Steven Joyce on tax cuts

Finance Minister Steven Joyce has given some indications of Government thinking on tax cuts (in election year).

Stuff: Joyce signals low and middle earners’ top rates target for tax cuts

Finance Minister Steven Joyce has signalled that cutting the top tax rate paid by lower and middle income earners is his top priority for tax cuts.

In a speech to the Auckland Chamber of Commerce on Thursday he said it was still too early to be sure that a surplus will be achieved in the current financial year, particularly given the costs associated with the Kaikoura earthquakes.

Treasury revealed on Thursday  that the books were in surplus by a narrow $9 million in the first six months of the current financial year – almost $700m ahead of forecast.

He was concentrating on four key areas for his first Budget on May 25.

They are:

  • better public services for a growing country,
  • building the infrastructure a growing modern economy needed,
  • paying down debt “as a percentage of gross domestic product”
  • reducing the tax burden “and in particular the impact of marginal tax rates on lower and middle income earners, when we have the room to do so”.

The Government has let bracket creep effectively increase tax rates for all income earners over the past eight years – something Michael Cullen eventually got hammered for by voters in 2008.

One could be a bit cynical about now offering to address this in the first election after John Key’s exit.

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35 Comments

  1. Surplus? Surplus? Smoke and mirrors and weasels .We are 160 billion dollars in debt.

    Reply
    • High Flying Duck

       /  February 17, 2017

      Our debt to GDP is falling – now under 25% and remains at very low levels internationally despite the GFC, earthquatkes etc.
      Not sure what your issue is. $$ of debt is irrelevant unless it is put in context.

      Private sector debt is another story…

      Reply
      • Gezza

         /  February 17, 2017

        How so? What do you mean here HFD?

        Reply
        • High Flying Duck

           /  February 17, 2017

          Not sure what you’re after here Gez, but i expanded below. Our debt was close to 26% of GDP 2 years ago. Now it’s just under 24.5%. We are among the lowest debts in the OECD and have had a few surpluses in a row in recent times.
          Just throwing a figure of debt and saying it’s bad has no meaning. If The USA had our debt they would be laughing. If Fiji had it they would sink.
          Ours is at a pretty good level, is dropping as a % as the economy grows and is funding infrastructure, rebuilding and other positive investment expenditure, which in my mind makes it “god debt”. Borrowing to pay day to day is the bad sort but we have moved well past that.

          Reply
          • High Flying Duck

             /  February 17, 2017

            *’good’ debt. God debts are far harder to repay…and can lead to unfortunate bouts of eternal damnation if one defaults.

            Reply
          • Gezza

             /  February 17, 2017

            Sorry if unclear, yes I did read on down for the discussion, your elaboation is very clearly explained & appreciated. What I meant was what is so different about private debt & what’s your suggestion there? Sorry if it seems like a dumb question but I AM an economic retard.

            Reply
            • High Flying Duck

               /  February 17, 2017

              Ah, got you Gez – and just as an aside you are anything but retarded in any matters judging by your posts. Keep going and i might even agree with one of them one day.

              NZ household or private debt has always been always high, but with the massive increase in house prices and corresponding mortgages, NZ non-government debt levels have been rising to very high levels.
              Most of this debt is owed offshore.
              This is fine at low interest rates – in fact despite the huge debt level, the debt servicing costs have been comparatively low by historical standards.
              As the rates rise so do the costs and a lot more money heads offshore. Along with this a lot of financial pain can come home to roost with lower domestic spending, perhaps a housing correction and less ability to fund growth in productive asset classes.

              Government debt really is fine, but overall NZ does have a high debt issue.

            • Gezza

               /  February 17, 2017

              Got it. 👍 Have you ever considered approaching the two main tv channels with an offer to guest on economic discussions – well, maybe not The Nation, but Q&A?

            • High Flying Duck

               /  February 17, 2017

              My wife reckons I have a fine face for radio. But I came back with “then explain Bill Ralston?” and she backed down.
              Not really the TV type to be fair. Much happier pottering with the tumbleweeds 🙂

            • Gezza

               /  February 17, 2017

              You remind me of my former CLA. On any legal question he would never say in 100 words what he could say in 10. At my farewell I told him that was what I liked most about him, and asked why his he so favoured his (slightly less admired) protege & designated successor when he had precisely the opposite talent. He just smiled, patted me on the shoulder & said, “because he’s always right … I’m working on him Gez.”

    • David

       /  February 17, 2017

      Who is this ‘we’ exactly?

      Reply
  2. Nelly Smickers

     /  February 17, 2017

    Wayne’s mum and a lot of her friends said they hoping to hear Steve say something about *a rise in the Super*…..they’ll probably all vote for *Winnie* again anyway o_O

    Reply
  3. patupaiarehe

     /  February 17, 2017

    While a tax cut would be nice, I would far rather have an honest explanation of why it isn’t really in our best interests. If NZ really is $160,000,000,000 in debt, as Paul Scott alleges, surely we should try to reduce the principal, rather than just paying interest…

    Reply
    • Alan Wilkinson

       /  February 17, 2017

      Depends on whether the interest rate is greater or less than the expected rate of return on other options for the money. For example if the Govt is paying a lower rate of interest on its borrowings than the private sector it is better to return the money via tax relief so the private sector can pay off its debt first rather than pay off the public debt.

      Reply
      • patupaiarehe

         /  February 17, 2017

        The government generally does Alan, due to borrowing in bulk, & being far less likely to default than ‘Joe average business owner’. PAYE tax cuts really don’t affect employers, they just deduct a bit less from their employees, who still cost them the same.

        Reply
        • Alan Wilkinson

           /  February 17, 2017

          So if the employees can pay off their debts faster, the country benefits from tax cuts. And the proportion that goes into more spending benefits employer businesses and reduces unemployment.

          Reply
          • patupaiarehe

             /  February 17, 2017

            Not necessarily Alan, a $20/week tax cut for your average smoker won’t quite fund the recent increase in excise tax. Give with one hand, take with the other….

            Reply
          • duperez

             /  February 18, 2017

            And if employees and employers, the private sector, have more money, do they pay off debts faster or do they spend up more and borrow more for that fancier lifestyle?

            Reply
        • patupaiarehe

           /  February 17, 2017

          This government appears to me, to be like a teenager on minimum wage, who has a credit card, with a $100k limit. He uses it regularly, but makes the minimum payment every month, so the lenders are happy, & don’t bother him. I suspect we are at the point, where the teenager can’t afford his monthly payment, but still has $20k left in available credit, so pulls out $2k in cash to pay his monthly bill. If he spends nothing more, and continues with this behaviour, the ‘shit will hit the fan’, in less than a years time…

          Reply
          • patupaiarehe

             /  February 17, 2017

            As usual, this brings a song to mind…

            Reply
          • High Flying Duck

             /  February 17, 2017

            There are many ways to effectively pay back debt. Growing the economy is the best way – If you make have debt repayments of $900 but only make $1,000 you have debt levels at 90% of income which could be a serious issue. If your debt stays the same but your income doubles to $2,000 debt lowers to 45% of income and things get much easier.

            It is important to realise that the borrowed money wasn’t frittered away – it went on supporting the country through the GFC and paying billions for the Canterbury earthquakes.

            At the same time core government spending has been reigned in and the tax take has increased with the growing economy.

            We have now had a series of surpluses and can make decisions.

            If debt remains static while the economy grows at 3% plus I think it can be taken as a huge plus.

            We have had years of “bracket creep” where tax thresholds stay the same as incomes rise with inflation – so tax cuts aren’t actually doing anything but correcting a hidden tax grab.

            Reply
            • patupaiarehe

               /  February 17, 2017

              I do understand HFD, that you need to spend money to make money. A wise man would be using this extra income to reduce debt, instead of just servicing it.

          • High Flying Duck

             /  February 17, 2017

            As AW mentioned – it depends on the return. Debt is a good thing when it achieves a return. It is only when you borrow to pay the day to day bills there is an issue. Ask the Greek about that one.
            Our debt is low as a proportion of our economy and there is not need to pay it down in any great amounts when we have need of infrastructure and right some tax imbalances.
            NZ Government debt was more than double what it is now when Labour knocked off Muldoon. The policies they put in place and structural changes they made ensured our debt levels reduced significantly.

            I assume you would give great credit to Roger Douglas for saving the country from imminent bankruptcy?

            Reply
            • patupaiarehe

               /  February 17, 2017

              Seeing as how the country didn’t go bankrupt, I guess he did do something right. Some who lost their homes, might argue otherwise…. He did start something though, the ACT party, which is going to ‘make or break’, at election time…

            • Blazer

               /  February 17, 2017

              citations please…sounds unbelievable from one Natz govt to…another…wonder how they got a rep as good financial managers!

              ‘NZ Government debt was more than double what it is now when Labour knocked off Muldoon’

            • High Flying Duck

               /  February 17, 2017

              Hi Blaze, you’re right – I misread the graph:

              http://www.tradingeconomics.com/new-zealand/government-debt-to-gdp

              Muldoon took debt levels from well under 10% of GDP to between 30% – 40% of GDP when he was turfed (so still well above todays levels), and debt climbed further to over 50% in the following 8 years. Then National under Bolger through to Labour under Clarke brought it back down to 4%. GFC & Chch took it back up and it is coming back down again now.
              I may have given undue face value credit to Douglas for bringing debt down, although his policies are the ones that did reign in public spending and are still in place today.

            • Blazer

               /  February 19, 2017

              I think you may find debt=servitude.As for the Greeks, people do not realise that the so called bailouts are used to pay bondholders their interest instead of defaulting on it.It is of no direct benefit to the citizens who are victims of…austerity.

          • High Flying Duck

             /  February 17, 2017

            I think you’re right – it will break the 1 seat barrier…again. But probably no more than that.

            Reply
            • patupaiarehe

               /  February 17, 2017

              I think they could do much better than that HFD. Mr Seymour needs to take a risk though, and break the sychophantic relationship with the Nats. Tell the public that increasing excise tax is BS, and go back to the basic principles of ACT, less government, & more personal responsibility. Just imagine a coalition government, of NZF & ACT….

          • High Flying Duck

             /  February 17, 2017

            Don’t get me wrong Patu, I’m a big fan of ACT and have voted for them many years ago.
            I also have a lot of time for David Seymour – he’s doing a great job, raising important issues and seems to be more interested in getting things done than grandstanding.
            But whether he is able to grow the base is very debatable. He hasn’t shifted the needle at all in the last few years and i’m not sure the ACT brand can be rescued.

            Reply
            • patupaiarehe

               /  February 17, 2017

              The ‘Act brand’ can be rescued. Seymour ‘sucked a lemon’ supporting the excise increase. He needs to stand up in public, & say that ACT will suck lemons no longer. IMHO, he needs to ‘grow a pair’, & stand in Epsom again, after telling the Nats that his love isn’t unconditional.

  4. Brown

     /  February 17, 2017

    The easy way to effective reduction of debt was to inflate the debt away. I bet the govt is annoyed that inflation is so low and looks likely to stay that way.

    Reply
  5. Nelly Smickers

     /  February 17, 2017

    Reply
  1. Steven Joyce on tax cuts – NZ Conservative Coalition

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