What will a Labour Goverment do to my pocket come April 2018 Tax Cuts?

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Ultimate Geek
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#1843663 10-Aug-2017 16:46

MikeB4:

I am not a tax expert, the opposite in fact, but if the thresholds are raised does that not flow on as tax cuts to all levels given the way in which our tax liability is assessed?

You could argue that point. Earners in the upper brackets will certainly benefit the "most" (in absolute terms) from lower bracket adjustments - but the dollar value of that benefit is capped, and relatively speaking they will see a smaller percentage of their tax bill being reduced than a lower income earner.

Simple example: A tax rate 10% up to $10k and 20% over $10k. New policy, sees the bracket adjust up to $20k.

A person earning $20k previously has a tax obligation of $3k ($1k from the lower bracket plus $2k from the upper bracket) They would get a tax cut of $1k. (or a 33.3% reduction of their bill.)

A person earning $40k previously has a tax obligation of $7k ($1k from the lower bracket plus $6k from the upper bracket) They would also get a tax cut of $1k. (or a 14.3% reduction of their bill.)

When you get into the extremely high-earner realms, the $1k saving becomes almost insignificant in the context of the total tax liability... (but you could still legitimately "call it a tax cut for the rich" if you wanted to.)

SepticSceptic

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#1843664 10-Aug-2017 16:47

Along with supposed tax cuts, was there also a proposed increase in WFF and Accommodation supplements ?

A tax cut here, will invariantly lead to a levy or other tax elsewhere - tax cuts don't come out of thin air, the govt always wins.

As for WFF and Accommodation increases, that will invariably lead to an increase in rental prices - as much as the market will bear. Again, a zero-sum gain, except for the property owners.

I'd rather not see a tax cut, but rather it was invested into the country for all.

allio

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#1843701 10-Aug-2017 18:18

National supporters love to point to the fact that National's responsible economic management got us through the GFC relatively unscathed.

The reason we got through the GFC unscathed is that our public debt was at a historic low after 9 years of Labour. This allowed National to borrow up big time to keep the bills paid.

I remember National, in opposition, castigating Michael Cullen's run of large surpluses and calling again and again for him to return it to the long-suffering taxpayer via a tax cut. I wonder where we'd be if he'd listened to them.

I don't want a tax cut. Nobody I know is asking for one. I would much rather the government resumed contributions to the Super fund now, rather than in 4 years. Makes absolutely no sense to me to cut taxes while not contributing to the super fund and simultaneously telling me that unfortunately I can't retire at 65.

Pumpedd

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#1843750 10-Aug-2017 19:55

allio:

National supporters love to point to the fact that National's responsible economic management got us through the GFC relatively unscathed.

The reason we got through the GFC unscathed is that our public debt was at a historic low after 9 years of Labour. This allowed National to borrow up big time to keep the bills paid.

I remember National, in opposition, castigating Michael Cullen's run of large surpluses and calling again and again for him to return it to the long-suffering taxpayer via a tax cut. I wonder where we'd be if he'd listened to them.

I don't want a tax cut. Nobody I know is asking for one. I would much rather the government resumed contributions to the Super fund now, rather than in 4 years. Makes absolutely no sense to me to cut taxes while not contributing to the super fund and simultaneously telling me that unfortunately I can't retire at 65.

You forget that it wasn't only the GFC, but major earthquakes that effected us more. Sure the spend up had a huge effect on our economy, but it still cost the NZ Govt billions. Also spent billions in new infrastructure which the previous labour government totally neglected for nine years. IMO the real cost of this was to health, poverty and housing.

allio

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#1844761 10-Aug-2017 20:57

Pumpedd:

You forget that it wasn't only the GFC, but major earthquakes that effected us more. Sure the spend up had a huge effect on our economy, but it still cost the NZ Govt billions. Also spent billions in new infrastructure which the previous labour government totally neglected for nine years. IMO the real cost of this was to health, poverty and housing.

That doesn't detract from the point, which is that we were lucky the previous Labour government paid down debt instead of cutting taxes like National was asking them to.

I don't criticise National for borrowing their way through the GFC (and earthquakes). It was by far the best strategy. I'm just saying we were lucky we were able to do it, unlike a country already in serious debt like Portugal or Italy, which had to resort to very damaging austerity measures.

Your second point is interesting. Do you work in health? I do, and I think you'll have a hard time finding somebody to agree that the sector was "totally neglected" under Labour and rescued under National. Plenty will agree that the exact opposite is true, though.

tdgeek

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#1844805 10-Aug-2017 21:51

Wiggum:

MikeB4:

Hang on you have been pounding on about no real hardship or poverty in NZ?????? and , how can you exclude folks on Income Support from those "on the breadline"?

If National wanted to give a meaningful tax cut they should have applied only to low income brackets. If National wins (doubtful) myself and my wife will get money we just do not need.

Where did I say there was no hardship in NZ? I have said numerous times that I don't believe there is real poverty in NZ, very different thing.

Living close to the breadline is the poorest condition in which it is deemed acceptable to live. (There are working/non beneficiaries, who pay rent or mortgages, have jobs) in this situation, there are also beneficiaries in this situation. None in real poverty.

Thanks for answering my question though, you have stated that you will quiet happily not take the tax cut come April 2018. Its interesting, because unlike you, there are plenty of New Zealanders who really need that money, and who will be voting for their pocket.

And that is you? Tax cuts rock. I remember the days when Labour used tax cuts, to get on side with their demographic, the lower socio economic. National now offer tax cuts that we cannot afford (election year), while Labour wont. Ironic that.

tdgeek

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#1844809 10-Aug-2017 21:55

Pumpedd:

As a lifelong National voter and supporter I am looking to change my vote especially since Metiria Turei is out of the picture as a possible person in Govt. I do like the freshness of the new labour leadership but nothing much has changed behind that....it is still the same old faces, just like National.

The main issues I am not happy about this year is National Govt complacency and the state of Housing, welfare and health (no particular order). I feel after 9 years national are ignoring their social responsibilities and encouraging private health facilities (eg cancer clinics) that a lot of NZ will never be able to afford. We are 10 years behind Australia in some cancer treatments and the system needs a major shakeup. I dont know if more money is the answer, but urgent attention is needed as the needy are being left out on health, welfare and housing.

Paula Bennett has been in charge of both Housing and Welfare over the years and in my mind has done more harm than good in both portfolios.

Still unsure what Labours policies are at this stage with respect to the above, but time will show.

Thats me too. Nats allowed and encouraged immigration, I like that. But they ignore housing, let the market rule that. Roads. Health. They offer economic stability. Well if I spent nothing, my bank balance will look good too. Until I have to catchup.

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tdgeek

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#1844811 10-Aug-2017 22:00

sen8or:

If labour get in, the tax cut will go. For me personally, thats not a particularly strong negative strike against them (nor is it a positive tick to keep National in), but, its the "what else will labour do" question that is their biggest weakness in my book.

Ultimately I think National have done a decent enough job over the past 9 years for them to stay in. Has it worked for everyone, probably not, but no Govt in the history of the world has kept everyone happy.

I look at what they haven't done. NZ is so small that we ride the global wave, many good or bad times we cannot control. Housing, health, roads, waterways, eco, we can, and they haven't. Im a long time National voter. Id rather vote Adern and fail than vote Bill and wait for the market to solve everything. And we wonder why JK bailed???

tdgeek

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#1844820 10-Aug-2017 22:20

Pumpedd:

allio:

National supporters love to point to the fact that National's responsible economic management got us through the GFC relatively unscathed.

The reason we got through the GFC unscathed is that our public debt was at a historic low after 9 years of Labour. This allowed National to borrow up big time to keep the bills paid.

I remember National, in opposition, castigating Michael Cullen's run of large surpluses and calling again and again for him to return it to the long-suffering taxpayer via a tax cut. I wonder where we'd be if he'd listened to them.

I don't want a tax cut. Nobody I know is asking for one. I would much rather the government resumed contributions to the Super fund now, rather than in 4 years. Makes absolutely no sense to me to cut taxes while not contributing to the super fund and simultaneously telling me that unfortunately I can't retire at 65.

You forget that it wasn't only the GFC, but major earthquakes that effected us more. Sure the spend up had a huge effect on our economy, but it still cost the NZ Govt billions. Also spent billions in new infrastructure which the previous labour government totally neglected for nine years. IMO the real cost of this was to health, poverty and housing.

Re GFC, I certainly recall that we were less scathed by this as we are much much less exposed to global finance issues. We are relatively insular in that respect. Good on us, probably luck than fate. The EQ and War levy was insurance. It seems that these funds were locked up, so did cause us issues, they should have been earmarked. Today, we have congestion in AKL, housing crisis, where nothing has been done, the former, deferred. The latter, leave it to the market. It has worked as we are better off as the money that should have been spent on roads is in the consolidated fund. The housing has worked out well, the market has sorted that, as we all know.

ShiroHagen

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#1844836 10-Aug-2017 22:55

Wiggum:

Is it just me that thinks tax increases are a bad idea?

With respect, what was your position in 2010 when the GST rate went up to 15%?

Did you think it was a bad idea then or, because it was National who introduced it did you shrug your shoulders and say “Well at the end of the day I’m pretty comfortable with that”?

How about the airport "border clearance levy” - a tax in all but name in 2015 – again by National. Did you question back then why they didn’t “just shuffle around what taxes/income government already gets”?

Whilst tax increases won’t benefit my pocket, I can at least respect Labour for clearly signalling an intent ahead of an election. I for one am sick of National’s ever changing double speak; and taxes are only one example: John Key’s many hats, the definitions of “swimmable” waterways, the list goes on.

At the end of the day taxes are just one variable for us to consider. But in looking at the wider picture, perhaps we should ask ourselves: after 9 years in government, has National done a good job of ushering in the brighter future it campaigns on? Or put another way, are you worried for our kids’ / grandkids’ future? That will decide my vote in September.

Lias

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#1844845 10-Aug-2017 23:10

The current tax brackets are stupidly low, it's ridiculous to classify someone earning 70k a year as rich. The steps should be more like 0-50, 50-100, 100-150, 150+ instead of 0-14,14-48, 48-70 and 70+.

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DaveDog

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#1844929 11-Aug-2017 08:47

There are a couple of sides to this debate in my mind...

Firstly, in my opinion adjusting the tax thresholds should not be considered tax cuts. Over time, inflation erodes the value of what we earn and in theory we get salary increases (in theory) to counter that. I think the thresholds should be linked to inflation to counter that.

Secondly, we should remember that the Government when they roll out tax cuts aren't giving us anything. They're actually just taking less away of what is rightfully mine in the first place. I earn the money that I get paid and they simply take a chunk of it in tax. It's MY money that they're taking and a tax cut isn't a great gift - they're just taking less of it.

Thirdly, we talk about how the rich should pay their share... I'm not rich - but I think you'll find they do. A rich person pays more tax than a poor person - lets not be in anyone disillusioned about that. You'll also often find that for the tax a rich person pays that they don't burden the Government either - their children will often be in private schooling (which they pay for on top), they'll go private when they require medical care (which again they pay for on top), they'll drive and own more expensive items - boats, cars and the like which they pay more GST to purchase and likely more tax on fuel and the like too...

Fred99

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#1844933 11-Aug-2017 08:57

Lias:

The current tax brackets are stupidly low, it's ridiculous to classify someone earning 70k a year as rich. The steps should be more like 0-50, 50-100, 100-150, 150+ instead of 0-14,14-48, 48-70 and 70+.

Income shouldn't really be the determinant of "rich". "Wealth" should be. We tend not to tax wealth (rates excluded).

I'm not bothered enough to want to go through stats again, but I think you'll find that above around $70k is actually cut-off point for the top quintile for income. In other words 80% of full-time workers earn less than that.

I don't know what goes on in forums (not just this one) - but if people are to be believed, then almost everyone seems to be volunteering that they're earning at very high level. If that's true, then there's probably huge bias in opinion being presented. Perhaps high-earners just have too much spare time and can be a little boastful.

I agree that tax brackets are probably far too low, there should also be a band of zero tax rate up to perhaps $20k - especially as we've shifted away from income tax to a much flatter system with GST. The consequence of shifting those bands must be either an increase in marginal rates for high earners - or reduction in government expenditure.

I wonder what the high income earners dominating public discussion will be in favour of ? (/s)

tdgeek

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#1844936 11-Aug-2017 09:02

DaveDog:

Firstly, in my opinion adjusting the tax thresholds should not be considered tax cuts.

If you are a politician they are tax cuts, we are being great and giving this to our deserving and wonderful population, who may vote for us more

Lias

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#1844984 11-Aug-2017 09:42

Fred99:

I don't know what goes on in forums (not just this one) - but if people are to be believed, then almost everyone seems to be volunteering that they're earning at very high level. If that's true, then there's probably huge bias in opinion being presented. Perhaps high-earners just have too much spare time and can be a little boastful.

Places like GZ will be heavily skewed upwards because we are for the most part educated & technology savvy. Apart from the obvious hordes of us who work in IT & Telecommunications, many at senior levels, we have lawyers, managers, business owners etc.. Not so many cleaners, road workers etc..

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