OnPoint by Keith Ng

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OnPoint: Updated: GST compensation: Can be done?

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  • Keith Ng,

    So they're going to halve the bottom tax-rate?

    They can. Or they can create a tax-free threshold. But they point is that, actually, they have enough money to afford this *and* aligning the rate at 30%, which they have ants in their pants about.

    Auckland • Since Nov 2006 • 543 posts Report Reply

  • Keith Ng,

    The decline in income taxes will be sufficient to compensate those who are not eligible for any benefit - as the goal is to set the GST rate + income tax rate to the same level as it is now anyway, so that labour income is taxed in exactly the same way.

    (More seriously: I'll believe that when I see it, especially for very low income earners, c.f. Keith's figures.)

    They can - but whether they will is a different matter.

    Matt, the government asked the TWG to put up revenue neutral proposals, but I haven't heard them say they want total tax on labour income to stay the same.

    Auckland • Since Nov 2006 • 543 posts Report Reply

  • Keith Ng,

    If they do that - 30% rate alignment paid for with depreciation changes and ringfencing of losses, with a rise in GST matched with a $5-6000 tax free income threshold I'd actually be pretty impressed (sorry, that may not go down too well here*). But after the massive overestimate, underdeliver of today I don't feel like they're going to go that far. But perhaps I'm being negative without even giving them the chance.

    Actually, a GST increase with 100% of the revenue returned to the tax system via a tax-free threshold would actually have a net *progressive* effect (mostly).

    Say, a person on $20,000/year has to pay an additional 2% ($400) of their income to cover the GST increase, but they'd get $750 in tax cuts from a tax free threshold of $6,000.

    Whereas a person on $80,000/year only has to pay an additional 1.5% ($1,200) of their income to cover the GST hike (for reasons explained above), but they'd also only get $750 in tax cuts.

    Thus, this combination would actually have the net effect of making the tax system more progressive.

    Auckland • Since Nov 2006 • 543 posts Report Reply

  • Keith Ng,

    Also, don't you realise this is the internet? Specifically the NZ blogosphere? You don't admit that you may have been working under false assumptions - you grow increasingly hostile and tangential to the mounting body of evidence.

    Nah. I'm a respectable print columnst. We don't do that. We just make meaningless predictions ("A land tax seems certain, unless Key changes his mind, which is quite likely, in which case he will go with capital gains tax, something else, or nothing at all, according to my sources."), and when even *that* strategy goes south, just pull a complete Stalinist-revisionist, and pretend that we never made the prediction, that the event never occured, or that the time period in question does not exist ("June? What is June? THERE IS NO JUNE.").

    Auckland • Since Nov 2006 • 543 posts Report Reply

  • Cecelia,

    Economically illiterate, me, but I was kind of thrilled by Bernard Hickey's passionate article in the Herald today.

    http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10625085

    Hibiscus Coast • Since Apr 2008 • 559 posts Report Reply

  • Craig Ranapia,

    Economically illiterate, me, but I was kind of thrilled by Bernard Hickey's passionate article in the Herald today.

    Meh... As I've said elsewhere, I've got a lot of time for Bernard -- and you're certainly not going to die waiting to know what he thinks on any subject -- but when pundits start doing their best Moses impersonations it seldom adds anything particularly useful to grown-up discussion. You can passionately flounce to your heart's content, but if you're going to act like a particularly tiresome teenager, I'll treat you like one.

    North Shore, Auckland • Since Nov 2006 • 12370 posts Report Reply

  • Peter Cox,

    Jeez, that's a bit rough, Craig. Particularly if you're not going to say why he's wrong...

    I liked it too, Cecelia, very much. I've often thought that there rather ought to be some kind of counterbalance to the debate we get from the property council et al., because there's a lot people who have no voice at all. It's nice to see someone say exactly what I've been thinking for quite some time.

    Auckland • Since Nov 2006 • 312 posts Report Reply

  • Sacha,

    If I may be so bold as to summarise his utterances elsewhere in the 'sphere I believe Craig was objecting to Bernard playing the 'leave the country' card. Again.

    I quite like the odd bit of passionate economics providing it is not pimply Randian bollocks.

    Ak • Since May 2008 • 19745 posts Report Reply

  • Craig Ranapia,

    Jeez, that's a bit rough, Craig. Particularly if you're not going to say why he's wrong...

    Fair enough. I (mostly) agree with Hickey's substantive arguments against the Rentier Welfare State, but the "leave the country" column he reheats several times a year isn't "passionate". It's theatre.

    North Shore, Auckland • Since Nov 2006 • 12370 posts Report Reply

  • Cecelia,

    One of my UK sons is returning to the Antipodes but not to NZ. To Melbourne where after a year he'll get a substantial house deposit from the gummint.

    Hibiscus Coast • Since Apr 2008 • 559 posts Report Reply

  • 3410,

    Did I hear the prime minister, on the 8 o'clock NatRad news, say that a GST rise would not hurt the poor because:

    When you think about it, those on higher incomes spend more actual cash on goods and services

    ?

    WTH?

    Auckland • Since Jan 2007 • 2618 posts Report Reply

  • Hilary Stace,

    Did Bernard Hickey just say on NatRad that Key is 'governing for the old and the rich, not the young and the poor'? Is this the same Bernard Hickey who is right wing economic commentator/Key admirer?

    Wgtn • Since Jun 2008 • 3229 posts Report Reply

  • James Littlewood*,

    TWG estimates upping GST to 15% will be worth $2.89b. 35% of this will be borne by the bottom 50% (by income) of the population.

    Not being a tax specialist, by any stretch, I'm missing something here. What % should the bottom 50% pay?

    Agree with Bernard H that the property welfarists need correcting, but I wish he'd given us a bit more analysis.

    Auckland • Since Mar 2008 • 410 posts Report Reply

  • Just thinking,

    Bernard Hickey for President!

    His numbers were convincing, that this tax break is for 100,000 landlords at the expense of the rest of NZ.

    If you're in opposition right now, maybe, just maybe you want a reasoned and cohesive policy to work for the disadvantaged/disaffected. A point of difference, rebranding if we must go to the marketing blurb.

    You've lost the middle ground and there is a, traditional constituancy that has been abandonded. (think Coke Classic minus the opium).

    You of course need to drop Goff & King, unless you are still so disorganised that you plan to lose the next election too.

    I've noted the Greens have picked this up :)

    Putaringamotu • Since Apr 2009 • 1158 posts Report Reply

  • Tom Semmens,

    So there we have it; the Key government is the inheritor of Shipley. An unimaginative, blinkered small "n" neo-liberal incrementalism combined with a fair amount of mean spirited new Victorian beneficiary bashing.

    It tells us this government is in character the creature of the dismal and dreary double dipper of Dipton, with all the provincial small minded moralising that English brought to government when National was last in government.

    It seems more and more that John Key is little more than a stuffed shirt, a PR exercise in electability that runs a loose ship because he doesn't care enough to manage it any better.

    Sevilla, Espana • Since Nov 2006 • 2217 posts Report Reply

  • Bart Janssen,

    What bugs me about all the discussions of the details is nobody is asking the question
    "Why should we want to pay less tax?"

    It is the underlying premise of all the debates that we should pay less tax. But the reality is that tax is what pays for the things we want and need from our government. Things that we can't supply ourselves as individuals and that we need to gather together to supply. You can't pay for a good teacher for your 2 kids but you can group up with your fellow citizens to pay for an education system.

    The detail of who should pay more - rich folks or poor folks is kind of silly if we don't work through the logic of what amount of tax we actually want to pay for government services we want to receive.

    When Key finally gives us the actual numbers my bet is the rich will pay a smaller proportion than they do now but not by much. Until we know the actual numbers it is all kind of pointless.

    Auckland • Since Nov 2006 • 4461 posts Report Reply

  • Craig Ranapia,

    Did Bernard Hickey just say on NatRad that Key is 'governing for the old and the rich, not the young and the poor'?

    I wouln't be at all surpsied, Hillary, which leaves me wondering why "the young and the poor" should be that upset about the depreciation rort being done away with?

    North Shore, Auckland • Since Nov 2006 • 12370 posts Report Reply

  • Paul Williams,

    Hickey's comments surprised me but they read genuine.

    Remember Key's pre-election migration lament? "Wave goodbye to higher taxes, not your loved ones"? Doesn't quite ring true now yeah? Employment's growing strongly again in Australia, expect to see PLT departures pick up again. Hickey could well be correct.

    Sydney • Since Nov 2006 • 2273 posts Report Reply

  • 3410,

    which leaves me wondering why "the young and the poor" should be that upset about the depreciation rort being done away with?

    Sheesh. Can we have some intellectual honesty, please?

    Auckland • Since Jan 2007 • 2618 posts Report Reply

  • Tom Semmens,

    Is this the same Bernard Hickey who predicted a catastrophic collapse of over 30% in housing prices?

    He makes some pertinent points, but his powers of deduction are not all that very good.

    Sevilla, Espana • Since Nov 2006 • 2217 posts Report Reply

  • Christopher Nimmo,

    He makes some pertinent points, but his powers of deduction are not all that very good.

    He's an economist. You don't need to get your expectations too high.

    Wellington • Since May 2009 • 97 posts Report Reply

  • Andre Alessi,

    A tired old game perhaps but I can't resist:

    If Labour were still in power, and had made the same changes (not completely out of the question, IMO) we would be hearing nonstop that A) the increase in GST will lead to a reduction in discretionary spending, and thus harm small businesses in New Zealand, and B) the administration costs of making this change, reprogramming tills and tweaking accounting programs, etc, would fall heavily upon small businesses and drive many out of business.

    Now both these things are probably worth talking about anyway (particularly the second, which I think is going to cause headaches for some not-so-small companies for months afterwards) though I don't for a second believe anyone will actually lose their business as a result of this change. But still, funny how things change eh?

    Devonport, New Zealand • Since Nov 2006 • 864 posts Report Reply

  • Craig Ranapia,

    Sheesh. Can we have some intellectual honesty, please?

    Excuse me? The young and the poor don't get tax benefits from paper depreciation of investment property - do they? Serious question, so I'd rather appreciate a serious answer.

    BTW, before we all decamp to Australia, do you still pay fairly substantial stamp duty on house and land sales over there?

    North Shore, Auckland • Since Nov 2006 • 12370 posts Report Reply

  • Paul Campbell,

    (as someone who files a regular GST return)

    changing the actual rate isn't that big a thing - though one of the nice things about 12.5% is that one simply divides by 9 to calculate how much GST is included in something - 15% is a pain - one now needs to divide by 7.6666666....

    Dunedin • Since Nov 2006 • 2623 posts Report Reply

  • 3410,

    Excuse me?

    Your implication that the argument that the new tax policy continues the favouring of property investors is invalidated by Key's slight nod in the right direction is just bogus.

    Property Investors Federation's verdict: "it's nice".

    Auckland • Since Jan 2007 • 2618 posts Report Reply

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