incentives to save is questionable but the courage is not.

And National is willing to take the hard decisions, and not pretend that the decade of deficits is acceptable.

Paula Oliver in :

National has risked alienating people who have embraced KiwiSaver, as the party goes into the election with a tax-cut package that would leave more money in the pockets of most earners – but takes away two business tax breaks to pay for it.

Mary Holm says the changes improve KiwiSaver:

The National Party’s proposed changes to KiwiSaver would considerably reduce two of the biggest gripes about the scheme – that some people can’t afford it and that it ties up savings. …

The contributions of anyone earning less than $52,150 would be tripled by employer and government input. And that means three times bigger retirement savings. …

The reduction of the minimum employee contribution from 4 per cent to 2 per cent of pay means it would be easier to afford KiwiSaver, especially after taking tax cuts into account.

John Armstrong says it is a bit of a fizzer:

The door banged shut in Labour’s face following Monday’s mind-numbingly pessimistic economic forecasts. Labour can thank National’s underwhelming tax package for reopening it at least slightly.

Colin Espiner reports on a snap poll:

A snap poll for yesterday showed National may have pitched the package about right.

The poll of 212 people by Futurescape Global found 43% felt the tax cuts matched their expectations, with 34% feeling it fell short. A slim majority of those polled felt the country could afford National’s package, but people were split over whether they were confident in National’s ability to manage the economic crisis, while 55% said the tax package had not altered their vote. The poll has a margin of error of 6.7%.

Brian Fallow sees a shortage of growth:

National claims its tax package will stimulate the economy in the short term and improve incentives and drive growth in the longer term.

The first claim is plausible, the second not so much.

Reducing the top tax rate faster will be better for growth long term, but quite simply the money was no longer there.

James Weir in the Dom Post surveys business opinion:

Business New Zealand also disagreed “pretty seriously” with the decision to drop R&D tax credits but said the planned tax cuts and target to cut personal tax rates to 33 per cent over time rated a “seven out of 10″ score overall.

The Press editorial is positive:

Even if tax cuts were not on the agenda, there is a case to argue that the levels set for KiwiSaver were too ambitious from the start. As it stands, some young people entering the scheme and earning the average wage throughout their working lives could end up earning more in retirement, when their National Super entitlements were added to their KiwiSaver earnings, than they did in their lifetime.

Yep, and that is daft. The 4%/4% KiwiSaver forced people on the average wage to save too much, taking money they need during their working life.

Clark has said this election will be one of trust. If this is so, then the question for voters will be who do you trust in the turbulent world we now face? With these tax cuts, and with some detail of its longer-term economic plans, National has placed its cards on the table. It has produced figures to show that its plans are fiscally responsible. Voters must decide whether Key and his colleagues can be trusted to deliver on them, or whether Labour can be trusted to manage difficult times as well as good ones.

Will Labour produce a plan? Or is Labour saying it will run a decade of deficits and not make any changes to tax rates or spending?

Tracy Watkins blogs:

A year ago, Key might have risked over promising and under delivering on those amounts.

But that was a vastly different world..

The failure to deliver more may peel off some soft support among those who were leaning toward National but, because of Working for Families, will not be a whole lot better off.

But the rest will probably agree with Key that it’s a package that’s right for the times.

So is it enough? You’d have to say yes.

And finally NZPA reports that least surprising news of all – that unions and political rivals don’t like it. Some get their facts wrong:

United Future leader Peter Dunne, who is minister of revenue, said it was complicated and would be difficult to administer.

“Superannuitants and low income earners are the big losers,” he said.

Bzzt. Wrong. By 2011 superannuitant couples will get $15 a fortnight more.

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42 Responses to “Reaction to Tax Cuts package”

  1. goodgod (1,363 comments) says:

    Cullen’s not concerned about the ten year rainy day because he’ll be the last from the trough.

    You go Cullen, fuck it real good, you fuckin’ cowardly hypocrite.

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  2. OECD rank 22 kiwi (2,819 comments) says:

    What the country needs during these difficult times is more tax cuts.

    ‘Please, sir, I want some more.’

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  3. tknorriss (327 comments) says:

    I see our glorious bleeder is playing loose and free with the cheque book again. Putting 40 mil into nationalising some land thats useful for nothing other than walking through. Probably paid 10 times more than what it is worth based on past experience. This expenditure is occuring when the country clearly cannot afford it. How totally irresponsible.

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  4. Viking2 (11,228 comments) says:

    Is this the best they could think up. My God they are just as bad as their socialist partners in the house.Screw the businesses, give to the poor, keep the public service in the trough and tax the rich, i.e. anyone earning a modest living upwards, keep the high tax rates that drove thousands to leave, fail to give support export where we earn our living.
    You’ve all been sucked in by the socialists. Worse you can’t now tell the difference between left or right hand socialists.
    One lots queer and the others think they are born to rule.
    Stop fawning on these socialists and get some meaningful change before the rest of us good ones leave you to your tax dreams.
    Message for DPF:
    How about listing all MP’s and prospective MP’s and telling us which ones have actually earned a living owning and running their own businesses. Then we will be able to identify all the rest as the trough dwellers they all really are. P.S. Key and English have never trudged off to work with the responsibility that a business really entails. Only ever bits of it.

    The Nationalist Socialist Party are alive and well in the Hive.

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  5. mistywindow (27 comments) says:

    The Kiwisaver proposals are a reasonable compromise. But not the removal of R & D tax breaks.

    All our problems stem from our dismal productivity. Dealing to R & D is not a good sign for National’s intentions of doing anything about it.

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  6. democracymum (660 comments) says:

    tknorriss

    Like you I was in disbelief last night watching another 40 million of our hard earned tax payers money being spent by the fiscal fool and hedonistic Helen.

    Looks like a nice little earner for the property owner, – hey Helen we are going to sell off this piece of land that you like so much, how about buying it off us?

    Nice to have friends in high places, when you are selling off your family assets

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  7. slightlyrighty (2,499 comments) says:

    Viking.

    At least National has done something, and done something quickly. What has Labour done about the coming crisis in NZ except make it worse by spending millions, if not billions, on the likes of Interest free student loans and kiwirail?

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  8. tknorriss (327 comments) says:

    democracymum said: “Looks like a nice little earner for the property owner, – hey Helen we are going to sell off this piece of land that you like so much, how about buying it off us?”

    Yeah, she is welcome to buy my place if she wants to. Its worth about $400k. But she can have it for a bargain at $4 million if she wants to.

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  9. first time caller (384 comments) says:

    Not to mention the trainset…Now we have the farm in the middle of nowhere, what’s the bet they’d put train tracks to take the middle of nowhere so we can all enjoy her latest whim!

    Reckless spenders!

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  10. coventry (316 comments) says:

    Maybe she’s just pre-purchased the site for the next new prison that we need ?

    Am sure we can build something nice and safe and secure on 78,196ha.

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  11. dime (9,611 comments) says:

    although i cant stand the name “kiwisaver” (condescending fucks. apparently its not good unless it has some shitty grass roots name attached to it), ill jump in at 2%.

    4% is too high! im on a high income and im single and i dont wanna pay 4%! god knows how average income earners with families are doing it.

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  12. getstaffed (9,189 comments) says:

    Did anyone see the woman asked for comment on the tax package on TV3 news last night?

    She said she’d likely fritter any extra dollars from reduced taxation, while having it put into Kiwisaver would keep it ‘safe’.

    Statements like that leave me despairing for our future, one in which the average person-in-the-street has been convinced, despite evidence aplenty, that the government should take care of us because we can’t do that ourselves.

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  13. Max Call (212 comments) says:

    I think that what National is proposing is a shocker! cutting the R&D! they keep going on about making this country more productive etc and pro business
    what a bunch of hypocritical populists
    all for an extra $10 more than what Labour is offering

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  14. Max Call (212 comments) says:

    where is the vision??????????????

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  15. expat (4,048 comments) says:

    Kiwisaver is the best thing laybore have done, should have been in place years ago but no-one wanted to toy with nz’s commie legacy left by pinko norm kirk (or big norm as the homoeroticists at the substandard call him).

    R&D write offs are probably a great idea of its not already depreciably, which if its a capex item it is. Probably targetted to the oil industry or something i think youll find.

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  16. expat (4,048 comments) says:

    anyone else noticed the upsurge of standard trolls here in the past few weeks – must be lamenting the lack of traffic at pinko central.

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  17. Tamaki Resident (66 comments) says:

    DPF missed an important quote from John Armstrong:
    “Labour is on strong ground in being scathing about the absence of new economic initiatives from what was billed as being more than just a tax package. If the election is about economic credibility, then the rescue plan will have to consist of more than amending the Resource Management Act or Key calling in public service chief executives for a stern chat.”

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  18. NeillR (349 comments) says:

    Dime, i’m with you. I’m a small business owner and until now i couldn’t justify having 8% (my 4, plus 4 from my company) going into Kiwisaver. But with the changes that National’s proposing i can put in 2+2, which is definitely doable. More than that meant that i was taking from my own company’s growth, which wasn’t an option. I’m sure that once everyone gets over the hysterical shrieking from Clark they’ll realise that it’s ensured that more Kiwis will save for their retirement – surely what Labour was looking for anyway?

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  19. siobhan (278 comments) says:

    How is this cutting R&D? Has anyone bothered to show how this credit has increased spending on R&D and if so the improved value in that spending and improved outcomes.

    National are offering a straight out input of $100 mill into R&D, no messing with tax credits or accruing interest off some fund. So where is this dramatic cut that is going to be to the detriment of business.

    Labour only thought it was useful to implement this credit last year, after 9 years ago talking about a “knowledge economy”. If this particular credit was that important it should have been implemented 9 years ago, and so well established that it would be showing such significant results that there would be no way National could touch it.

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  20. stephen (4,063 comments) says:

    siobhan http://www.stuff.co.nz/4720686a13.html

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  21. Exiled (20 comments) says:

    Tamaki Resident says:

    DPF missed an important quote from John Armstrong:
    Blah, blah, blah…

    Armstrong has had a hard-on for Cullen for years, so it’s not surprising he thinks it’s a bit of a fizzer. For a guy who’s supposedly one of the leading political reporters in the country (admittedly it’s a small pond), he writes a lot but says very little.

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  22. getstaffed (9,189 comments) says:

    siobahn- too few of those gradating from our towers of educational excellence can spell nolege econimy let alone help build one.

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  23. siobhan (278 comments) says:

    Yes Stephen, I can see why a few businesses would be upset at losing something. Anyone would.

    However, for what my opinion is worth, I don’t see why there is this continuous necessity to give money via tax credits. This strikes me as job creation for IRD and the accounting community. It must surely add to the litany of paper work and process that a businesses are already bogged down with.

    Also, I am a firm believer in up front funding of R&D. Having worked in the sector – it is bullshit to watch scientists do their job for six months of the year, then spend the rest of their time chasing money. That is wasteful and inefficent. Those businesses that are innovative and forward thinking are going to be so without tax credits.

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  24. stephen (4,063 comments) says:

    Yeah – I take it as a given that business will always moan about losing handouts, but I see the way it is structured as more of a key…I barely get that either though.

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  25. siobhan (278 comments) says:

    To be fair, most of us would moan if something was taken off us.

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  26. stephen (4,063 comments) says:

    Esp as in this case they’d spent time and money on new accounting systems and what not.

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  27. Tamaki Resident (66 comments) says:

    Exile – I’m just trying to balance the selective quoting which seems very common in a lot of DPF’s posts. Have you got anything substantive to say in response to John Armstrong’s piece or just vague generalizations?

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  28. Right of way is Way of Right (1,129 comments) says:

    Tax cuts, well so far the socialists have targeted WFF, which is a reditribution of wealth (TAX) at low to middle income earners with families.

    I have three kids, my wife and I both work, and we earn enough to be entitled to three fifths of bugger all under WFF, in fact, our entitlement under WFF is exactly NIL!

    We also have to pay full fees for prescriptions, doctors, as we are so astoundingly wealthy. (Yeah Right)

    But we don’t own a business, so no tax rebates there.

    I am actually grateful that finally someone has realised that us middle income earners need some sort of concession, and a recognition that the government is taking more than it needs to carry out the core functions of government!

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  29. PhilBest (5,117 comments) says:

    FFS, what a bunch of socialist wankers the MSM is, we’re heading for a rerun of 1929 and all they can do is tell us that the Nats are risking letting Liarbour back in the race by daring to tinker with KiwiSaver and Working For Families…….FFS.FFS.FFS.

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  30. polemic (396 comments) says:

    Ah but Phil its the MSM that have created the Labour/Peters Axis of populist ideaology.

    They like the Clark/Peters Axis because what does it give them to swan around and report on if there is no scandal.

    Special Exemption to Lady Audrey Young who deserves to be knighted for her public service in exposing the corruption of Winston and the axis or Williams/Clark etc.

    A vote for Winston = a vote for Labour = a vote for corruption and nanny state

    A vote for Winston First is a vote for Labour!!

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  31. Lee (627 comments) says:

    I have to say that I don’t think there is anything particularly populist about Labour, at least in any real sense of the word. They are a party of narrow elitist interest groups, primarily Chardonnay socialists, sexual perverts, Jew-haters, glorified welfare bludgers (the PSA), and those who refuse to work for a living.

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  32. Jafa (37 comments) says:

    I distinctly remember one of Labours pledges in the 1999 election was to bring some sort of R&D tax credit in. Cullen reneged on this pledge immediately on taking the office of Finance minister because it was ‘too costly’. The figure being talked about was around $200 million. Fast forward to 2008. We have the $600 million trainset and the $40 million lifestyle block in the middle of nowhere. Amazing what a few years of intoxicating power and voter amnesia will do for you. Labour need to be kicked out for the utter contempt they show towards taxpayers cash on this score alone. They been in power and have overseen the biggest spendup in New Zealands history. National productivity has fallen and 10 years of red ink loom on the horizon. Now remind me again why we ‘need’ Helen Clark?

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  33. OECD rank 22 kiwi (2,819 comments) says:

    The important quote from John Armstrong:

    “When John Key announced some months ago that National would be retaining Labour’s Working for Families programme, those families would not have imagined they would be disadvantaged when National finally released its tax policy.”

    You know what I say to Families on the Bludging for Families welfare programme that feel disadvantaged by National’s tax policy? Fuck ‘em!

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  34. jackp (668 comments) says:

    Armstrong seems to badger Key because families that qualify for working for families won’t get the full 50 dollars more a week. Only 41 dollars. How can Armstrong be so clumsy. It was last Monday that the books have been opened to find nothing there. Key is showing great initiative to make the tax cuts… Armstrong is talking as if the economy was doing very well. I rarely agree with him, he seems to dribble.

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  35. jackp (668 comments) says:

    Not to get off the subject, I heard on the news that there was another secret tape about Bill English saying they will do anything to get in. Now I see Helen Clark’s theme-trust. There are suppose to be more. Labour had those tapes all along. Here we go for more mud slinging. Helen Clark doesn’t have a plan so she does what she does best, bring up dirt.

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  36. OECD rank 22 kiwi (2,819 comments) says:

    A few weasel words from Vernon Small:
    Nats’ tax policy hits low-income savers

    If the gist of the statement made by Vernon is true and Labour Bludgers are going to be screwed over by National’s tax policy then it’s almost enough to make me give my party vote to National, almost.

    While National continues to support Bludging for Families I don’t really need to weight the pros and cons of National vs ACT. I suspects however that National will scrap Bludging for Families after 2011, just before it start flogging off state assets. ACT has already come to the conclusion that those actions need to be taken today and not in three years time which is why I’ll be giving my party vote to ACT.

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  37. philu (13,393 comments) says:

    yeah..good one national..!..

    ..piss off/screw over anyone earning less than $44,000..

    ..’gut’/hack into kiwisaver..

    ..and end r & d support for companies..?

    (are you sure you don’t have a labour ‘mole’ ..in/running/driving your policy-division..?..

    ..best get phil best ‘on to it’..eh..?.)

    phil(whoar.co.nz

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  38. philu (13,393 comments) says:

    test

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  39. philu (13,393 comments) says:

    yeah..good one national..!..

    ..p*ss off/screw over anyone earning less than $44,000..

    ..’gut’/hack into kiwisaver..

    ..and end r & d support for companies..?

    (are you sure you don’t have a labour ‘mole’ ..in/running/driving your policy-division..?..

    ..best get phil best ‘on to it’..eh..?.)

    phil(whoar.co.nz

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  40. philu (13,393 comments) says:

    comments disappearing to moderation..?

    phil(whoar.co.nz)

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  41. Exiled (20 comments) says:

    Tamaki Resident says:

    Exile – I’m just trying to balance the selective quoting which seems very common in a lot of DPF’s posts. Have you got anything substantive to say in response to John Armstrong’s piece or just vague generalizations?

    No, you claim Armstrong had something important to say, inferring that anything Armstrong says carries weight. Newsflash for you – it doesn’t. Just one day previously Armstrong stated that the dire state of the nation’s books were of absolutely no fault of Cullens. None at all. It was all due to ‘international circumstances’.

    I have no problem with Armstrong being partisan, in fact I wish we had more journalists who said it as they see it rather than trying to come across as independent and fair. But what I do expect is our media to hold to account the people who are actually making the decisions, no matter who’s in power. I read DPF’s blog for basically one reason – the level of political analysis on this blog, irrespective of the owner’s leanings, outstrips anything I’m likely to find in the MSM. I don’t want Armstrong’s opinion every day, I want facts, figures, analysis. As I said, Armstrong writes a lot but says very little.

    And as DPF’s quotation from Armstrong was less than flattering in the first place, I don’t know why you bothered to indulge in a bit of ‘selective quoting’ of your own. Unless you were just being a hypocrite?

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  42. OECD rank 22 kiwi (2,819 comments) says:

    Do you think ACT can force National to scrap the 39c rate completely so the highest rate is 33c at a minimum and preferable 30c for PAYE?

    I’m sure Roger Douglas can convince National when he is Finance Minister.

    Added bonus for National, they over achieved on tax cuts in their first term in office.

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