Q&A on Tax Cuts

In tribute to Rob Hosking, this week's column is a Q&A on the tax cuts that were.

Bill English says the 2010 and 2011 tax cuts has been deferred. What does that mean?

It means they have been cancelled.

Are you sure?

Yes

So we won’t get them at some future point?

You may get tax cuts in the future, but when you do it will be a new package, not the package that was planned for 2010 and 2011.

So when might we get tax cuts again?

Once the government is running a surplus again.

When will that be?

2017 on current projections

Might we get them earlier?

Yes, Bill English said that they could look at tax cuts again, even if not yet back in surplus, so long as the economy is growing strongly enough that the deficits are reducing.

So we could get them by the next election?

No, Bill English all but ruled that out.

Does the government still want to cut taxes?

In theory yes, it says it has a medium term goal to align the top personal, trust and company rate at 30%.

So how long is medium term?

A good question. The government won’t say. Long-term would be a better description of the likely time-frame.

Okay, back to the cancelled tax cuts. I thought the government had costed them as being affordable?

They had.

What happened?

The credit crisis inspired global recession is knocking $50 billion off our GDP over the next three years.

But didn’t they cut spending on KiwiSaver so that these tax cuts were fiscally neutral?

Yes.

So Labour’s future tax cuts would have been cancelled also?

Beyond doubt.

Why did the government not just cut some more spending, rather than cancel the tax cuts?

Because you haven’t had these tax cuts yet

What do you mean?

The government has generally maintained the spending promises and tax cuts already implemented, but have pulled back on future tax cuts and spending increases.

Why has it done that?

To minimise howls of outrage.

Won’t people be equally upset?

No. Ask yourself this. Would you be more upset with your employer if they did not give you a pay rise next year, or if they actually cut your current pay?

Oh I see what you mean. One would peeve me off, but the other would make me go postal. So the government wasn’t deciding between tax cuts and spending, it was deciding between things already delivered and things not yet delivered.

Yes. They did not reverse, for example, the 2008 or 2009 tax cuts.

Thank goodness. How much were they worth?

The October 2008 tax cuts represent around $1.5 billion a year of foregone revenue and the April 2009 tax cuts around $1.8 billion a year of foregone revenue. That is $3.3 billion annually of tax cuts.

And how much were the cancelled tax cuts worth?

Around $1 billion a year. So three quarters of the tax cut package was delivered and one quarter cancelled.

How much would the future tax cuts have meant for me?

If you are on $30,000 a year (and not on Working for Families), you would have got around $8 a week. On $50,000 you would have got $12 a week and on $100,000 you would have got $18 a week.

So what do I do if I still want my tax cuts?

Move to Hong Kong. They have just announced tax cuts of NZ$3.8 billion.

This article is tagged with the following keywords. Find out more about My Tags

Post Comment

13 Comments & Questions

Commenter icon key: Subscriber Verified

"Captain, the ship is listing dangerously to port!"

"Quick! Move the deckchairs!"

Reply
Share

Q: So when National said only recently that Labour would have cancelled their tax cuts, wasn’t National being duplicitous as they already knew they were cancelling their own?

A: The thing is…

Q: And since the taxcuts are cancelled, doesn’t that mean the government effectively lied to us during the election campaign?

A: Well, umm…

Q: And so basically would you say that New Zealand has elected a government based on a lie?

A: This interview is over.

Reply
Share

Mate, you may have voted for National for the Tax cuts, but most informed New Zealanders voted for National for more things than that, including that they were sick of a left wing - nanny state - tell you what to do - socialist - labour dragged government!!
Even Labour agreed that they would support a halting of tax cuts in these tough economic times, but now that they think they can gain some milege out of it they claim it is wrong to stop them.
Quite frankly, "whack it on the bill Phil" and his slap it on the credit card for future generations to pay for oppositon party, are nothing but a bunch of whining idiots who hopefully will be further punished at the next election.

Reply
Share

So, rather than disappoint the beneficiaries (including those on WFF and with student loans), who mostly did NOT vote him in, Mr English has chosen to disappoint the hard workers who pay tax -- and too much of it! And many in that category are the ones who voted him in.

(Personally, I'd favour a Roger Douglas budget -- especially in this economic weather. At least he knows how to steer a ship. And keep it afloat.)

Reply
Share

big bruv, at least use your "real" name.

1. It wasnt a lie, and it is actually decietful to try and paint it as one. You would have a better time arguing it was a broken promise. But calling it a lie is just stupid.

2. It is not the role of the Government to only consider the feelings of those that voted for them. Even though it sure felt like that when Labour came in (to the point that they would mock those who failed to vote red), National supporters should be above that sort of thing.

3. Why would you want to see a Douglas budget when 95 percent of the country didnt vote for him?

Reply
Share

NO-ONE RESPOND TO KIMBLE HE IS JUST SPREADING HATE AGAINST ACT.

Reply
Share

NO-ONE RESPOND TO KIMBLE HE IS JUST SPREADING HATE AGAINST ACT.

Reply
Share

<blockquote>
Quite frankly, "whack it on the bill Phil" and his slap it on the credit card for future generations to pay for oppositon party, are nothing but a bunch of whining idiots who hopefully will be further punished at the next election.</blockquote>

By deferring payments to the Cullen fund, haven't we whacked Babyboomer superannuation payments on the credit card for Gens X, Y and Z to pay - in all likelihood, at the expense of of their own superannuation entitlements?

Surely we should continue to collect babyboomer retirement funds out of babyboomer taxes, not bleed future taxpayers dry just to bail out boomer retirees.

Reply
Share

<i>
Quite frankly, "whack it on the bill Phil" and his slap it on the credit card for future generations to pay for oppositon party, are nothing but a bunch of whining idiots who hopefully will be further punished at the next election.</i>

By deferring payments to the Cullen fund, haven't we whacked Babyboomer superannuation payments on the credit card for Gens X, Y and Z to pay - in all likelihood, at the expense of of their own superannuation entitlements?

Surely we should continue to collect babyboomer retirement funds out of babyboomer taxes, not bleed future taxpayers dry just to bail out boomer retirees.

Reply
Share

Tax cuts are always affordable, you've just got to have the guts to cut spending.

Clearly Bill doesn't and Roger does.

Reply
Share

yeah. right on. kick those welfare bludgers in the goolies Bill. don't be such a pansy.

Reply
Share

CULLEN INCREASED TAXES WHEN HE GOT THE TREASURY BENCHES IN 1999 ,AND LOOK AT THE MESS HE PUT US IN ,THAT LOSER SHOULD HAVE GIVEN MANY TAX CUTS OVER THE BOOM YEARS ,SO DONT BLAME THE NATS ,BLAME PHIL squeaky GOFF AND NOW BUCKET MOUTH CUNLIFFE WITH HIS NEWS CLIP OBSCENITIES ON THE ECONOMY,WHAT A PAIR OF DUMMIES.

Reply
Share

So what do I do if I still want my tax cuts?

Vote ACT. Forget about National for tax cuts. They are too afraid to cut back wasteful spending and middle class welfare.

Hong Kong managed in y/e 2007 to give me back HK15,000, then in 2008 a massive HK25,000 and now in 2009, with a recession some HK8,000.

Total tax cut in just three years 48,000 or around $NZ12,000.

Added to this despite a maximum tax rate of 15-16% in those three years no one pays anywhere near that oncec allowances, credits and source rules are factored in.

Reply
Share

Post New comment or question

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.

NZ Market Snapshot

Forex

Sym Price Change
USD 0.7836 0.0008 0.10%
AUD 0.8928 -0.0013 -0.15%
EUR 0.6193 0.0005 0.08%
GBP 0.4884 0.0001 0.02%
HKD 6.0790 0.0070 0.12%
JPY 84.6940 0.0470 0.06%

Commods

Commodity Price Change Time
Gold Index 1228.6 -12.490 2014-10-23T00:
Oil Brent 86.8 2.120 2014-10-23T00:
Oil Nymex 82.0 1.530 2014-10-23T00:
Silver Index 17.1 -0.080 2014-10-23T00:

Indices

Symbol Open High Last %
NZX 50 5292.8 5344.4 5292.8 0.77%
NASDAQ 4427.4 4475.6 4382.9 1.60%
DAX 9008.6 9044.9 9047.3 -0.63%
DJI 16468.1 16767.5 16461.3 1.32%
FTSE 6419.1 6419.1 6419.1 -0.47%
HKSE 23311.9 23352.6 23333.2 -0.13%
NI225 15354.4 15377.0 15139.0 1.01%