May 20, 2010
Post budget Misc
- What ever happened to ‘revenue neutral’?
- Whatever you think of the budget itself we have to admit that it was a masterpiece of media strategy: they got the issue of tax-cuts for the rich out well in advance, set expectations around it, took the critique from the opposition and then reversed all the expectations. The rich still get massive, MASSIVE tax cuts but the story is around the larger than expected changes to lower and middle income brackets – because those are news, the changes to the top end aren’t.
- Labour still haven’t figured this out – they’ll still explaining to middle income earners that they get nothing when those people can just look at the charts in the newspapers and see that they do actually get quite a lot. Sure, they lose some of it through GST, inflation etc – but if you’re explaining you’ve lost. I’ve been saying for years that National’s media strategy is in a whole other class to Labour’s and this is yet another example of that disparity between the parties.
- Part of the strategy was a disinformation campaign: English has been solemnly telling us for months that tax changes had to be ‘revenue neutral’. The package he released today is not even remotely revenue neutral. He’s borrowing around half a billion dollars a year (at least) to pay for all of this. Naturally all the the pundits that criticised Labour’s plans to borrow for more government spending as ‘irresponsible’ are falling over themselves to praise English’s ‘solid’, ‘sensible’, etc borrowing for tax cuts. Jackasses.
- I’m pro the GST increase: our economy is moving towards a scenario in which the richest people in the country will be retired baby boomers costing a fortune in super, healthcare etc but paying no income tax. So a move away from revenue taxation towards consumption taxation is fine by me.
- English promised in the last budget that he’d start up repayments to the Cullen fund when the crown accounts returned to surplus. Which they would have done in the next few years if he hadn’t just decided to borrow a massive sum of money to give us all tax cuts. So some lucky future government will get to make a decision about cutting spending, raising taxes or gutting superannuation.
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The news should be that this is one of the most aggressively small-government budgets in NZ’s history. By the time those cuts are paid for we’ll be able to drown the government in a bath-tub. But I sense that the fact there were cuts for middle and low income earners will mean the media will claim the government is centrist.
Comment by IrishBill — May 20, 2010 @ 7:11 pm
Newsflash! Standard against tax cuts for working classes!
Comment by patx — May 20, 2010 @ 7:34 pm
“The news should be that this is one of the most aggressively small-government budgets in NZ’s history. By the time those cuts are paid for we’ll be able to drown the government in a bath-tub.”
Oh.. how I wish!
JC
Comment by JC — May 20, 2010 @ 7:43 pm
I rate it as a B. (Culluns’ were around a B+). Could have been an A- with exempting fruit and vege from GST (although I have no idea about what that would have cost and how it could have been made up somewhere else).
Labour’s response seems aimed at those paying little attention. Hard to know how that will play out but I tend to suspect that the reality of money in paypackets wont gel with Labour’s rhetoric.
Comment by Neil — May 20, 2010 @ 7:49 pm
Nobody seems to know what to think. Which is a triumph for Bill.
Comment by vibenna — May 20, 2010 @ 7:57 pm
Muted all but the most lunatic end of the right. Pleased the middle and has made Goff and co look shrill. That would have to be 8.5/10
Personally I would have been happy with a plan to stop borrowing money and pay down what we owe. Everything else is just lollies for the voters.
Comment by Barnsley Bill — May 20, 2010 @ 8:05 pm
The Herald called it a “sock-it-to-the-rich approach”. Because, you know, whereas previously an individual could avoid higher tax by hiding income in a trust, now they will be able to get taxed at the same low rate without any of that effort.
Fuck Audrey Young is dumb.
Comment by derp de derp — May 20, 2010 @ 8:09 pm
Support’s National’s agendas. 10/10.
Comment by George D — May 20, 2010 @ 8:16 pm
I thought you’d be happy with it Barnsley. Thing is you are the lunatic end of the right and even you’re happy with it which should indicate just how far right this budget is.
Comment by IrishBill — May 20, 2010 @ 8:18 pm
I agree with you, Danyl. I too think an increase in a consumption tax (i.e. GST) is not a bad option.
As for the comment about GST on fruit and veg: The implementation costs would be borne by retailers and would be passed along to consumers to the point that any decrease possible would be offset by increases in across the board prices to consumers. It also gives us such scenarious as Pringles vs the Aussie govt. Pringles are made with a mashed potato mix that is pressed into the chip shapes. Pringles thus claim they make potato chips (GST exempt) whereas the Aussie govt claims it is a biscuit (made from a dough) and thus GST applicable.
I know which system I prefer – something simple. Because as soon as you open the door to the argument that one set of items should be GST-free, then it opens the door to every other thing that should be as well. Pharmaceuticals? Diapers? Housing? Bus and train tickets?
Comment by David in Chch — May 20, 2010 @ 8:21 pm
I know which system I prefer – something simple
Oh, simplicity. The ultimate goal of any society.
I hear that Bill English has sold his Wellington home and possessions and is moving to a monastery where he’ll live on nothing but bread, cheese and water.
Comment by George D — May 20, 2010 @ 8:38 pm
Anyone spot the potential loophole for property investors? You know, the rich people who were going to be hit really hard by this budget, making it okay for them to get big income tax cuts?
They only lose their depreciation benefits if the house has a useful life expectancy of more than 50 years. If a house has a useful life expectancy of less than 50 years, the current depreciation regime holds. Expect a new industry to emerge around defining the lifespan of a building and ways of defining the property so that it’s useful lifespan is only 49 years.
Anything built since the late 1980s/early 1990s, especially if it used untreated timber, should be a sitter for this
Comment by MollyByGolly — May 20, 2010 @ 9:05 pm
I kind of agree (amazingly) with John Armstrong when he says that the budget seems to stop halfway through – it doesn’t really seem to have many new ideas about what could make us wealthy.
I hate the idea that we are going to pour more money into operations while continuing to skimp on preventative health. Let’s just park the ambulance at the bottom of the cliff and leave it there while the obese/asthmatic/lung cancer ridden bodies pile up eh?
And, finally, i’d love to know what has been cut to create the $1.8 billion Bill English says has been “freed up” for health and education. It doesn’t look good for Vote Environment.
Comment by LucyJH — May 20, 2010 @ 9:12 pm
ah – one thing that got “freed up”. State housing budget
“The budget for improving and buying state houses has been cut by over 80% from $120 million to $18 million.”
Comment by LucyJH — May 20, 2010 @ 9:17 pm
C’mon, George D. What’s the alternative? Anything else needs to be properly laid out and designed, and that hardly EVER happens. Witness the example I gave from Aus. The legal costs will end up where they always end up – in higher costs for us, the consumers. I would prefer a simple system than one with all sorts of ifs and buts. The US tax system is, apparently based on the experiences of friends of mine, so arcane and complicated that you MUST have an accountant to work it out for you, unless you have so much time to devote to it. There are SO many possible deductions and tax savings possible.
The NZ system, for all its faults, is MUCH simpler than the Canadian system, which in turn is much simpler than the US system. I know what I prefer. I for one do not miss hours, no DAYS spent working on a tax return, and paying a hell of a lot more tax for less.
Comment by David in Chch — May 20, 2010 @ 9:17 pm
So Danyl,
You support political parties lying to the electorate in order to get elected and breaking their electoral promises for the sake of power?
Your false-flagging pseudo-leftist Farrarite commentary becomes more and more transparent by the day.
/End Winston.
Comment by Badger — May 20, 2010 @ 9:30 pm
[...] to other round up post round the country as of now: The Standard, Red Alert, Kiwiblog (*,*,*,*), Dim Post, NZIER, Infometrics, Rates Blog (*,*,round up post!), NBR, Not PC, Public [...]
Pingback by TVHE » Budget 2010 — May 20, 2010 @ 10:35 pm
You are turning into such a rightie Danyl. Pretty soon you will receive a management promotion as a reward from the VRWC.
Comment by vibenna — May 20, 2010 @ 11:14 pm
Danyl, I am SO gutted by the GST rise! Umm, can you pop round and write some code for my accounting software that changes the GST rate to 15%? Sorry, but its the poor end of Karori. At least you won’t have to risk being run down by Bill’s ministerial car down here…
Comment by Mr February — May 20, 2010 @ 11:56 pm
[...] Part of the strategy was a disinformation campaign: English has been solemnly telling us for months that tax changes had to be ‘revenue neutral’. The package he released today is not even remotely revenue neutral. He’s borrowing around half a billion dollars a year (at least) to pay for all of this. Naturally all the the pundits that criticised Labour’s plans to borrow for more government spending as ‘irresponsible’ are falling over themselves to praise English’s ‘solid’, ‘sensible’, etc borrowing for tax cuts. Jackasses.” Dimpost [...]
Pingback by Budget punditry round-up spectacular! « The Standard — May 20, 2010 @ 11:58 pm
Labour still haven’t figured this out
Hey, I wouldn’t be too harsh on Labour — they did a pretty good job of framing a class war narrative, have postured over any GST increase without any pesky questions for Phil Goff about why this one is evil and the one he voted for isn’t (or whether they’re actually done a bus-sized u-turn and won’t actually repeal it after all). Oh, and Cunliffe deserve a shameless hypocrisy Oscar for accusing English of creative accounting to spin the benefits while doing much the same to make it seem like we’re all going to be fucked like like the sucker on the bottom of a gang-bang.
they got the issue of tax-cuts for the rich out well in advance
Holy fucking shit — you mean the Government did exactly what they campaigned on to the kind of borderline-retarded shock not seen since… well, a decade ago when Michael Cullen had to explain very slowly that nobody who actually read Labour’s tax policy should have been at all surprised at the top rate increase.
Comment by Craig Ranapia — May 21, 2010 @ 12:03 am
Danyl, I am SO gutted by the GST rise! Umm, can you pop round and write some code for my accounting software that changes the GST rate to 15%?
public double checkDouble(double i) {
if (i==12.5) return 15;
if (i==1.125) return 1.15;
return i;
}
Comment by Danyl Mclauchlan — May 21, 2010 @ 6:47 am
So some lucky future government will get to make a decision about cutting spending, raising taxes or gutting superannuation.
There is an opportunity to put this extra money in Kiwisaver, at least.
Comment by Stephen — May 21, 2010 @ 9:06 am
Craig Ranapia wrote: “Holy fucking shit — you mean the Government did exactly what they campaigned on to the kind of borderline-retarded shock not seen since… ”
no, they did what they’ve been talking about for the last few months, which is different from what they campaigned on before the election.
Comment by kahikatea — May 21, 2010 @ 9:06 am
I’d be content to raise GST if you did it all by make the lowest tier of income tax free.
Comment by lyndon — May 21, 2010 @ 9:22 am
restructuring tax regime – election issue
containing govt. spending – election issue
Comment by patx — May 21, 2010 @ 9:28 am
In his answer to the questions “what are you going to do with your tax cut” from a reporter, Goff said he’ll pay off the mortgage and…save for his kids’ education.
If only ze rich all cared about their kids and mortgages! Oh what a world!
Comment by Stephen — May 21, 2010 @ 9:28 am
The implementation costs would be borne by retailers…
seems convincing.
Comment by Neil — May 21, 2010 @ 9:47 am
… although I admit to tuning out when John Key’s first example in the house and on John Campbell was a just-married graduate couple on $50 000 each. Which put them well above the median AND average household income.
restructuring tax regime – election issue
containing govt. spending – election issue
Fascinating. I think it was Danyl started me thinking about message having more impact than policy, as long as there was the vaguest of parallels.
Comment by lyndon — May 21, 2010 @ 11:02 am
lydon @ 29. But so many couples in Wellington ARE both professionals. Not that many Wellington professional I know earn a mere $50,000. That is a RECENT-graduate salary, me-thinks.
Comment by Clunking Fist — May 21, 2010 @ 1:49 pm
the populace gets more money in their pockets across the board and LabourLite are still moaning
Comment by patx — May 21, 2010 @ 2:12 pm
Except we don’t, because on the back of everyone having more money in their pockets, price rises to cover the GST rise will likely be higher; and the interest rate rise that’s probably going to arrive on the back of everyone having more money in their pockets is going to be eaten up on people’s mortgage increases.
Not to mention the fact that what they’re actually doing now is borrowing more to fund a tax cut right now – borrowing from Peter to pay Paul. Then Paul has to pay back Peter later on, with interest. Which, again, is an excuse for greater cuts in the public sector.
The model for the belt tightening confuses me – one would think that required cuts to departments would be made by thorough audits of departmental functions, and then tailoring the cuts to efficiency recommendations. But that hasn’t happened. In fact, right now they’re going for a second round of cuts, in some cases without having performed any kind of audit. Audits for tax have decreased, but internal public sector audits aren’t being performed either.
The target for cutting public spending isn’t actually looking at places and saying that you can do something more efficiently or you can do this differently and saving money that way. It’s creating a target by deliberately reducing the amount of income you have and then saying we have to make these cuts.
What kind of business does that? Reduces its own income, then makes cuts? I thought the government had a lot to learn from the private sector – it does – but it turns out they’re playing some ridiculous game of making the savings in departments match the cuts in taxes they made. After they’ve borrowed suitably to pay for it at first, of course.
That’s not the way you run an efficient business, or an efficient government. That’s the way you cut down the public sector to reach an arbitrarily defined target you’ve bandied about as being ideal because you don’t like the public sector and don’t think it has a real function or provides any real value.
If they’d audit properly, then I might believe that efficiency savings are exactly that – but they’re not doing that. They’re throwing figures at departments and creating a self-fulfilling prophecy. We believe that government is shit, and so we’re going to put it under so much stress it becomes shit.
Comment by dontsurf — May 21, 2010 @ 2:52 pm
lydon @ 29. But so many couples in Wellington ARE both professionals. Not that many Wellington professional I know earn a mere $50,000. That is a RECENT-graduate salary, me-thinks.
I know recent graduates in well-paid fields who earn that much or more. I know plenty more in badly paid fields who earn around what the average New Zealander earns.
$28,000.
Not $36,000.
Our “journalists” are financial, statistical, and political illiterates.
Comment by George D — May 21, 2010 @ 3:00 pm
interest rates are external to this discussion.
people on balance are getting more money in their pockets.
Comment by patx — May 21, 2010 @ 3:24 pm
Your blog, your rules, Danyl, but here’s an observation: a few commenters are making your comments threads closely resemble Kiwiblog’s. Not many, but a few. Entirely up to you if you moderate, of course, but srsly.
Comment by Eddie C — May 21, 2010 @ 3:27 pm
Fairfax is considered a serious news organisation??
Comment by deserthead — May 21, 2010 @ 3:27 pm
interest rates are external to this discussion.
people on balance are getting more money in their pockets.
Comment by patx
Interest rates are integral to this discussion, because interest rates will go up on the back of the tax cuts. If interest rates didn’t go up, says macro, then inflation would most likely rise too fast and eat up the increase anyway.
Not that I’m one to believe in macro, but I am one to believe that you’re being pretty naive if you don’t think that Bollard is planning on a rate increase on the back of the budget. I also think you’re being pretty naive if you’re discounting the borrowing that they’ve subscribed the country to, especially after God knows how long National have been going on about borrowing… what was it, $240m a week?
So borrowing is okay if you’re dropping taxes? That kind of fiscal sleight of hand – which is actually more like “got your nose” kind of trickery, designed to fool the people who don’t know how to use a mirror – isn’t what’s going to provide a solid base for economic growth. This kind of budget is designed to prove to a middle class base that their promises for tax cuts mean something, while they do a poor job of attempting to disguise how they’re funding it and their future plans.
Comment by dontsurf — May 21, 2010 @ 4:03 pm
Interest rates are totally outside of the discussion. Tax cuts cannot predict interest rates rises or cuts. You may be able to take the possibility of them into account but what you can’t do is beat up on tax cuts because you reckon that interest rates will go up (which they will, probably, at some stage, we think, this year) although given the current state of the world markets and the massive amount of liquidity being pumped into europe then its not out of the question that inflationary pressures will be subdued. But who can tell. Whats on the table is a fairly rationale rebalancing of the tax system to take into account a) ageing population with non taxable assets b)a non saving gen x y z c) a large middle class taking welfare via WFF d) a govt. spending profile out of whack with its revenue profile etc
This budget is designed induce behaviour towards earning and saving rather than spending, dodgying and taking handouts via a very inefficient tax redistribution system.
Comment by patx — May 21, 2010 @ 4:11 pm
Not that many Wellington professional I know earn a mere $50,000
Well, then you know a bunch of people top 20% of income earners.
I know plenty more in badly paid fields who earn around what the average New Zealander earns.
Indeed. The distinction between the average salary of a New Zealander and the salary of the average New Zealander is a bit fine for most of the coverage I’ve seen.
Comment by lyndon — May 21, 2010 @ 4:40 pm
I also think you’re being pretty naive if you’re discounting the borrowing that they’ve subscribed the country to, especially after God knows how long National have been going on about borrowing… what was it, $240m a week?
If $240m a week is bad, then $400m a week is… ?
Comment by George D — May 21, 2010 @ 5:01 pm
dontsurf @ 32 “What kind of business does that? Reduces its own income, then makes cuts?”
But I’d ask “WHat kind of business can spend what it likes safe in the knowledge that they can just get current and future citizens to pay for it” The answer being, in both cases, no business at all, but a government.
Not many bausinesses I know charge you even if you don’t want many or any of its services. The govt is NOT a business, so some comparisons can’t be made. “Spend less than you earn” seems to be one of the few rules you can apply to business, govt and households. Also true is the extention to that rule “over the cycle” in that all 3 can borrow to fund “infrstructure” (home/factory/road).
Comment by Clunking Fist — May 23, 2010 @ 6:38 pm