Labour dumps tax cuts

January 22nd, 2014 at 12:14 pm by David Farrar

The Herald reports:

has officially dropped its policies of having the first $5000 of earnings tax free and of removing from fresh fruit and vegetables Leader David Cunliffe said this morning.

The policies were adopted in the run up to the 2011 election under then-Leader Phil Goff but Mr Cunliffe’s immediate predecessor David Shearer in his first major speech as leader almost two years ago indicated that the policies would be dumped.

Labour estimated the policies would cost the Government about $1.5 billion a year in lost revenue.

The GST off fresh fruit and vegetables policy was a piece of populist nonsense and it is good to see it gone. It would have complicated a tax that is praised globally for its simplicity, and achieved little.

The $5,000 tax free earnings policy had some merit – it would have delivered tax reductions to every taxpayer. There is a case to be made that no one should pay tax until they are earning enough to live on, as otherwise you just give it back to them in welfare and have wasteful churn.

“While these were worthwhile policies , we believe there are better ways to help struggling Kiwi families”, Mr Cunliffe said.

Will this be a different form of , or just spending increases? I hope Labour go into 2014 offering . They offered $1.5 billion of in 2011. They may not have been well targeted particularly, but they were . Will they offer anything to taxpayers in 2014? Or just tax increases?

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48 Responses to “Labour dumps tax cuts”

  1. Steve Wrathall (281 comments) says:

    Credit where credit’s due. Even the dimmest eventually realize that their 2011 policies were from The Big Ole’ Book O’ Stupid

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  2. mister nui (1,020 comments) says:

    So, are we going to see National now come out, sticking to their core values, and announce all earnings below 28k will be tax free and WFF is being given the arse????

    Hardly fucking likely.

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  3. NK (1,223 comments) says:

    No party can offer to cut taxes without firstly looking at limiting the spending. Spending as a percentage of GDP has remained static since about 2004 (~34%) from the figures I’ve seen so this needs to reduce to below 30% before tax cuts are offered. I can’t ever see the Watermelons agreeing to that.

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  4. labrator (1,844 comments) says:

    The $5000 tax free region was their best policy, provided it was tied in to reducing WFF’s nasty tentacles. I’d like to see the numbers on what amount we could do tax free with a flat tax rate above that. Stop the churn…

    They should’ve dumped the GST policy before christmas, it would look less like they realised how dumb they are in an election year.

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  5. lazza (381 comments) says:

    Deary me Cunners! Your mob is deep in doo doo.

    National are full steam ahead culling old pollies, announcing election strategy and policies as well as holding all of the cards for announcing the election date … with an economy going gang-busters.

    And all the while …what is your Labour rabble bunch of losers up to.?

    Here’s what.

    Not! new stuff, in fact the reverse! … like dumping (Goffs old) “policies” … not note dumping “pollies”.

    Gone are the $5K tax break and gst on veggies. Is that your best shot?

    Geez if you think this is winning election year tactics then what might your losing ones look like?

    Wanna give up now?.

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  6. chris (635 comments) says:

    I think a tax free earnings threshold is an excellent idea, but only if we get rid of WFF. You can’t have your cake and eat it too.

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  7. NK (1,223 comments) says:

    I think a tax free earnings threshold is an excellent idea, but only if we get rid of WFF. You can’t have your cake and eat it too.</blockquote

    Socialists can. In fact they have not just their cake, but they want everybody else's too.

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  8. peterwn (3,239 comments) says:

    nui – National’s enemies would just love National to stick to its ‘core values’ (and anyway, cite what ‘core values’ you are thinking of). It is plain useless sticking ton ‘core values’ if they lose votes hand over fist.

    On a more general basis, Labour can hardly be offering these tax cuts when it plans to significant tax increases and new taxes. Labour got away with promising tax increases in 1999, so they probably think they can get away with it again.

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  9. OneTrack (2,987 comments) says:

    “Labour can hardly be offering these tax cuts when it plans to significant tax increases and new taxes”

    Exactly. Cunliffe has all the people he made promises to in order to get elected. Then it will be time to pay the piper (but using other peoples money so it isn’t that bad). And that money has to come from somewhere. The problem for him is, New Zealand just doesn’t have enough rich pricks so he has to tax the rest more as well. Except for beneficiaries. And it wont be long after Labour/Green get elected that there will be a lot less rich pricks (and more queues on the way to the airport).

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  10. PaulL (5,954 comments) says:

    Increasing the tax free threshold is a no brainer, and it was good policy. National would be fully sticking to their principles to do this, and there is no way that wouldn’t be a vote winner.

    Surely it would be possible to introduce a tax free threshold with compensating changes to WFF. The aim would be that people with the lowest income would pay less tax, and people at the top end of WFF would have reduced subsidy.

    The downside is that this would further increase the effective marginal tax rate of those whose WFF is abating.

    Maybe an alternate approach is to explicitly declare the aim that nobody faces an effective marginal tax rate (having consideration of every government programme, benefit or subsidy) of greater than 60%. And specifically target the situations where that’s exceeded today – I think it basically comes down to someone who goes off a benefit into part-time work, and someone who is towards the top end of WFF who accepts a pay rise or increased working hours. The high effective marginal tax rates in both those situations are a drag on NZ’s net productivity.

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  11. queenstfarmer (764 comments) says:

    So now Labour, which just yesterday was attacking National for a “flip-flopping” on policy, does its own flip-flop – but it’s always different when Labour do it.

    Anyway, it’s a shame they dropped the $5,000 tax free threshold. But the Labour fruit & veg GST policy was ridiculous, and at least David Cunliffe has finally acknowledged that.

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  12. mister nui (1,020 comments) says:

    If the Nats were smart, and implemented a decent tax free threshold, at the same time as obliterating WFF, they could simply educate the public on how much better off they will be.

    But the right is useless at annunciating economically sensible policy with soundbites – this is where the hysterical left have it allover them… Not that the left’s policy is ever economically sensible….

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  13. Keeping Stock (10,270 comments) says:

    Interestingly, this is the THIRD time that Labour has dumped these two policies. David Shearer also dumped them in March 2012, and again in March 2013

    Are recycled u-turns the best thing that Labour can come up with after the holidays? Sheesh; if that’s the best that Cunliffe can do, Key might not have to worry about ANY coalition arrangements later in the year, let alone the last cab off the rank :D

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  14. alex Masterley (1,507 comments) says:

    Keeping Stock points out that these policies were dumped in March 2013 by Mr Shearer.
    Is Mr Cunliffe that bereft of ideas he has to repeat what the previous leader said and claim it as his own?

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  15. OneTrack (2,987 comments) says:

    ” But the Labour fruit & veg GST policy was ridiculous, and at least David Cunliffe has finally acknowledged that.”

    The Standard must now be going ape – that was supposed to be the big game changer. ( And no I am not going to look – I am in too much of a good mood for that)

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  16. tas (613 comments) says:

    Good to see Labour developing some signs of intelligence. My mother — an ardent Labour/Greens voter — described the GST off fruit and veges policy as “stupid” as soon as she heard about it. She knows perfectly well that supermarkets put something like 400% markups on fruit and veges and Labour’s policy will just increase the supermarket’s profit margin a bit. It’s a policy that couldn’t even convince their supporters.

    She also sees through Labour’s ridiculous minimum wage policy…

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  17. duggledog (1,505 comments) says:

    Good hopefully we can have a tax reduction battle between the hard left and the centre left. I am sick of being reamed for my tax dollar only to see a huge amount of said tax go down the shitter.

    Look, whatever Labour says and does prior to the election is meaningless. They will always want to take from the ‘rich’ and give to the ‘poor’, one way or another. Especially with Green folk round the cabinet table

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  18. mister nui (1,020 comments) says:

    So from these three quotes from Cunliffe, it is pretty easy to see where he is heading;

    From Twatter:

    Bold new policies coming in 2014

    From the Herald article:

    there was new evidence that items such as fresh fruit and vegetables were mainly consumed by people who could afford more and there were better ways to give relief to families were less well off

    and the kicker:

    the tax free zone, while simple, would have delivered the same relief to top income earners as well as those struggling to make ends meet and Labour wanted better targeted measures

    What a surprise, he’s going after rich pricks….

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  19. dime (9,805 comments) says:

    ““While these were worthwhile policies , we believe there are better ways to help struggling Kiwi families”, Mr Cunliffe said.”

    what about childless gays? what does he have against them?

    my guess – top tax rate of 40% and an increase in Welfare for families.

    after all, when asked if he will tax the rich more he smiled and said “you bet”

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  20. mister nui (1,020 comments) says:

    3 down votes for suggesting National give everyone a tax cut and obliterate WFF…..

    Some of you really are righties in name only…..

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  21. Alan (1,087 comments) says:

    No one appears to have grasped the politics of this.

    A universal tax free allowance is expensive and by it’s very nature doesn’t deliver much of an impact to people as it’s got to be spread over 4.5m many of whom would never vote Labour in any circumstances.

    The election will be won by targeting niche groups that *might* vote labour and pushing up turnout in those demographics. By scrapping the universal nature of it, Cunliffe can target this money to a small grouping where it will have a bigger impact.

    This is what Labour did in 2005 with WFF / Student Loans. It was smart politics then, and it’s smart politics now. It’s better to give $100 to someone that might vote for you, than to give $5 to twenty other people. (It’s shit economics of course, but politics and economics are non overlapping magisteria in an election year)

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  22. Keeping Stock (10,270 comments) says:

    What a surprise, he’s going after rich pricks….

    Given that he lives in one of New Zealand’s most affluent suburbs, I don’t imagine he’ll get invited to too many neighbourhood BBQ’s once his “tax the rich pricks” policies are announced. :D

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  23. Raphael (86 comments) says:

    “Mr Cunliffe said there was new evidence that items such as fresh fruit and vegetables were mainly consumed by people who could afford more and there were better ways to give relief to families were less well off.”

    KFC to become GST free?

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  24. duggledog (1,505 comments) says:

    “New Zealand just doesn’t have enough rich pricks so he has to tax the rest more as well. Except for beneficiaries. And it wont be long after Labour/Green get elected that there will be a lot less rich pricks (and more queues on the way to the airport).”

    Agreed OneTrack. NZ doesn’t have rich people bar a handful who generally spend all their time overseas and are basically invisible

    Personally should the worst happen I won’t be ‘going to the airport’. Some of us plan for war during a time of peace, as it were. Me and Dime (I guess?!) will wait till the dust settles, then buy property from those who exposed themselves to high debt, not thinking there could ever be a scenario like what happened in the late eighties ever again.

    If I can buy a property in a mortgagee sale from a Labour / Green voter, all the better!

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  25. burt (8,206 comments) says:

    the tax free zone, while simple, would have delivered the same relief to top income earners as well as those struggling to make ends meet and Labour wanted better targeted measures

    He’s channeling Dr. Cullen …. We can’t reduce taxes on low earners because high earners will get the tax break too and that’s not fair good for our policies of envy ideology.

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  26. labrator (1,844 comments) says:

    No one appears to have grasped the politics of this.

    I think we’ve all grasped the politics of this. Labour want to buy their way in to the next election as all control freak socialists feel they’re entitled too. Cunliffe wants to be Prime Minister, that’s his goal in life, do you think he’d let a pesky little thing like the national economy get in the way of his ego?

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  27. dime (9,805 comments) says:

    “Personally should the worst happen I won’t be ‘going to the airport’. Some of us plan for war during a time of peace, as it were. Me and Dime (I guess?!) will wait till the dust settles, then buy property from those who exposed themselves to high debt, not thinking there could ever be a scenario like what happened in the late eighties ever again.”

    Fuckin A!

    Personally, my business will probably make more money under a lefty govt. Being an importer of consumer goods. More money to the poor, more of Dimes quality goods purchased…

    Wellington will come screaming back to life too. More sales :D

    but yeah, not flash for the country at all.

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  28. NK (1,223 comments) says:

    I have just been leaked Labour’s new tax policy: Company tax @ 45% on revenue.

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  29. OneTrack (2,987 comments) says:

    “Company tax @ 45% on revenue”

    Only 45%?

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  30. duggledog (1,505 comments) says:

    Dime

    $2 Dollar Shop?!

    Nobody has to ‘leave New Zealand’. There’s no need to, except to go on flash holidays.

    You just have to have a logical, flexible plan to prosper under whichever government you get given. Got taught that as a teenager by an old geezer, seen me right ever since.

    It’s mercenary sure but you gotta look after number one in this life. Don’t count the government into your future!

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  31. dime (9,805 comments) says:

    duggle – haven’t sunk that low.. yet :D

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  32. NK (1,223 comments) says:

    Only 45%?

    Yes. The remaining 55% is taxed on the profit!

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  33. Manolo (13,518 comments) says:

    The envy tax on “rich pricks” will be hiked to 45%.
    Long live socialism…….yeah right.

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  34. RRM (9,786 comments) says:

    The envy tax on “rich pricks” will be hiked to 45%.

    Are you making that up, or is it confirmed?

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  35. alwyn (411 comments) says:

    I see, from a caption competition in Keeping Stock a couple of weeks, ago that David C had spent the long break in the mountains.
    I must be about 40 days since he vanished from sight. Obviously he has been doing his Moses’ impersonation and went up to the mountaintop to get his orders from God.
    These two must be the first of ten that were engraved for him on tablets of stone. When are we going to get the other eight of the commandments that he has been given?
    The Labour party are going to have great difficulty if there are any like “Thou shalt not steal” and “Thou shalt not covet thy neighbour’s goods” aren’t they?

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  36. backster (2,142 comments) says:

    The $5,000 tax free was the best of the reforms on which Labour was defeated.It did have considerable merit in allowing paper boys and other part time workers to develop a work ethic without being handicapped by tax…..Bill English could do a lot worse than to implement the policy (first $5000 tax free) in this years budget and thus condemn Labour to campaign on repealing it.

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  37. igm (1,413 comments) says:

    It is amusing to note those in Labour who have all the ideas of running a better economy don’t seem to offer any personal examples of success in either financial or commercial fields.

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  38. burt (8,206 comments) says:

    DPF

    Labour are opposition – what are National doing in this years budget;

    Scrapping WFF ?
    Scrapping interest free student loads ?
    Increasing the “rich prick” threshold to an amount that is actually rich ?
    Allowing tax deduction of private health insurance and private school fees ?

    OR

    Continuing to run socialist policies ?

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  39. GJM (62 comments) says:

    Alwyn said
    “I must be about 40 days since he vanished from sight. Obviously he has been doing his Moses’ impersonation and went up to the mountaintop to get his orders from God.”

    It was well known that Helen Clark was one for the outdoors and walking in the hills as well. It might just be a coincidence of course…

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  40. srylands (405 comments) says:

    David C has just posted a “thanks guys” message at The Standard for all the brilliant ideas:

    “I’d just like to say thanks for all of the feedback The Standard’s community gave in the recent post about my upcoming state of the nation. Many of the comments reflect my own thoughts, and also gave me new insight into New Zealander’s concerns. More than a couple made me laugh out loud. It’s great to see such an enthusiastic progressively-minded group of people in action.”

    Makes me scared that he is drawing his inspiration for economic policy from The Standard.

    http://thestandard.org.nz/david-cunliffe-on-the-state-of-the-nation/

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  41. OneTrack (2,987 comments) says:

    “It was well known that Helen Clark was one for the outdoors and walking in the hills as well. It might just be a coincidence of course…”

    There aren’t many hills in New York. But the UN building could be called a “mountain top” if you had to use the stairs. :-)

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  42. Sir Cullen's Sidekick (872 comments) says:

    Labour and tax cuts? Are you mad? Wait for Cunliff’s announcement of rich prick tax. You would be slapped with 39% and 42% tax rates in the name of restoring social justice.

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  43. johnwellingtonwells (137 comments) says:

    Try walking down 31 flights of narrow stairs to the ground floor in the UN building. I had to do it every four months for fire drill. At least the turned the lifts back on when it was finshed. H1 is probably six floors higher but probably goes out for coffee before the fire drill

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  44. Steve (North Shore) (4,544 comments) says:

    Anyone who believes what Labour says is discombubulated. The past record of Labour shows lies, deciet, coruption, underhand dealings, bullshit,lies, lies, lies.
    Did I mention lies?

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  45. wreck1080 (3,863 comments) says:

    Cunliffe is a no go as a PM.

    He comes across as a bit of a wanker .

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  46. jedmo (33 comments) says:

    Cunliffe’s reference to those who buy fruit & veges being able to afford more sounds like condescension … sounds like he is generalising that the poor don’t recognize the value of fruit & veg.

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  47. bhudson (4,736 comments) says:

    Stuff reported it just a little differently:

    Leader David Cunliffe said the changes, signalled as likely by David Shearer when he was leader, would free up about $1.5 billion a year.

    http://www.stuff.co.nz/national/politics/9637111/Labour-axes-tax-break-policies

    Given that Labour was promising spending of more than $16bn last election – money that would had to have been borrowed – Stuff or Cunliffe are saying that dropping these policies will free up borrowing potential to be spent elsewhere.

    Not saving money, not borrowing less, just spending it differently.

    Same old, same old from Labour – borrow and spend, spray and pray.

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  48. SPC (5,563 comments) says:

    The trouble for National regarding taking over the higher tax free threshold concept is that they have committed to saving into the Cullen Fund when returning to a surplus, and have just got to a balanced budget.

    The first election issue is would Labour resume saving into the Cullen Fund and if so when? And how, given the borrowing to save argument some years back when English ended contributions while the budget was in deficit.

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