By Lynn Grieveson
Prime Minister John Key has left open the possiblity the National-led Government could propose middle-class tax cuts in its platform for re-election on September 20.
Asked by reporters in Parliament if National would campaign with a tax cut promise, he said: "We are not going to rule that out, and you'll see tomorrow (in Budget 2014 due at 2 pm) what the indications of how much extra sort of spending we believe we could undertake without putting pressure on interest rates and maintaining our desire to see debt levels below 20% of GDP. "
"So there are options for that additional expenditure, and they would obviously be spending by the Government, or alternatively returning that through some sort of tax programme," Key said.
"It's a possibility, but when you see the number tomorrow, what you will see is that there is some extra room over and above the billion dollars in broad terms we have spent for the last couple of years, but it's not a massive amount, so we will have to consider and weigh all that up as to how it could be allocated," Key said.
Asked who was most in need of tax relief, he said: "It's pretty obvious I think that middle New Zealand pays a fair bit of tax and often doesn't get a lot in return."
"As you move up the income levels they get less of things like Working for Families, probably don't get Accomodation Supplements and the likes because our system is heavily dependent effectively on a redistribution system for those most in need, and that happens through programmes like Working For Families," Key said.
"I think when you see the numbers tomorrow what you will see is not only a surplus for the next financial period, but actually increasing surpluses over the years, off I think quite conservative numbers by the Treasury. The driving factor of course is the government wants to get debt below 20% of GDP by 2020 and what the numbers show is that with this extra free, we will well and truly achieve that objective, all things being equal," Key said.
Asked if the net debt target was achieveable with tax cuts, Key said: "That's included in that additional area if that's where we wanted to go, but you know I just caution you to just wait and see the number tomorrow because it's not enormous. When you see the number tomorrow you'll be able to draw an assessment of what you think the options available to both us and effectively the other political parties are, but that's our best guess of what's available without overstimulating the economy and maintaining our desire to see debt held at low levels."
He was then asked if tax cuts meant income tax cuts.
"I suppose if that's was where we ultimately decide to go, then yes. But then again it's just so early, we haven't really made any call like that, whether we might just spend it on areas of need, those decisions haven't been made yet," he said.
Key said he did not know yet when a decision would be made about whether National would offer tax cuts.
"Obviously as we go into the campaign we'll want to think about what we are campaigning on if we are in the position to have a third term. So all of those decisions will have to be made sometime in the next four and a half months."
64 Comments
If we assume your statement is truw, I wonder if we'd be in that position if we didn't have WFF - i.e. if we had no WFF, would CPI have risen as fast? Would rents have risen as fast? Suppliers can only charge what the market will bear or go out of business. I cannot help but think all this tinkering is smoke and mirrors, not to mention horribly inefficient.
You are talking nonsense. People at the top keep the country going tax wise. People paying 33 cents in the dollar, professionals and owners of businesses for example. The middle class pay stuff all as many are on Wff for a start and they pay tax at lower rates if they pay any at all. If I recall correctly the top 10 per cent earners pay 50 per cent of the tax paid.
You poor victim you boatman... let me remind you what you so called 'landed boomers' receive as part of your "communistic social engineering"? Herewith...
- tax free capital gains from all the properties you own and wheel-and-deal with,
- free money from negative gearing.
- free money from WFF and Accomodation Supplement from your tenants rent
- Pensions that you receive regardless of your tax-free income - More free money (I'm going to have to work till I'm 70 to get mine.)
- free or subsidised healthcare for most of your life (the health subsidy is covering less and less)
- and remember your free education from your uni days. (See how much a degree in anything worthwhile costs now!) Try starting your career with at least a 50k student loan.
- you're also able to tie up your money in trust funds so the government is unable to get its due tax
It's easy to point at the others and whinge about what they get... but you mate are living high on the hog enjoying the best of NZs past; into the future. Don't try tell me this tax-free money you receive trickles back down into the economy, cos all you do is buy more houses and get more tax-free money and pushing the price of living even higher.
The middle-class are struggling to afford homes, particularly in Auckland and Christchurch as foreigners are welcomed to buy and rent out properties TAX FREE in an already heavily constrained market. Half of a middle middle-class salary goes into just paying rent! See what you can get for under 500 bucks a week in a middle-class suburb and to buy the same house will cost 1000 bucks a week... And I hardly think 50 bucks a week on a 75k salary and 4bucks a week on a 80k salary as part of WWF means effectively NOT paying tax...
Yes, the middle-class do carry the tax burden, because we have to fund your tax-free ventures so you can make more tax-free money.
Have a nice day
Blue Meanie
Blue Meanie, Spot on.
All these Baby Boomers seem to forget the cheque’s they used to receive every year which knowing them was probably spent on new cars and holidays. Now me and my partner who have done just as much work (if not more) to finally purchase our own rental home don't get to enjoy the same tax benefits that they did for years. By the time I get to retirement (27 atm) age it will probably have shifted higher then 70!
Good points Blue M. I can add that this older generation are enjoying multiple incomes at a time when they are mortgage free and child free. There are many of them with Nat Super, Private Super and still working - many of these couples have 4 - 6 income sources as a result. I would fit into the older rather than younger gropu, but believe at present there is a huge plunder going on at Nat Super level. Tis not good.
You sure you are still in the middle class?
Did your generation build the roads you drive on, the hospitals and the schools? When I left school the top tax bracket was over %60, maybe thats how the %15 of us that went to Uni got it for free. Very few of my friends could aford a car let alone to travel.
NZ changed after the UK entered the EU and the 70's oil crisis. Leadership failed to adjust.
Everyone loved capital gains as it took no work and was tax free, they just responed to stimuli. The problem is the debt and the interest flowing offshore, without it we would be rich again.
Yes, so interesting that people forget when they cherry-pick their points they end-up undermining their whole argument. Yes tax rates were 66% and if you go back just a few more years there was also a surtax of 90% on really high income earners, all of which paid for the roads and hydro-dams we all now enjoy
And I forgot, there was no point in income splitting, husband and wives incomes were amalgamated for tax puposes if one of the spouse earned over a fairly moderate amount
Ok Andrewj I am assuming you think $80k-$90k isn't middle-class and is infact moving into elite - because if you think it's a lower income and working class salary what the heck is a 40k-60k income (which is around the average- the midddle- NZ pa salary)?
As I said in my earlier comment, half of an 80k-90k salary will go on rent in a middle-class suburb in Auckland. To buy a house with a 20% deposit (which I have) will cost more in mortgage payments/rates/insurance etc but will mean I can only afford a house under the power-lines, directly next to the motorway in Massey... zoned for decile one schools... what an awesome aspiration, to move backwards (is this what you want for future generations - moving into decline rather than moving forward?)... 15 years ago a workng class salary could have bought a house like this... http://www.trademe.co.nz/property/residential-property-for-sale/auction… now it would cost 65% of an 80k, after tax, salary AND HOLDING THUMBS FOR CAPITAL GAINS! How can that kind of terror debt be good for NZ?
As for your tax paid state assets... gee, the government has just sold them back to you boomers and to overseas investors, NICE!... But if you want to be pedantic... it is my generation that is paying for the new roads/dams/hospitals and the the upkeep of old and of course your blooming pensions etc... the same pensions which will be worthless by the time I am 70 and able to retire
While you boomers are ripping every red cent you can from ours and the following generations, the generations before you were giving up their lives so your generation (and ours) didn't have to live under an Imperial Japan or Nazi Germany... everyone other than the boomers (before and after) have have had to sacrifice so the boomers can have their on-going FREE MONEY!
You got UNI for free because the previous generation were paying the 60% top tax... you were only 17 and wouldn't have contributed anything, so you can't argue that.. Our Uni fees, to get a decent degree, to get a 'decent' waged job are in excess of $50k... We start working life big time in the red!
As for cheap cars... well we pay road tax, WOF, licence etc you'd probably know it's not cheap to run a car... add that on top of a 65% mortgage payment, there isn't much safety room for those other unimportant things like food and 'free' schooling!
Overseas travel... I'll give that to you, we surely can travel easily and cheaply when we are young and single!
Just saying that's all... you guys enjoy your free money now you here...
who gives a toss about the next generations of Kiwis?!?!?!?!!?!?!?!
Have a nice day
BLUE MEANIE!
My cynicism gets ahead of me sometimes. I think the middle classes are in big trouble.
I have a certain amount of nostalgia towards the past. Im still a good distance off the pension and don't fit into the baby boomer generation.
I have 5 children and I worry about their future. I don't like the anger in your comment but I don't blame you. We wasted resources and thought the whole world could join in. Globalisation is a disaster for lower income earners.
I am amazed a lot more people are not angry. This will end in a train wreck, promises by politicans won't be met, pensions will be destroyed and everyone gets to suffer.
Logicaly we could never afford to put everyone through University, used debt to hide the fact that many jobs had vanished.
I left school and earnt $97 a week before tax on a farm. I got up at 6am got my horse in brushed him down gave him some feed and went and had breakfast to start at 7.00am. Worked my butt off all day.
I could hardly afford fuel in my car and cars were horendously expensive. Inflation destroyed my grandparents savings a lot of which were in life insurance policies. Those with asset with low debt, prospered. Im expecting a nasty bout of deflation.
Inflation went the way of those in debt, keep out of debt and keep your nose clean, interesting times coming for those with debt.
life is a cycle and its easy to get angry if your expectations are not met, perhaps you believed a lie that you were told, 'prosperity for everyone'? Hopefully at the end of the day the universe is ultimately fair.
Andrewj, the thing is, it's always easier to say "life is not fair," wash hands and then walk away, rather than to stand for something larger than self. In NZ it could be fairer if the 'haves' just gave a little back of what they received from their forebears to next generations.
As for angry, nah, just venting... I'm a survivor, educated and a realist, I have plans and my little tribe will be fine, maybe a bit of good will also come out my plans for others too... that's my hope anyway...
I'll leave you with Helen Keller's wisdom -
“I am only one, but still I am one. I cannot do everything, but still I can do something; and because I cannot do everything, I will not refuse to do something that I can do.”
peace out!
Blue Meanie
While life is never fair, and noone p[romised or should try to make it so.
There is however a question on the table for a functioning public society should accept what kind of minimum level activity from it's trading members, and just what kind of opportunities should new starters be expected to have?
How many hours should every person be expected to provide for public service?
What about those who have major illness or handicap?
What about those who have, through no direct fault of their own, become less able?
And what of those who have through their own fault, what level should we demand of them?
And why should the majority get to inflicit it's views on the minority?
Remember English/Key also dropped the top bands of the income and company taxes and increased GST in there first term. GST is a regressive tax because lower incomes spend a higher percentage of there incomes. So National's first tax cut was paid for by those on middle and lower incomes. The logic that National gave at the time was this would help NZ to transition away from a low investment high consumption economy. But that doesn't work if the investment is in unproductive assets such as pushing up existing house prices....
@Yoda ....... what are you also nuts , WORKING FOR FAMILIES is YOUR money already .
You pay tax and the governemt gives some of it back ................. and you think they are being nice giving you your money back.
WFF is an ill disguised effort at communistic social engineering , manipulative and dishonest and socialist nonsense , just take less tax , its less hassle and less admin
So JK is saying that to avoid interest rate hikes there is an amount of the governments surplus that it is going to take out of the economy by not spending it, and not returning it in tax cuts. Send it all to the Cullen fund instead?
How is this any different in impact vs Labours Variable Savings Rate which they claim won't work?
For individuals, based on the 2011 Household economic survey, the middle 40% of individuals 15 years and over were earning around $15800 to $45900 a year. When National talk of tax cuts for the middle class, we will see if they use a higher bracket than the middle classes.
The frontal view, yes but then there is the large % of swing voter that is pretty central. So ppear too far off centre and that vote moves off. Behind the scenes National is pretty "blue" IMHO, I think that will bite them as younger voters come on line though its currently its chewing Labour very badly by the look of it.
regards
I go there for entertainment on occasion. Frankly the posters and articles there are way right of Act IMHO, let alone National.
Now where the posters themselves think they sit in the political spectrum is another matter.
For instance I see comments that now National has a mandate it can do any far right wing thing it wants because it "suckered" the middle swing vote" into voting for them. So maybe its a Q of preceived power to do things, ie Act has none so its pointless bending Act to "your extermist right wing will" because Act has no Power, National on the other hand does...if only for a term.
regards
I am blown away when I hear people suggesting we PAY MORE TAX .............
What makes anyone think that the Government spends your money more carefully than you do ?
AND
Lets not forget that lowering taxes can be stimulatory for the economy or increase the savings rate
I noticed someone in an earlier post linking the OCR to the tax rate , there is no real direct correlation
NZ has exremely poor infrastructure compared to other countries I have lived in. In particular our transport system is pathetic. I would quite happily pay higher taxes for better infrastructure.
I think transport is the key to unlocking affordable housing in NZ. I have recently been looking at the US motorway system. It dates back to the 1956 Federal Aid Highway Act. The US has six times the motorway length per capita compared to NZ but only double the population density. The purpose of those Highways was to aid transport across the continent and between states. But the majority of users are actually those traveling within one urban area.
I think what happened in the US is that the motorway system provided a free framework for affordable housing to move into. Certainly Hugh Pavelitches surveys show many cities in the US has very affordable housing of around three times medium incomes. This gives US cities particular characteristics -polycentric business districts, affordable standalone housing on large sections and a transport system completely dependent on the automobile.
What does this mean for NZ? Well we could replicate the US. Double, triple, quintriple our motorway system throughout NZ to provide that free framework. But it is not 1956. It is 2014 and oil has increased in price relative to electricity. Oil is non-renewable and imported. It will run out at some point. Electricity in NZ is renewable, local, will not run out and can even be increased.
What that indicates to me is NZ should invest in a transport/housing framework for the 21st century not the 20th century. We should invest in a transport framework that caters for electric bicyles, cars, buses and trains. Urban areas would be more diverse -high density around the public transport nodes, lower density for the bicycle and car centric areas. There also should be the allowance or 'ordinances' for sustainable villages along the lines of Murray Grimwoods suggestions.
This option gives the most flexibility to what is currently an uncertain future. If petrol automobiles transition smoothly to electricity then the transport and housing mix will gradually move in that direction. If the economics is better for electric bikes/scooters and public transport then gradually we will move in that direction. If that level of 'civilisation' is unsustainable then we will move in Murray's direction. Although there will always be some urban areas to manage our 'governance structures' that provides the 'leviathan' to protect us from each other, from violence and war in particular -HT Waymad.
I am having trouble with my copy and paste function. But I have previously put up the engineering required to provide the electricity energy equivalent of our domestic car fleet oil use. Basically NZ has enough consented but not built wind turbine sites to do this. Also solar panels are becoming economic too.
So the question is not whether we have electricity. But there certainly are doubts about whether enough electric batteries can be made at an affordable price. Also questions about how to power heavy/mobile things -trucks, tractors, diggers etc. Some people believe these resource constraints will collaspe the global economy and this will collaspe/ swamp our economy.
So in my opinion a flexible approach is best.
72% of our present electricty output is renewable. 37% of the primary energy is ie if you include fossil fuels. In terms of expanding our renewable electricity supply generation that is technically very easy to do. So more wind, geo-thermal and cosndierable tide has no restriction on expansion except its cost and who pays for the building. If it was me in Govn I'd be spending money on it right now, hopefully the Green's will get in and we'll see a speed chnage shift up.
That isnt the problem though, the problem is converting that into transport energy that we can afford to pay for. EVs for instance are 3 times the price and last 1/2 as long, so a 6 fold increase. Or indeed other aspects of the economy that can only use fossil fuels.
This speaks to me that we are going to see huge changes in our economy and how we work/earn in it and teh change will be progresive and hopefully managable.
For instance food will become all organic and there will be a considerable human power aspect to it, that means food will be a lot more expensive.
All this points to assets such as housing being massively over-valued. Also many businesses being over-valued and in fact they will not survive. I expect retailing/consumerism for instance to go from its present 70% of the economy to easily less than 1/2 that.
A knock on from that is Malls as they exist right now will become things of the past. Lots of pensions funds in commercial property that wont see a return so how do they pay out to OAPs? Everything is so inter-related that we see iterations of mind boggling complexity as the result...jsut how do you work out the impacts(s)?
regards
Steven we can argue about how far and how fast we need to change regarding renewable energy, transport and housing but to ignore the issue totally like National does is just stupid.
John Key's indication that the highest priority for a government surplus is tax cuts indicates a complete lack of vision for what NZ could be.
A few small step in the right direction is better than walking the other way.... So I hope Labour/Greens can give us voters a better vision for the future.
Yep, certainly the Green's proposal of a green development bank is better than anything else being suggested, it is however a small step.
I suppose the key for me is to move from efficiency assuming BAU to resiliance, ie the ability to weather changes even if quite sever with no severe impact.
JK's comments actually I take as utterly obscene, a total uncaring of much of NZ IMHO. It will be interesting to see if his comment is taken positievly or like I take it negatively by NZers, I guess that will be shown pretty clearly in September.
regards
While I'll agree that sprawling surburbia was due to such highways, that was the past. And yes, petrol in the US is now $4US a US gallon and rising and the large distances to drive in gas guzzling overweight badly made dinosaurs is hurting the US economy and badly. Its not a model you can do in NZ or indeed anywhere in teh world now IMHO.
"What that indicates to me is NZ should invest in a transport/housing framework for the 21st century not the 20th century. We should invest in a transport framework that caters for electric bicyles, cars, buses and trains"
Yes, probably. The issue I have is we wont have BAU so why do we need so much transport? If thats the case we would have wasted large sums on such infrastructure that simply was poorly spent because we didnt appreciate the scale of changes that are going to happen.
For instance if you look at villages and town and cities of the past the frequency of ppl moving betwen them was very small as the costs to do so and the need was prohibitive.
My "big thing" is we dont know, and it seems few are thinking deeply in that direction. The stuff I do see pretty much all says BAU just some minor changes. When in fact there is no evidence or underlying logic to support that contention. So even academia is building on quicksand.
regards
Re: "If you look at villages... of the past the frequency of pll moving between them was very small.."
Depends how far back. In Victorian times mobility massively improved compared to say the 16th century.
We should be able engineer a transport/housing system as least as good as Victorian times given the technical knowledge we have gained....
Victorian times and victorian railways is actually an excellent example. If you look at historic maps of the UK the amount of railways laid was mind boggling, Yet many dissappeared, in the time of her son, ie pretty quickly, they never made any money or enough to keep them operating.
Its not a technical problem IMHO, it is an economic problem. That is we can do something but if ppl cant afford to purchase it / use it it will disappear.
As an example,
For public transport to pay for itself the units have to be mostly full. For my line as an example running the trains make sense 7am to 10am and 4pm to 7pm. Outside of those times running a 22tonne? electrictity consuming tranport solution that directly requires 3 ppl to operate (plus those not on the train) makes no sense to carry literally a handful of passengers. We would be better off with small 10~15 seat trolley bus run by a driver. On top of that quite a few of those traveling between 930am and 330pm are on a gold pass so travel for free, it cant be economic.
Also that the lines are 50%? subsidised by the regional council, so if you had to pay the $10 instead of the $5 just what would be the patronage? All these subsidies have to be un-raveled to find what the true economic cost is and what can be afforded. PDK was spot on, traige will happen but the bugger will be clearling off the vested interests so sound decisions can be made.
regards
Yep those dammn vested interests, rentiers living of the incomes of others...... Get rid of them and see what we are left with..... It might not be as bad as you think, or it might be..... I prefer to be optimistic but flexible enough to cater for events not working out....
Flexible, yes, I dont think any other country is as well placed except maybe Cuba that was forced to do it already and survived despite even the US attempts to get rid of it on top of losing Russian oil imports overnight.
The thing about NZ is we have a huge % of renewable electricity and an excess in food given our population somethings many other countries dont enjoy, UK for instance.
The rentiers are a worry, for instance lets consider the lifeboat scenario just how many ppl coming here by "simply" handing over $s would it take to de-stablise us? what would they actually produce? I'd see them as parasitic in nature....
regards
Also transport systems don't make money themselves. All the US pre 20th century 'turnpikes' -private roads went bankrupt. Transport is like education. You need it if you want a modern civilised economy, parts of it can be privately provided on a for profit basis, but the core of it needs to be paid for from taxes for the wider public benefit.
You are talking rubbish frankly IMHO. "lets not forget" is the same as "common sense" it often isnt. Actually there isnt a whole lot of evidence that giving tax cuts is stimulator. In fact the reverse is looking more true, take the Bushie era tax cuts, economy floundered but created a housing boom which bust big time. Here in NZ the JK tax cust went into housing it seems, just how did that prove good for the economy overall? not really at all.
Then look at how the rich get their money through the likes of hedge funds, these are frankly produce no goods and are parasitic, so giving them more money to invest actually is counter-productive IMHO.
The Govn spends the money in different ways than its seems yet more expensive housing, which is where any such tax cuts will go IMHO. Given how weak our economy is and un-employment at 6% then Govn spending into areas such as new schools probably has a stimulus multipleir in the order of 1.5X the actual amount spent, plus we get public infrastructure we need at a highly competitive price.
regards
Reduce taxes and get rid of WORKING FOR FAMILIES , its bloody nonsense to take the money away from a working family and then give them their own money back in some kind of socialist money-go-round .
WFF is a dishonest deceptive system that makes us think the State cares for families , and we can all see it for what it is .
Just reduce income taxes for those working people with children
Well there are different ways to do it..
Would it be more efficient? yes might well be less of an overhead to administer though the well off would then also benefit where with WFF they shouldnt be.
Given we should be reducing our population IMHO, then incentives to have more children is nutty IMHO.
regards
WFF was introduced due to high cost of living in NZ in the latter part of the Cullen/Clark's administration. I was amazed at how high costs had gone up in NZ when I returned in 2012 compared with 2004 when I left. Those costs have not come down under the English/Key administration. Housing, electricity, telecoms, building supplies, supermarket retail etc are all high compared to our competitors overseas. We all know the answer is proper regulations and goverance to bring in more competition and prevent the ticket clipping, price gouging rentier behaviour in the private and public sector. Fixing this would be a big step into making NZ a successful and fair society.... Tinkering around with a tax cuts or handouts will do bugger all IMHO. Did Keys 2008 tax cuts help? Did Clarks 2005 election year handouts help?
I would suggest the JK's tax cuts went into property speculation so actually made things worse...
2005 handouts as in increaswd WFF? well compared to how Brash's bribes would have been spent (on yet more property speculation), yes they probably did in comparison.
regards
There is a lot of evidence to say that a more redistributive tax system is actually better for total economic growth. As a kiwi living in Australia, I’m not a massive fan of the new 49% top tax rate but at least that does kick in at a level where people can afford to pay it (180k). 33% is a little low in my mind, a top tax rate of 39% could be reintroduced (at say 130k) to fund a drop in taxes on investment/kiwisaver income and other general spending
Re: steven's "EVs for instance are 3 times the price" - the first part is rapidly changing. The Mitsubishi SUV is $40K in petrol, $60K in PHEV. So if you drive 50km a day you will save about $3000 a year in petrol and spend about $600 in electricity. The difference, $2400 a year, is 12% of the extra capital cost of $20K. So at least for those who can afford new cars, electric vehicles are already economic. "...and last 1/2 as long" - everything except the battery will last much longer. The batteries are improving steadily but remain an unknown factor.
Discussions around Taxes are almost as emotive as discussions about housing . I believe a lower tax rate for those earning under $70k would be good for everyone .
Firstly it would narrow the REAL gap between the so called rich and and poor with resorting to confiscation from the haves
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