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Wednesday, September 22, 2010

National to spin GST tax rise

Govt readying to sell GST rise
National MPs will be out in their electorates in coming days selling the Government's tax cut and GST increase package to voters before it takes effect next month.

What this GST tax rise represents is the largest transfer of wealth in recent political history from the bottom to the top. This GST tax rise is to fund a tax cut that benefits the wealthy, ie 'we' are all subsidizing tax cuts for the Sam Morgans of this world. The crumbs being left in most of our pockets won't go anywhere near making up the shortfall when other inflationary pressures are taken into account (which the Governments so called tax calculator ignore) and this is the real danger to National.

To date most NZers have given Key the benefit of the doubt, his smile and wave persona works well with our laid back culture, his story of state house immigrant boy doing good is irresistible and his non ideological evolution as a merchant banker adds to his laid back demeanor. He is maybe the first truly global political leader we've ever had who understands it isn't about pointlessly putting the boot into Unions that matter, what matters is how much dairy tonnage we sell to China. His challenge is to reign in the hard right elements of his Government, a battle he increasingly loses.

What this GST tax increase represents however is a game changer, to date NZers have 'trusted' Key because they like him and he told all of us that his tax changes would make EVERYONE better off. NZers are expecting to feel like they are living that promise, but as National strategists will have realized, if NZers don't feel better off each week they are going to blame Key and they will stop liking him and the second they stop liking him, the second they stop trusting him and his promises of being better off are going to be shown up as the vacant aspiration snakeoil it really is.

National have to sell these changes as being positive, but as NZers feel hurt week in and week out, they won't believe what the Government are telling them. Key will start to look like an out of touch boy in a bubble medicated optimist who isn't grounded in the reality of the pain everyone else is going through, this will be Labour's best chance to break the Key illusion while reminding all NZers that post 2011 National will unleash their full spectrum free market assault.

October 1st is when the rubber really hits the road and Crosby and Textor earn their invoices.


At 22/9/10 8:34 am, Anonymous sdm said...

Most NZers will be better off from these tax changes - maths shows us that.

At 22/9/10 8:42 am, Anonymous Anonymous said...

I'm still trying to figure out how my 80c extra per week makes me better off when public transport increases alone are six times that. Oh wait, I'm on the sickness benefit, that's right, I don't deserve to live above the poverty line. Thanks National.

At 22/9/10 9:22 am, Anonymous anfield1973 said...

sdm - maths have nothing to do with spin. when you put figures into the the govt calculators they UNDERSTATE the amount of the increased gst cost by simply understating your total weekly spend. the majority of kiwis are not savers, earnings are spent on Goods and Services.

At 22/9/10 9:36 am, Anonymous Anonymous said...

Most of us will not be better off after the gst rise. Govt spin will try to tell me otherwise though.

At 22/9/10 10:28 am, Anonymous sdm said...

anfield1973 - if you cut taxes across 100% of income, but increase tax on expenditure, then the bit of money not spent on items with GST (savings, mortgage etc) means that from a cash perspective, you are better off



PS - Chelsea will beat liverpool at anfield!

At 22/9/10 10:31 am, Anonymous bob said...

what about labour spinning it as a 15% gst rise. Claiming that gst will now be 27.5% is completely dishonest. just like the kia ora gaza nutters. have a shave

At 22/9/10 10:58 am, Anonymous sdm said...

Anon 9.36

If you earn more than you spend on GST rated items, you will be better off. Simple.

At 22/9/10 11:55 am, Anonymous Simon said...

Silly that, but the big stinking lie, the giant steaming turd in the corner of the room, so to speak, is the fact that a GST increase will go anywhere but to the rich at the expense of the poor.

At 22/9/10 1:35 pm, Anonymous JonL said...

"this will be Labour's best chance to break the Key illusion" - and, on present form, they will fail, miserably!
Oh for a credible opposition with good sound policies and the morals & ideals to put them out to the public whilst getting stuck into bad government actions!

At 22/9/10 1:42 pm, Blogger Uroskin said...

And just watch all those companies under the cloak of a Government-mandated GST rise to rack up prices in general after Oct 1. Example: http://fullerswatch.blogspot.com/2010/09/another-turn-of-screw.html

At 22/9/10 2:57 pm, Anonymous Pinko Economics Professor said...

bob - you must have misheard something somewhere along the way. It's actually a 20% rise in the rate of GST (from 12.5% to 15%).

I don't accept that most people will be better off from the tax changes either. Basic economic theory tells us that people on lower incomes spend a higher percentage of their income on the necessities of life - food, clothing etc which all attract GST.

Bomber - What is it with these dim-bulb Tory Boys always commenting on your blog?

At 22/9/10 3:18 pm, Anonymous sdm said...

"Basic economic theory tells us that people on lower incomes spend a higher percentage of their income on the necessities of life - food, clothing etc which all attract GST. "

Does this person have accomodation costs? Because of they do, then the percentage of their income that goes towards their accomodation isnt GST rated, so therefore wont be subject to a tax increase.

I spent 42% of my after tax income on my mortgage. So even if I spend all the rest of my earnings, the GST will only go up on 58% of my income.

But 100% of my income will be taxed at a lower rate. Its not hard to understand.

At 22/9/10 4:10 pm, Anonymous bob said...

pinko eco prof.......... labour party staffers have been informing members of the public that the 15% is on top of the 12.5%, therefore increasing it 27.5%, in a pathetic attempt to scare monger. did momentum consulting hire you as a professor? ;)

At 22/9/10 5:57 pm, Anonymous Pinko Economics Professor said...

No one ever mentioned the accomodation costs you speak of... its common knowledge that they aren't subject to GST. I mentioned food and clothing specifically. You could include electricity and transport costs too.

You seem to have misfired a bit with your rebuttal. The point I was making is that people on low incomes spend a greater proportion of their income on the necessities of life (such as food and clothing) which do attract GST. This fact is true irrespective of income taxation rates.

People on low incomes have received only a pittance in tax cuts, compared to people at the top who need them least. I dispute the official line from the Government that we will all be better off. Perhaps some people will be, but I suspect if we were to look back on this in a years time, after the "simple maths" has been tested in the real world, you will find that the tax cuts will have been more than offset for those people on low incomes by the rise in GST and the onflow effects of this.

Hopefully I will be proved wrong....

At 22/9/10 6:15 pm, Anonymous Pinko Economics Professor said...

bob - I'll let you in on a little secret.... I'm not actually a Professor! I just dabble in Tory Baiting for my own amusement from time to time. Gets a bit boring after a while though.

Sounds like faulty maths to me. Keep in mind that the average Labour Party Staffer wasn't exactly top of the class in 5th form maths! Perhaps you could give me some names? Don't worry too much - I doubt they've fooled anyone. Pretty pathetic indeed.

At 23/9/10 7:47 am, Anonymous sdm said...

"No one ever mentioned the accomodation costs you speak of... its common knowledge that they aren't subject to GST"

Let me be very clear as you dont seem to get it.

If you lower the tax on 100% of a persons income, but raise it on their consumption, then they are better off.

Consider this breakdown of income

Accomodation: 40%
Expenses: 50%
Savings 10%

The person gets a tax cut on 100% of their income, but a tax increase on 50%. Ergo, the tax cut is bigger than the increase.

The ones lying are clearly the labour party, and I am surprised so many are falling for it.

At 23/9/10 12:26 pm, Anonymous JonL said...

"Savings 10%"
You live in a world where people actually have enough left over to save!
Gee - you must have heaps!!!

At 23/9/10 2:31 pm, Anonymous Anonymous said...

Nice to see Phil the Nightwatchman and Silent T taking one in the pooper from Teflon John in the House yesterday over the GST/Tax Cut issue.


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