Thursday, August 18, 2005



Gazumped

In the wake of a better-than-expected Pre-election financial update, Labour has come out and gazumped National on the tax front - not by cutting tax rates, but by massively extending the already generous Working For Families package. The abatement threshhold has been increased to $35,000 while the abatement rate has been reduced to 20%, meaning that an extra 60,000 families will benefit by around $50 to $100 a week. And it does all of this without breaking the bank, because targetted assistance can deliver far more to those it targets than across-the-board tax cuts. The extension is expected to cost around $400 million a year - compared with $600 million for National's proposed cuts to the company tax rate or almost $700 million a year to flatten the tax scale by cutting the top rate to 33% (neither of which will provide any benefit to the vast majority of New Zealanders).

As with the student loan policy, there's a calculator so you can work out how much you benefit by. I should add that the average net tax rate figure is more than a little misleading, as the calculator does not include the increased accomodation supplement which is a key component of Working For Families. Once this is taken into account, the point at which a family would be paying no net tax whatsoever would be somewhere around the $55,000 mark (depending on family size and location).

This is already being criticised as "redistribution", and yes, it is - and that is nothing to be ashamed of. Taking money from the rich via taxation and giving it to those in need via benefits and services is the foundation of any decent society. As I said when Working For Familes was first announced, if this is "communism by stealth", bring on the dancing cossacks!

20 comments:

It's good to see someone being so honest about 'wealth distribution'.

Just a question though, how would you handle the scenario in which the people paying the tax simply decided to leave the country?

I ask because that's what they're doing, and at times I'm seriously tempted to join them.

Posted by Duncan Bayne : 8/18/2005 03:53:00 PM

The right like to talk about the spectre of the rich leaving, but it doesn't seem to be reflected in the tax take. Either they're not, or else their departure simply opens up an economic niche for someone else, who pays the taxes in their place. Either way, at current tax levels, the effect isn't significant enough to be worth bothering about.

As for yourself, if you think you're genuinely better off in Australia or whereever, then feel free to leave. I understand that Somalia is currently a Libertarian paradise, being tax free and full of guns. Maybe you could go there?

Posted by Idiot/Savant : 8/18/2005 04:25:00 PM

And if these people leave the country, where in the western world do they think thay are going to go and pay less tax ? Good grief.
Lrt them go, if they are that stupid.

Posted by Anonymous : 8/18/2005 07:36:00 PM

And if these people leave the country, where in the western world do they think thay are going to go and pay less tax ? Good grief.
Let them go, if they are that stupid.

cor. spelling :-)

Posted by Anonymous : 8/18/2005 07:37:00 PM

Mmmmmm, smell the burning strawman ...

Firstly, you're assuming the tax take stays constant as a proportion - which it doesn't, National has already put the lie to the 'no new taxes' claim, and that's not counting fiscal drag. The tax take is increasing alright - because the Government is taking more from the suckers who remain :-(

Secondly, I think you're confusing Libertarianism with Anarchism - and I think you're doing it deliberately, with the intention of discrediting Libertarianism in the eyes of the ignorant.

Somalia isn't Libertarian - but The Free State Project is.

Posted by Duncan Bayne : 8/18/2005 07:41:00 PM

Oh, and 'anonymous' - it's not so much a tax issue as a liberty issue. Remember when Clark said that the role of Government is whatever Government defines it to be? That's not a good sign ...

Posted by Duncan Bayne : 8/18/2005 07:43:00 PM

this is great (and for the record I have 2 kids and I'm in a bracket where I'll get none of it) - most western countries have some form of tax deductions for kids (just look at the US) - not covering teenagers as well is a bit silly though - it's almost like saying they should be sent out to work when they hit 15

Posted by Anonymous : 8/18/2005 07:57:00 PM

This is great for my family and I hope for lower income families. One does have to worry about the vote buying aspect of it, but I suppose that the opening of the books meant that the new surplus figures would have come out anyway.
I/S do not encourage our Libertarianz friends to go to Somalia, that contry has enough problems as it is.

Posted by Balach : 8/18/2005 08:57:00 PM

"role of govt is whatever the govt defines it to be"

Helen isn't quite right, so long as we have a democracy the VOTERS get a chance to define the Govt's role. Not quite as good a chance as we would get under STV mind you........

I personally find the distinction between the purely Liberterian view and anarchy just a little too close..

I have a family income $100,000+ and two grown up kids so I don't get anything out of this package at all. But I think the targetting is not all bad.

Posted by Anonymous : 8/18/2005 11:07:00 PM

Duncan: hey, you asked about the consequences of the mythical "flight of the rich"; I simply pointed out that the expected ones weren't occuring, and that it did not seem to be a signficant problem. Hardly a strawman.

As for Somalia, other Libertarians have begged to differ. But that's your doctrinal dispute, not mine.

Posted by Idiot/Savant : 8/19/2005 01:37:00 AM

of course it's not happening - high end tax rates are lower here than in other western countries (I know I got a tax cut when I moved back to NZ last year) - there will always be tax havens people can move to, but unless you're retired and want to sit on an island in the middle of nowhere for part of the year they just aren't that usefull

Posted by Anonymous : 8/19/2005 05:43:00 AM

Idiot:

So, this just "redistributing" money from the "rich" to "deserving families". Of course, it would be nice to know why those of us who don't have children don't count in Labour's book. Guess we're not a large enough voting bloc.

If Labour wants to play fertility-based wedge politics, fine. But let's be honest about it.

Posted by Craig Ranapia : 8/19/2005 07:03:00 AM

Actually, for the first time, I feel gutted. It's clear that as a single earner, I'm just a giant tax cow to be milked for all I'm worth.
I've said before that I'm happy to contribute a significant amount towards the kind of society I value, but this feels like pork barrel politics, and I'm the sucker.
I will be investigating trusts and alternate tax structures, which I've avoided on principle up till now.
I'm not really sure what line has been crossed, but along with the refusal to properly address bracket creep, there definately is one.

Posted by Huskynut : 8/19/2005 08:15:00 AM

Craig : The government is already giving money to our elderly because they possibly are unable to work. So why on earth should they not give money to families with kids who definitely are unable to work. And at the risk of getting the 'social engineering' BS thrown at me - have you had a look at the demographics of rich nations, they are not having enough kids to replace themselves. I would have thought in light of that , that a policy that assists working families to raise children was a sensible proactive thing to do.

Posted by Anonymous : 8/19/2005 08:34:00 AM

I think the package is good- though we won't get anything from it being a double income one child family.

I used to be quite anti policies that targetted people with children too but that was before I understood how incredibly expensive children are. We are getting by but there isn't a lot to spare. I have often wondered how other people with more children and lower incomes can possibly manage. It must be a constant, grinding, struggle.

I am quite happy for my taxes to go towards easing the burden of other families. I want my child to grow up in an egalitarian, fair society where no one is living in poverty.

Posted by Make Tea Not War : 8/19/2005 10:15:00 AM

Go for it, Duncan. Go flee somewhere were you like the role of govt better.

You could try that known Libertarian Paradise, the USA. Just remember to get fingerprinted on the way in, thanks, and note that as a recent immigrant you have very few civil rights under the Patriot Act. But in most states you could buy a handgun from Walmart at 3am while drunk, and that seems to be more important to most US libertarians than piddly details about civil rights.

You could try that other Libertarian Paradise, Australia. Top tax rates much higher than ours, of course, employment law vis-a-vis unions is like ours was 30 years ago, much high govt ownership of industries, much higher govt intervention in the economy, and you've got state govt as well as federal govt interfering in your life.

Or maybe you should get clear on this: just what foreign country are you claiming is so much better than NZ?

Posted by Icehawk : 8/19/2005 10:16:00 AM

Icehawk,

I think you're confused. Right now, I'd rather remain in NZ.

If Labour wins, and follow through with their promise to turn more than half of the country into welfare beneficiaries, then it's time to start investigating alternatives, because if Labour wins, then it's clear that most NZers are okay with these kind of policies.

The thing is, I'm well aware of how illiberal the USA is in many respects; the guy I invited to be my M.C. at my wedding couldn't make it, because he's Iranian (and Ba'hai, go figure), and wouldn't be automatically granted a border re-entrancy visa, despite working for a large & rather well known software company over there.

Likewise Australia - currently I'd rather live here, but give it a few years ...

Posted by Duncan Bayne : 8/19/2005 11:15:00 AM

It makes sense to target financial assistance towards families with children, because the cost of living is higher if you have children than if you dont. A single male bachelor (or a single femail bachelorette) doesnt face the same sort of costs that families do.

However, assistance to singles and beneficaries wouldnt go amiss. An increase in benefits such as the accommodation supplement, and allowing people who work to keep more of their benefit wouldnt be a bad thing.

Posted by millsy : 8/19/2005 11:18:00 AM

Duncan : To say that working families get tax rebates because they have kids does not make them welfare beneficiaries. I thought you right wingers wanted working people to keep more of their earnings rather than have the government spend it ?

Posted by Anonymous : 8/19/2005 11:28:00 AM

duncan,

You'll have to excuse me if I find this "eek! they're putting all families on welfare!" point of view bizarrely dogmatic. But then when we grew up our parents got non-means-tested the $10/week/kid child subsidy, and it doesn't seem to have ruined my parents moral character.

If the govt raised a poll tax of $100 and then sent every taxpayer a cheque for $100, you'd think the country had gone completely to hell because they'd made everyone a welfare beneficiary?

Lets get real. As a libertarian the real tax rate, and the real amount of money being redistributed, these are the measures you should be worrying about. So what are the threats to you Libertarian Manhood? After WFF comes in the biggest real state redistributions in our economy will be

a) from rich to poor (that's what a progressive tax rate does),

b) from everyone-else to the elderly (via superannuation)

c) from healthy to sick via govt-funded health care

d) from employed to unemployed (inc sickness benefits)

e) from everyone-else to approx 90% of families with children.

And it's (e) that you think is the biggest threat, even though it involves the least money?

Why aren't you out protesting NZ First's superannuation policy instead, and plotting a strategic vote for a Labour-Green alliance to avoid a National-NZ First one to avoid having national super go up?

Posted by Icehawk : 8/19/2005 12:00:00 PM