Pansy Speak: More surpluses - more taxes
More surpluses - more taxes
Oops! The forecast cash deficit of $1.5 billion has instead turned out to be a surplus of $1.7 billion instead. The Finance Minister claims this is due to stronger economic growth, combined with strong investment performance and under-spending against budgets.
It’s ridiculous that this big-spending government which has taken so much tax revenue has so little to show, with growing waiting lists, a rise in amount of violent crime and a bulging bureaucracy that is so over-funded they couldn’t even spend last year’s budget!
I bet many hard-working Kiwis would like to put some of their taxes back into the bank rather than spend that money on employing an additional 400 staff at the IRD to run the basic KiwiSaver scheme – and even more people will be required to administer the new subsides. Couple that with the news that Australians have enjoyed five years of successive tax cuts, and their after-tax income has increased by 33%, and you’re left with a very unhappy country. To add insult to injury, our after-tax income has increased by only half of what Australians’ has.
This year’s Budget has been called the saving and investing Budget by Dr Cullen, with the centrepiece being the KiwiSaver scheme to be introduced from 1 July. Employees can choose to contribute a minimum of 4% of their earnings (top rate up to 8%). In general, you will not be able to withdraw any money until you are 65. The Government has announced it will match contributions dollar for dollar up to $20 each week
Within four years, employers will have to contribute up to 4% of their employees’ contribution, and the Government will reimburse employers up to only $20 a week. Dr Cullen has dismissed this as an additional payroll tax; he claims the unions will take this into account when bargaining wages.
His wishful thinking may encounter resistance because increasingly, New Zealanders need more take-home pay to make ends meet – given that it doesn’t offer much choice, being locked away until retirement.
The Treasury believes that only half of the workforce will take up the offer because many don’t feel they have enough to make ends meet as well as putting money away for retirement. The ironic thing about the whole scheme is that KiwiSaver uses taxpayers’ money to subsidise higher income earners.
National supports saving initiatives but surely economic growth is equally important? Young people need the economy to grow to provide job opportunities, increase take-home pay, enable home ownership and build savings. This Budget fails to balance savings with growth. Without that balance we will see an increasing number of our highly-qualified people looking for greener pastures overseas.
One in four people have tertiary qualifications and half of them are going overseas. Each week 700 people are leaving for Australia, and while four million Kiwis live here, there are one million overseas. Compare this to Australia with 22 million people but only 800,000 overseas and the impact of living conditions becomes clear.
Then there are the questions about investing!
National supports removing the cap on donations for deductions – after all, John Key was first off the block for this one with his announcement earlier this week. We believe that will cultivate and foster a giving attitude.
I wonder how hard United Future had to twist Dr Cullen’s arm to get him to reduce the company tax rate cut from 33% to 30% (which is just in time for employers who have to make contributions to KiwiSaver!). Broadly speaking, the Government is returning $1 billion to business via this cut in the tax rate, but outweighing any benefits is that KiwiSaver will eventually cost employers $2 billion. It’s nothing more than a very expensive money-go-round.
Meanwhile, Auckland motorists will face an initial 5-cent fuel tax, possibly rising to 10 cents, to fund public transport and electric trains. On top of this, Auckland residents will also have to cover rate increases, higher charges for water and high rental costs. This situation demonstrates the importance of economic growth and the need for more take-home pay.
A Budget from National Finance Minister Bill English would have a commitment to an ongoing programme of personal tax cuts. There would be substantial investment in infrastructure across public transport, roading, telecommunications, water and energy. The Resource Management Act would be amended to reduce costs, delays and uncertainties, while committing to preserving high environmental standards.
National’s policies would deliver the right incentives for people to choose work rather than stay on welfare, a programme of action to reintroduce competition to the ACC system, and changes to labour laws, such as the 90-day trial period to give people an opportunity to enter the workforce.
We would improve education achievements. It is not good enough that 1 in 5 children are not succeeding at school. Business-wise, we would stop the flood of new regulation and red tape. Our immigration policies need to ensure that we attract the best skilled migrants, and we would make sure public services provide value for money.
Back in 1999, Prime Minister Helen Clark promised that Labour would return New Zealand to the top half of OECD. That promise has come to nothing and this Budget will do nothing to reverse our current position.
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