Thursday, 9 October 2008

National's tax plans fail to impress

While Labour and the Unions are scrambling to come up with reasons to rebut National's tax plans, critics on the correct side of National are disappointed at the scale of the planned tax cuts.

London-based blogger Clint Heine is well-unimpressed, particularly with National wimping out on abolishing New Zealand's top tax rate, with plans to drop it by just 2% (to 37%) by 2010. He rightly describes this as "madness and sheer gutlessness" from Key and English.

This is the "rich prick/envy" top tax rate of 39 cents in the dollar that Michael Cullen introduced in 1999, promising it would apply to "only the top 5% of income earners". That promise was never kept, with over 12% of workers now being forced to pay it.

More than a year ago, the Centre for Independent Studies revealed a person on the average wage of $36,000 in 2000 was now paying an extra $2,400 in tax each year (in real terms) because of Cullen's inaction and refusal to adjust tax thresholds.

The 3-year tax plans by both Labour and National fail to even compensate fully for this initial loss in real earnings since 2000.

Over-taxing many hundreds of thousands of New Zealand workers every year helped Cullen give the public and the media the false impression that he was capable of balancing the country's books. It has taken 9 years of bad policies to truly reveal that the emperor has no clothes.

Heine proposes a simple two-tier PAYE tax system, with 0% tax up to $20,000, and then an 18% flat tax rate from $20,000 upwards (dropping as the economic conditions improve). Not a bad idea, although I note that the Maori Party are even bolder, and want the first $25,000 of personal income to be tax-free.

ACT leader Rodney Hide says John Key has "failed to provide any economic leadership or direction". Hide says it proves that while a vote for National would get rid of PM Helen Clark, it would also be a vote to stick with the failed economic policies of Dr Cullen...
"I can see now why John Key doesn't want Sir Roger Douglas in his cabinet," said party leader Rodney Hide. The man he sees eye-to-eye with is (finance minister) Michael Cullen.
"What is needed is a recovery package that includes capping government expenditure, slashing red tape, and an immediate abolition of Cullen's 39 cent envy tax."
It is rumoured that National slashed over $2 billion from their original tax cuts package after the Government's books were opened, opting to give workers less of their own money back, rather than taking the bold (and actually quite simple) approach of cutting wasteful state spending.

The Hive revealed today (via The Independent) that New Zealand taxpayers are paying $36.9 million a year on public-sector communications staff and contractors.

Not PC has a very good message for the National Party: Stop the Spending!, while Pacific Empire has compiled a handy list of 407 (407!!) "government departments, state-owned enterprises, councils and quangos" that could help kickstart a good discussion around the caucus table of the incoming Government...

Rodney Hide notes that John Key has chosen to "cynically chase votes" rather than address the country's out of control spending and strangling red tape under Labour.
"[John Key] has fiddled while the economy burns... Key's lack of any plan, vision or leadership verges on the irresponsible. A Party vote for ACT and only ACT will see Cullen's 39 cent envy tax gone by Christmas"
* Scoop: Hide Slams Key's Economic Policy
* Clint Heine and Friends: Totally taxing Mr Key!

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  1. Madeleine Says:

    Only 12% of workers earn over $60k? You can't live in Auckland if you are earning less and even then you don't live that well on %60k - you are definately not rich!

    I wish the Nats would get some spine. The top tiers are over taxed to ridiculous levels. Flat tax is what they should be aiming for so they need to either bite the bullet and just do it or else keep chipping away at all tax levels but on a sliding scale so that ultimately they will arrive at a flat rate.

  2. Heine Says:

    The tax policy will not bring home Kiwis or inspire confidence from others wanting to move to NZ.

    My soon to be adopted country, The Czech Rep has a 15% flat rate, dropping to 12.5% in 2009 and it's neighbour Slovakia has the biggest growth rate in the OECD with a low flat tax as well. Other central and eastern european states are also enjoying these low taxes and as a result I know many people are leaving London to go home to enjoy these economic conditions.

    National have deserved their alleged poll drop - there is no substabce whatsoever. Now more than ever we need ACT to have a good party vote on Nov 8th.