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That was Then, This is Now #27 – John Key on GST

27 March 2015 1 comment

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27. gst (again)

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References

Fairfax media: Key ‘no GST rise’ video emerges

NZ Herald: Budget 2010 – Income tax slashed, GST to 15 pc

TV3 News: Adding GST to online shopping ‘inevitable’ – Key

Previous in this series

That was Then, This is Now #26 – John Key will let slip the dogs of war

Related blogposts

That was Then, this is Now #2 – GST

That was Then, This is Now #23 – Bolger breaks election promise AND predicts the future!

 

 

 


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This blogpost was first published on The Daily Blog on 22 March 2015.

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That was Then, This is Now #23 – Bolger breaks election promise AND predicts the future!

3 March 2014 2 comments

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That was then - 1 October 1986

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This was later - 2008 election year

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That was later - 2011 election year

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  • National Party leader Jim Bolger: promised to repeal gst – tick
  • National Party leader Jim Bolger: predicted Labour would increase gst – tick
  • National Party leader Jim Bolger: broke promise to repeal gst – tick
  • Labour: raised gst to 15% – cross*
  • Prime Minister John Key: promised not to raise gst – tick
  • Prime Minister John Key:  broke promise and raised gst  to 15% – tick

So, who has a better track record at keeping promises?

* Gst was raised to 12.5% in 1989.
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Previous related blogpost

That was Then, This is Now #22 – Lowest wages vs Highest wages

References

The Dominion: Bolger on gst attack

Fairfax media: Key ‘no GST rise’ video emerges

NZ Herald: Budget 2010: Income tax slashed, GST to 15 pc

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This blogpost was first published on The Daily Blog on 25 February 2014.

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Budget 2013: petrol taxes

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National is not going to be raising GST. National wants to cut taxes not raise taxes.” – So saith Dear Leader at a 2008 press conference. (see: Key ‘no GST rise’ video emerges)

Sure enough, in April 2009 and October 2010, National cut taxes.

As Key said in 2009,

“…The tax cuts we have delivered today will inject an extra $1 billion into the economy over the coming year, thereby helping to stimulate the economy during this recession. More important, over the longer term these tax cuts will reward hard work and help to encourage people to invest in their own skills, in order to earn and keep more money.”

Source: NZ Parliament -Tax Cuts—Implementation

Bill English and Peter Dunne issued a joint statement in 2010, which said, in part,

“Lower personal tax rates reward effort and give people an increased incentive to up-skill, develop new products and services, and get ahead under their own steam. This has strong benefits for the economy…

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… A person on the average annual wage of about $50,000 will get a weekly income tax cut of about $29 a week. Even after the increase in GST is taken into account they are more than $15 a week better off if they are paying an average rent or mortgage.”

Source: Beehive.govt.nz – Fact sheet – Personal tax cuts

Except… it was jiggery-pokery, and with a sleight-of-hand trick, National recouped much of the tax cuts by raising taxes elsewhere.

2010

– GST was raised from 12.5% to 15% – despite Key promising in 2008 that it would not be increased. (see: Key denies ‘flip flop’ over GST increase)

– tax increases for property investors (see: BUDGET RELEASE: Property tax changes increase fairness)

2011

– Cuts to Working for Families and increase in Kiwisaver payments (see: Budget 2011: Battlers asked to give back)

– Tax exemption removed for employer contributions and halving of  member tax credit (see: Experts stunned by KiwiSaver tax grab)

2012

– Children earning less than $2,340 per year to be taxed. (see: Young workers out of pocket)

– National announces Road User Charges to increase (see: Petrol, road charges hikes are ‘bad news‘)

– Student loan repayment rate increased to 12% (see: Budget 2012: The main points)

– Prescription items increased from $3 to $5 each (see: Budget 2012: The main points)

– Holiday home tax deductions cut (see: Budget 2012: The main points)

– Three tax credits dumped (see: Budget 2012: The main points)

2013

– 3 cents per litre increase in the price of petrol (see: Govt to hike petrol taxes and road user charges 9 cents over three years)

2014

– 3 cents per litre increase in the price of petrol

2015

– 3 cents per litre increase in the price of petrol

 

The up-shot?

  1. National pretends to be the Party of low taxes. It is not.
  2. National won an election in 2008 on promises of low taxation. It lied.
  3. National’s tax cuts benefit the top 1% whilst increases in other covert-taxation has less impact on them. This is true.

Moral of this story #1;

When National promises tax cuts, ask yourself,

  • Who pays?
  • What other taxes will be quietly  increased?
  • Who really benefits?

Moral of this story #2;

When Labour, The Greens, and Mana promise a new tax – eg; Capital Gains Tax – at least you know what you’re voting for.

Moral of this story #3;

On a scale of 1 to 10 – one being the most world-wise and street wise person on the planet, and 10 being that you hold shares in the Wellington Harbour Bridge – how gullible are National voters?

Just something to remember next time you’re filling up your car.

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Young workers out of pocket

Acknowledgment: Fairfax Media – Young workers out of pocket

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Tax cuts and jobs – how are they working out so far, my fellow New Zealanders?

10 November 2012 14 comments

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Setting the scene

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The Rhetoric…

National’s rebalancing of the tax system is self-funding and requires no cuts to public services or additional borrowing.”

National Party: Tax Policy 2008

The Reality…

The public service has slashed 555 jobs in the past year and is expected to lose almost 400 more by June 2014, the government has revealed.”

Fairfax Media: 555 jobs gone from public sector

“Treasury today published the Government’s financial statements for the 10 months ended April 30, which showed the debt mountain had grown to $71.6b.”

Fairfax Media: Government debt rises to $71.6 billion

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The Rhetoric…

In the longer term, our tax package encourages people to invest in their own skills and make best use of their abilities, because they get to keep more of any higher wages they earn. It encourages them to look for and to take up better and higher-paying jobs that make more use of their skills.”

National Party: 2008: Personal Tax

The Reality…

Thousands of New Zealanders – including many disillusioned immigrants – are looking for new jobs and new lives in Australia…

… And, judging by the long queues for the $15 event, it seems many of the employers will have no problem finding takers among job seekers who say they are fed up with New Zealand and believe the lifestyle, pay and opportunities are far better across the Tasman.”

NZ Herald: Fed-up Kiwis head to Oz en masse

The unemployment rate rose half a percentage point to 7.3 per cent in the September quarter, the highest level since June 1999, according to Statistics New Zealand’s household labour force survey.

NZ Herald: Unemployment up to 7.3pc – a 13 year high

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Consequences

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On 1 October 2010, as National implemented it’s second round of tax cuts, John Key made this statement,

Our changes to the tax system are about:

  • Helping hardworking families get ahead
  • Boosting growth to create jobs and lift incomes
  • Encouraging savings and investment
  • Making the tax rules fairer for all New Zealanders.

Many of you have told me that you are worried about the increasing cost of living. That’s why the tax changes are so important.

From today, the average family will be about $25 a week better off, even after the increase in GST. The average earner will be about $15 a week better off. A retired couple receiving only NZ Super will be about $11 a week better off.

National was elected to secure a brighter future for New Zealanders and we are delivering on our promises.”

See: National Party: Special Edition – Tax cuts today

It is a common theme amongst the New Right and neo-liberal dogma that cutting taxes equates to more jobs. The idea is that with more money in people’s pockets; they spend more; consumption rises; industry has to produce more; and subsequently hires more staff.

That’s a lot of assumptions to make. As John Key, Bill English, and other National ministers stated, many people used their tax cuts to save and/or pay off debt,

One of the things we are trying to do is lift the national savings rate. When you lift the consumption taxes and lower personal taxes, you encourage people to save. That’s definitely happening, we’ve got a positive savings rate in New Zealand now.” – John Key, 2 April 2012

See: Key defends tax cuts in light of zero Budget

And I think it is going to keep dropping. Kiwis have got the message that debt is a bad thing” – but they had been convinced about the merits of saving more. People do want to save and they know there is no free lunch.” – Bill English, 14 March 2012

See: Debt being paid off, but savings not growing

And even if people do spend more, there is no guarantee that businesses will hire more staff. Much of our consumer goods now originates from overseas, and what we spend here in NZ probably has little effect with overseas manufacturers.

Even locally, there is certainly no guarantee that an extra $15 or $20 in taxcuts will result in more jobs. Especially when gst, fuel, electricity,  and government charges have risen to eat up tax cuts for low and medium paid workers.

New Zealand finance bosses are feeling good about the economic recovery, but research shows that optimism doesn’t extend to hiring new staff.

Global finance and accounting firm Robert Half’s survey of 200 chief financial officers and finance directors found 79 per cent were confident about the prospects of national growth in 2012.

Those who thought their own company would pick up speed in the year ahead made up an even higher proportion, at 87 per cent.

However, the rise in confidence did not translate to more jobs – just 13 per cent planned to take on new finance and accounting staff. “

See: Confidence up, but jobs still not a priority

So John Key’s hopelessly optimistic vision of   “boosting growth to create jobs” has become a distant dream, based on -?

  • Naive faith in a discredited “free market” dogma?
  • Helping out his rich mates?
  • A misguided belief that creating jobs could be easily done at the stroke of a pen?
  • Free Market fairies and Employment angels?!
  • All of the above?

To make the picture complete, I present for the reader’s interest this graph, correlating the ’09 and ’10 tax cuts, with unemployment levels,

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Source

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The graph above vividly illustrates the fallacy linking tax cuts to job creation.

Indeed, after two taxcuts, this country has little to show for it except slashed state services; thousands of state sector workers sacked; and having to borrow billions more from overseas to make up for the shortfall in the tax-take.

The closure of two schools for disabled children, Salisbury Residential School in Nelson and McKenzie Residential School in Christchurch, is perhaps the most tragic face of National’s harsh policies.  When we cut taxes, we cut essential state services, there is no other option.

National supporters and low-information voters may hold cherished beliefs  that cutting taxes are a good thing – until they themselves, or a family member,  requires a state service that has been wound back, or eliminated altogether.

Whilst most of us understand that cutting taxes does not lead automatically to the Holy Grail of  more jobs, our Dear Leader seemed stunned by the shock rise in unemployment,

I’m very surprised with the numbers I’ve seen this morning, goodness knows what the next one will look like.

Oh goodness, Dear Leader. “Surprised”, were we?

How can he have been surprised when unemployment has been rising since January, when it was at 6.4%?!

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Source

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Was he not paying attention – much like his briefing at GCSB offices when Kim Dotcom’s arrest was discussed?

Mr Key really needs to bring his mind back from the golf courses of Planet Key.

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Postscript

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Speaking from Japan (where it’s probably the safest place for him, right about now) John Key dismissed ideas of investing in job creation policies, saying,

 “It would be a dangerous precedence for us to start saying we are going to support a particular industry over another where there’s change. If you want to roll that all the way back we’d still be producing cars in New Zealand and that probably wouldn’t be in New Zealand’s best interests.

See: No tax break plans to keep jobs in NZ – Key

Key is happy to throw  tax breaks at the highest income earners in this country – but thinks that tax breaks for preserving jobs “wouldn’t be in New Zealand’s best interests“?!?!

And let’s not forget the generous tax breaks he gave to Warner Bros – a multi-billion dollar corporation – as a ‘sweetener’ to keep “The Hobbit” in New Zealand (when there was in reality no risk of production going overseas, according to Peter Jackson).

This man may have been raised in a state house, by a solo-mum, but it appears that he has lost all perspective. His fitness to be Prime Minister has to be seriously questioned.

Only six months earlier, Key was reported in the Dominion Post thusly,

The number of unemployed people increased 6.1 per cent to 160,000 but the labour force participation rate also rose, by 0.6 points to 68.8 per cent.

Key said the unemployment rate was “a very weird one at the moment”.

About 9000 jobs had been created and the Government was on track to create 170,000 over four years, he said.” – Dominion Post, 7 May 2012

See: Key – “Europe shows zero Budget wisdom”

Deluded? Make up your mind after  he went on to say the following (Warning: Contains Crazyiness),

The number of people looking for work or in work is virtually a record in New Zealand, the second highest rate ever. What that shows you is that New Zealanders are more confident the economy is coming right and actually bothering to look for work. I know it sounds crazy.” – John Key, 7 May 2012

See: Ibid

Well, yes; crazy.

Only John Key could be so utterly disingenuous as to laud rising unemployment as ” New Zealanders are more confident the economy “.

Batshit crazy, actually.

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Sources

Fairfax Media: Key defends tax cuts in light of zero Budget

National Party: Special Edition: Tax cuts today

Radio NZ: Tax breaks to save jobs ‘a dangerous precedent’

TV3: Opinion – Is our economy collapsing?

Sh*t to p*ss you off

TV3: NBR Rich List 2011 – NZ’s wealthy doing just fine

NZ Herald: We’re doing all right, says English, despite GDP slowdown

NZ Herald: Fed-up Kiwis head to Oz en masse

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That was Then, this is Now #8

26 October 2011 1 comment

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Previous Blog post

That was Then, this is Now #7

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Jobs up, jobless down?

7 October 2011 4 comments

Two articles in the Dominion Post today (7 October) seem to suggest that unemployment was on it’s way down and that the country was witnessing a growth in jobs,

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Full Story

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The article states that “more than 4000 people came off the unemployment benefit and more than 2200 youths came off welfare, including 351 youths who came the unemployment benefit.”

However, the article continues with this,  “Bennett said the total number of people on welfare remained high, rising by 0.1 per cent in September to 328,496.”

So, the reality is that a certain number of those 4,000 people who   “ came off the unemployment benefit ”   may well have moved on to another benefit? Because that is what Bennett is saying, quite clearly,  ” the total number of people on welfare … [rose] by 0.1 per cent in September to 328,496 “.

The article also does not state where those 2200 youths who “came off welfare  ” went. Did they find employment? Is is full time or part time – and if the latter, are their wages still being subsidised by WINZ? Have they move “side ways” onto another benefit? Are they in training/education, or one of WINZ’s many, ultimately-futile “training” programmes?

The story simply does not enlighten us.

Paula Bennett’s comment here may be somewhat less-than-helpful,

Job hunting isn’t easy, but it’s fair to say that if you’re not looking, you won’t find a job…”

Thank you, Paula, you’re a real fountain of wisdom.

The second Dominion Post article is also vague and contradictory,

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Source

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The article states “SEEK Employment Index rose half a per cent in the last month, showing the new jobs listed on the employment website have grown faster than job applications.”

But then continues with “when seasonally adjusted, the index actually fell by 1.1 per cent in September…”.

It also seems bizarre to read that, “The five most sought category of employees in September were accounting, government and defence, healthcare and medical; engineering and automotive trades.

“Government and defence”?

This seems clearly at odds with current government  policy of curring back the civil service. The military and other government sectors have lost at least 2000 workers, with more job losses planned.

The above articles may sound optimistic, but redundancies are still hitting our economy and impacting on society,

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Full Story

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Full Story

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The question that springs to mind is that if the drop in unemployed is real – is it due to new jobs or new job vacancies? The difference may seem subtle, but is very real. New jobs are an indicator that the economy is beginning to grow again.

Job vacancies are existing jobs that have been vacated for one reason or another, and are being replaced. It is sometimes referred to as “churn“.

With current wages low and not keeping pace with inflation and the recent increase in gst, it is hardly surprising that most New Zealanders have had the lowest wage increases in a decade,

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Full Sad Story

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By contrast, we had somewhat more generous wage increases during the previous, unfairly-maligned, Labour Government,

Wage growth at a record high

Annual wage growth in the adjusted LCI (which measures changes in pay rates for a fixed set of jobs and excludes performance related pay increases) remained steady at 3.4% in the March 2008 quarter.  This is the equal highest rate recorded since the LCI began in 1992 matching the annual increase for the December 2007 year.

The unadjusted LCI (which includes performance related pay increases) shows annual wage growth of 5.4% in the March 2008 quarter, up from 5.0% at December 2007.
Annual wage growth in the QES (which includes performance related pay increases and is affected by the composition of employment) increased to 4.6% for the year to March 2008, up from 4.1% in the previous quarter.Source

Good times, eh, my fellow New Zealanders?

Despite John Key’s priority-pledge to raise wages – and not just by 38 cents!!! – we now have  a record flight of New Zealanders moving to Australia – 3300!

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Full Story

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As Ms Visser said,

It’s definitely a wake-up call – with 20 per cent of our workforce looking to leave at any one time it’s a scary thought.

Which indicates that this current government has done very little of practical value to motivate New Zealanders to stay and help build our own economy. Two tax cuts have certainly not worked the “magic” that Key, English, et al, had hoped.

Which suggests that Bill English’s May 2011 Budget statement, promising 170,000 new jobs may be a tad over-optimistic.,

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Full Story

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I guess the ‘moral’ of this piece is two-fold,

  1. Be cautious about  media stories that do not present the full story. A bit of ‘digging’ soon yields a fuller picture.
  2. Be cautious about politicians who promise you the world (you’ll be the one paying for it).

And I’ll finish this piece with a message from our Prime Minister, John Key,

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"The billboard also highlights Labour's failure to stem the tide of people voting with their feet and leaving New Zealand." - John Key, 1 Sept 2008

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Additional reading

Inflation outpaces income growth

Bill English: Focus on Finance – Budget 2011

Labour Market Reports – Archive Wage Growth – March  2008 Quarter

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That was Then, this is Now #2 – GST

21 August 2011 3 comments