Saturday 24 April 2010

Tax certainty

Labour leader Phil Goff has warned the wealthy he's got next month's planned income tax cut in his sights – National is lining up a treat for the top earners. But Mr Goff told TV3's The Nation if he is elected, he would turn the tax cuts around to help everyone else.
It has not even happened yet and the Labour leader is already limbering up to counter attack.
It's no secret that National are eyeing up a cut in the top income tax rate in next month's budget; the best guess says it'll go from 38 cents to 33 cents.
But it won't stay that way if Phil Goff ever becomes prime minister.
“Thirty-eight, I'm very comfortable with and I see no reason to cut the top tax rate below that.”
From TV3.
Recall of course that the proposed tax reduction is mostly being funded by some changes that would hit wealthy property investors.  So tax cuts for the moderately rich are being paid for by tax increases on the moderately rich.  Take out the first part, and we're back to soaking the rich.

I'm just glad they're seeming unlikely to be introducing a new land tax that would be added to a later Labour income tax increase....


  1. I wonder if Phil will reverse the property tax changes for us middle income earners with rental properties. I could at a stretch be one of his "kiwi battlers" or whatever he is calling us this month.
    Anyway Mr Key is doing wonders for our income. ETS, ACC etc. My economic circumstances have certainly suffered his "step change".

  2. A land tax wouldn't be reversed. Technical changes to a depreciation framework - I'd tend to see that as less set in stone. But I still wouldn't bet the house on reversal. It's always easier to expand the spending to meet the tax take....

    I bought in '05 (no rentals, just the one we're in). Had I not, I'd definitely be staying the hell out of buying anything until this uncertainty is resolved. Even if you're owner occupier, if rental owners are set to take a hit, that'll knock all prices back....

  3. In more normal economic conditions the depreciation changes wouldnt have much impact on the overall market (Blue Chip type investors aside). Making changes when an economy is clawing its way out of a long recession can have outsized effects, Japan raising their consumption tax tipped them backwards being one example.
    I dont think English/key take much notice of behavioural economics and I believe their changes to ACC levies, dopey ETS etc. coupled with their timidity to move far with mining, PPPs etc. leaves people with the conclusion their actions do not match their stated aspirations. In such a confused environment changes to tax rates may have the opposite affect to the ones they expect. No point in having lots of savings and it all sits in the bank for a rainy day because no one will take a risk.
    Having said that we settle on a block of flats today that are yielding 8.1%.