Thursday, May 17, 2007

Tax and tax, spend and spend: The "sustainable" Budget

More theft, more taxes, more spending, more compulsion -- that's the news from this new "sustainable" Budget: a budget that will sustain New Zealand's place at the poor end of the OECD. A budget that gives back with one hand, and grasps just as hard as ever with the other.

The only good news? The company tax rate drops to 30%, costing around $500 million a year, and there's a derisory 15% tax credit for (narrowly defined) research and development.

That's it. What's left?
  • "Chewing gum" tax cuts: Cancelled.
  • A new "payroll tax" on employers through the all but compulsory Kiwisaver (the derisory tax credits are not inflation indexed so over time as people earn more, notes David Farrar, employers will end up with more and more of the bill).
  • A $6 billion surplus, and even more petrol taxes! Up to ten cents a litre to pay for roads, and for public transport that people don't use (a sop to keep the Greens in line).
No personal tax cuts. No discussion of private provision of roads, No recognition that real saving, private saving, is what drives growth. Just abject bloody ignorance, and more thieving.

At the end of the day, as David Farrar notes, "14% of taxpayers will now be paying the 39% tax rate, up from 5% in 2000. And those 14% will pay 53% of all income tax... The surplus for this year is projected to be $6.3 billion and over the next four years after that a total of $22.7 billion. And not one cent of it coming back to those who pay it. Tax revenue is projected to increase from $52.2 billion this year to $62.0 billion in 2010/11."

Where's the door?

UPDATE 1: NBR has the details, without all the spin.

And it's worth pointing out, to all those to whom it isn't immediately obvious, that it's not governments who make us wealthy, but it is governments who make us poor.

UPDATE 2: Labour Party hack Jordan Carter, naturally, has the spin, and spun as ineptly as always -- which makes it more transparent. Here, he says, are "the key point about today's Budget":
massive support for individual savings, to increase savings, generate deeper and more liquid capital markets (and reduce the budget surplus in a non-inflationary way), and a raft of measures (including company tax cuts, R&D research credits and infrastructure investment) to make the economy more productive over time.
Clearly he's got no more idea than Michael Cullen does about either capital markets, inflation, what makes the economy more productive over time, or what a real tax credit looks like; no idea at all how real savings -- not virtually compulsory savings for poor people over which they have no control -- a regulation bureaucratic nightmare for employers -- how real savings are the key to genuine productivity.

UPDATE 3: Craig D. puts it perfectly in a comment made at Pacific Empire:
Everything Labour does makes me despair for the future.They absolutely hate the idea of anyone doing something independent of the government.

Rather than give tax cuts, they put in place a massive welfare system, recycling tax money back to most middle class families.

Now, instead of giving our money back to make our own decisions, we are to save through another government scheme.

What is Labour’s ultimate vision? Where everyone works for, is paid by, saves with and is dictated to by the government deciding what’s best?

UPDATE 4: From Dave at Big News:
This budget is about encouraging people to save? Ummn.. no its not, it's about taking consumer demand out of the economy so the Government can spend and tax more without affecting inflation.To save, people must do one of two things: spend less or earn more. If you can't do either, it's a bit like asking someone to flush the toilet after using a long drop.

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13 Comments:

Anonymous JC said...

Beaut!

A return to the good ole days of Fiscal Drag and Stagflation.

JC

5/17/2007 03:12:00 pm  
Blogger Greg Bourke said...

Well, well, didn't John Key kick some commie ass!

5/17/2007 03:19:00 pm  
Blogger MikeE said...

While not perfect by any means, the ACT alternative is definately much better:

Drop income tax to 20%
Hold government spending in real terms
Deal to red tape through a Regulatory Responsibility Bill
Demand transparency and accountability for all government departments through Service Level Agreements that would see Department Heads fired for failure to deliver
Distributing shares in the SOEs to everyone
Dismantle Cullen fund with a dividend into everyone's Kiwi Saver or an Education endowment

5/17/2007 03:31:00 pm  
Blogger PC said...

MikeE, for ACT that's genuinely VERY good.

I particularly like this: "Distributing shares in the SOEs to everyone."

What a great idea. I wish I'd thought of that myself. :-)

5/17/2007 03:59:00 pm  
Anonymous Duncan Bayne said...

Well P.C., any time you feel like dropping by sunny Melbourne (he says, looking outside at the pouring rain), we have a guest room (or will have, once we've unpacked the boxes that line all the walls).

5/17/2007 04:00:00 pm  
Anonymous Anonymous said...

The market has had a very favorable reaction to this - good gain on NZX today. All those billions of KiwiSaver funds have to go somewhere...unfortunately not to the man in the street.

5/17/2007 04:58:00 pm  
Blogger CD said...

I hate how they report tax cuts, like in that NBR article: "This will cost $2.1 billion in lost government revenue over four years."

It doesn't COST the government, because it was never the governments money to start with. It's not lost revenue, because the government never had the right to have it.

That's like saying the return of stolen goods from a burglar's ute costs the burglar a truck full of goods in lost income!

5/17/2007 05:48:00 pm  
Anonymous Falafulu Fisi said...

CD said...
That's like saying the return of stolen goods from a burglar's ute costs the burglar a truck full of goods in lost income!

Good analogy.

5/17/2007 08:02:00 pm  
Anonymous Tim Wikiriwhi said...

The most cheesy part is the extra 10c a liter evil ozone depleter for Aucklanders to fund their own communism!
I hope they feel good about being good little Kyoto/ Agenda 21 pillion passengers!
1 000 000 Cheap cars 4 sale!

5/17/2007 08:19:00 pm  
Anonymous James Leadbeater said...

You guys done having your little group cry?

5/17/2007 09:50:00 pm  
Anonymous James said...

"James Leadbeater said...

You guys done having your little group cry?"


There speaks the the sort of person who wanks off over rape cases...

5/18/2007 02:14:00 am  
Blogger KG said...

Leadbeater, it'll be a "group cry" for New Zealand as a whole when the chooks come home to roost.
Your socialist mates will have screwed the country and pissed away global economic trends which could have put this country on the path to decent sustainable development.
Me, I'm just a humble wage-slave and I'm sick to death of being wrung dry by every damn politician and bureaucrat who thinks he/she has more right to the money I earn than I do.

5/18/2007 05:49:00 am  
Blogger Luke H said...

Craig, that's a brilliant point!

5/18/2007 06:17:00 pm  

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