3. Tax cuts
19 May 2008
In the bitterly contested lead-up to the 2008 general election, National promised three tax cuts, to be spread over three years.
These were prompted by the nine consecutive Budget surpluses that Labour’s Finance Minister, Michael Cullen, had posted between 2000 and 2008. The public perceived that the government had too much of our money and demanded tax cuts.
Cullen resisted, as his main priority was continuing to pay down billions in debt that Labour had inherited in late 1990s.
Key and National Party strategists heard the insistent calls for tax cuts, and duly obliged – even though by November 2008, the global financial crisis had plunged the world into a recession, with only Australia and China escaping the worst effects.
In May 2008, Key promised voters tax cuts ‘‘North of $50‘‘.
On 1 April 2009, National delivered the first of two rounds of tax cuts (a third round had been scrapped, as by then the recession had blown a hole in the government’s revenue).
This is what the 2009 tax cuts delivered.
Anyone earning under $40,000 received nothing. Not even close to “north of $50”.
The following year, the second round of tax cuts was implemented,
Susie Nordqvist wrote in the Herald on 20 May 2010,
* Average income household – $24.71c per week better off
* Average wage worker – $15.91c per week better off
* Couple receiving New Zealand superannuation – $10.77c per week better off
* Professional property investor with 25 properties – $288.18c per week worse off
* Couple saving for their first home – $40.38c per week better off
* Domestic purposes beneficiary – $2.45c per week better off
* Minimum wage worker – $6.36c per week better off
* Student – $2.66c per week better off
* Business owner structuring income to claim for Working for Families – $153.03c per week worse off.
As the reader can easily determine, very few in the above group were receiving “north of $50”. When the rise in GST was taken into account, the actual real cut in taxes for average workers’ and families was reduced even further.
The only tax bracket that received a tax cut “north of $50” were those earning around $80,000 or more. Such as government ministers. And John Key.
When you factor in the rise in GST from 12.5% to 15% – even fewer got the much promised “north of $50”, except the wealthiest.
- Key had no choice but to cancel the third round of tax cuts (scheduled for 2011), and to reduce the amount on offer. The GFC and recession were biting into our economy so badly, that National was borrowing $450 million a week by the end of 2009. Adding the 2010 tax cuts into the mix eventually left this country with a $60 billion fiscal hole.
- Key knew that the tax cuts were unaffordable during the 2008 election campaign. The world was deeply mired in the global financial crisis and recessionary effects were beginning to hit economies around the world. To pursue the promised tax cuts was the height of irresponsibility.
- Key bought the election with unaffordable promises.
- Our debt will have to be re-paid. (Foreign creditors insist.)
Beware of politicians bearing promises and gifts. We will be the ones paying for it.
Verdict: mis-information/half-truth/deflection/broken promise/lie:
NZ Herald: Cullen – Tax cuts but strict conditions
Trading Economics: New Zealand Government Debt To GDP
Dominion Post: Nats set for $50 tax cut trump
Otago Daily Times: Key says donate tax cuts to charity
NZ Herald: Budget 2010: What the tax cuts mean for you
NZ herald: Key defends tax cuts for wealthy
Parliament: Tax System Changes—Impact on Operating Balance
Otago Daily Times: Government now borrowing $450 million a week – claim
Previous related blogposts
Above image acknowledgment: Francis Owen
= fs =