Tax cuts versus social spending: What will decide Kiwi-Indian votes in this election?
In a major election play, the government has announced tax cuts earlier during the budget this year with a promise to rain down money on workers and families with a $2.2 billion Family Incomes Package which will include tax threshold changes and changes to tax credits.
It means that workers earning more than $52,000 a year will get around $20 a week after April 1, 2018, when this will be implemented, seemingly asking voters to vote for the National Party, if they want to receive that extra money in their accounts.
The Labour Party has already declared that they will scrap National’s planned tax cuts saying that “now is not the time for tax cuts.”
"It is simply not credible for the government to say that a thousand-dollar tax cut for Bill English and me should be a priority over ensuring New Zealanders have homes to live in, modern schools, and world-class healthcare when they need it,” Labour Leader Andrew Little said.
Instead, the Labour proposed their “Targeted Families Package,” which it says will deliver up to $48 a week extra to middle-income families (and not the top earning families as the Labour Party alleges would benefit in the National’s tax cut plan).
One important question that needs to be asked here is that why the time is not right for tax cuts as we are told that our economy is in good shape with the government’s debt to GDP ratio lowest in about two decades, books are in surplus and employment is growing as never before with around 10,000 jobs being created every month as Prime Minister Bill English has been saying publically.
In fact, Prime Minister Bill English had suggested enthusiastically that the National party might want to do another tax cut again, sometime soon.
Speaking at the Party conference in Wellington in June earlier this year, Mr English said: "wouldn't it be great if we could do it again.”
To be fair to everyone, then it might also be asked here that why New Zealand continues to remain a low-wages economy as many experts believe if everything is as good in New Zealand economy as the National Party wants us to believe.
Like everywhere else in life, the truth is somewhere in between, and it seems the promises of tax cuts and social spending are being raised as a matter of political priorities, and not by economic exigencies.
Eventually, both tax cuts and social spending are seeking to help the end users – the voters - with some extra cash that each political party is calling differently. Like National’s tax cut can help tax payers an extra $10.86 or $20 a week depending upon how much they are earning. The Labour’s education policy can save parents from being asked to pay $150 school donations every year.
There seems to be a lot of clutter right now in the minds of Kiwi-Indian voters in New Zealand around this hotly contested issue of tax cuts and social spending that needs explanation.
What do tax cuts do for the economy?
The expert opinion is divided about the short term and the long term benefit of tax cuts on a country’s economy.
Tax cuts mean reduction in individual taxes, which largely benefits targeted tax payers by increasing their real income. Therefore politicians often see tax cuts as rewarding tax payers.
However, tax cuts largely results in decrease in the real income of the government, therefore leading to question that why a government would want to do that as a loss of income will directly impact government’s ability in social spending (things like health, education etc which are seen to benefit those towards the lower income bracket).
Generally, governments chose this pill (accepting a decrease in revenue) for a variety of reasons such as increasing the level of domestic spend in the economy to boost overall demand within country’s economy or just to reward tax payers.
It is not clear though, what is the driving factor behind National government’s proposed tax cuts.
Social spending: differences in priorities
Different political parties have different priorities in terms of spending their dollar.
While National Party’s stated goal is to use the maximum value of their earned dollar to service country’s debt and improve books. The Labour Party traditionally prefers to delay servicing of debt and use as much value from an earned dollar as possible towards spending more on social sectors such as education, health, etc.
Both these goals, servicing national debt and social spending are important political goals and are not necessarily mutually exclusive as many tend to believe.
While National Party also spends socially such as recently announced Accommodation Supplement for families to assist families (on benefit) living in relatively high-rent areas, the Labour party, on the other hand, seeks to catch up with National’s demonstrated preference of servicing country’s debt to GDP ratio.
Currently, 23 per cent of GDP (when the rich country average is 71 per cent), National’s target is to drive it down to between 10 per cent and 15 per cent of GDP by the middle of the 2020s. The Labour (and the Greens) has set a target of 20 per cent in five years of coming to power.
National’s and Labour’s promises on tax cuts and social spending
Against this backdrop, it is important to have a brief overview of what voters can expect in this election.
- Labour will spend an extra $17 billion over four years on health, education and family incomes in the Budget if it wins the coming election.
- $8bn on health (This is on top of what National has already committed)
- This extra health money would go to "mental health services, more affordable primary care, providing more operations and the latest medicines,” as the Party claims.
- $4b on education will mean a plan to end 'voluntary' school donations for parents, rebuilding outdated school buildings, addressing teacher supply issues and few other policy measures offered in 2014 campaign like requiring ECE centres to employ at least 80 per cent qualified teachers by the end of its first term and extending the 20 hours of free ECE education for 3-and-4-year-olds to 25 hours per week.
- Labour Plans to spend $5bn between Working for Families, Best Start package and the Winter Energy Payment.
- National Party’s promised tax cuts plan can potentially give an extra $1000 a year to many average Kiwi-workers and families.
Expectedly, both political sides are blaming each other for doing improper calculations and having differing priorities.
What will decide Kiwi-Indian votes?
Towards this goal, The Indian Weekender is focussing our next election special issue – Verdict 2017 (Friday, July 28)– on the debate between tax cuts versus social spending calling all political parties to put forward their views.
This will help Kiwi-Indian voters in making up their choices clearly for the forthcoming general elections.
In a major election play, the government has announced tax cuts earlier during the budget this year with a promise to rain down money on workers and families with a $2.2 billion Family Incomes Package which will include tax threshold changes and changes to tax credits.
It means that workers earning...
In a major election play, the government has announced tax cuts earlier during the budget this year with a promise to rain down money on workers and families with a $2.2 billion Family Incomes Package which will include tax threshold changes and changes to tax credits.
It means that workers earning more than $52,000 a year will get around $20 a week after April 1, 2018, when this will be implemented, seemingly asking voters to vote for the National Party, if they want to receive that extra money in their accounts.
The Labour Party has already declared that they will scrap National’s planned tax cuts saying that “now is not the time for tax cuts.”
"It is simply not credible for the government to say that a thousand-dollar tax cut for Bill English and me should be a priority over ensuring New Zealanders have homes to live in, modern schools, and world-class healthcare when they need it,” Labour Leader Andrew Little said.
Instead, the Labour proposed their “Targeted Families Package,” which it says will deliver up to $48 a week extra to middle-income families (and not the top earning families as the Labour Party alleges would benefit in the National’s tax cut plan).
One important question that needs to be asked here is that why the time is not right for tax cuts as we are told that our economy is in good shape with the government’s debt to GDP ratio lowest in about two decades, books are in surplus and employment is growing as never before with around 10,000 jobs being created every month as Prime Minister Bill English has been saying publically.
In fact, Prime Minister Bill English had suggested enthusiastically that the National party might want to do another tax cut again, sometime soon.
Speaking at the Party conference in Wellington in June earlier this year, Mr English said: "wouldn't it be great if we could do it again.”
To be fair to everyone, then it might also be asked here that why New Zealand continues to remain a low-wages economy as many experts believe if everything is as good in New Zealand economy as the National Party wants us to believe.
Like everywhere else in life, the truth is somewhere in between, and it seems the promises of tax cuts and social spending are being raised as a matter of political priorities, and not by economic exigencies.
Eventually, both tax cuts and social spending are seeking to help the end users – the voters - with some extra cash that each political party is calling differently. Like National’s tax cut can help tax payers an extra $10.86 or $20 a week depending upon how much they are earning. The Labour’s education policy can save parents from being asked to pay $150 school donations every year.
There seems to be a lot of clutter right now in the minds of Kiwi-Indian voters in New Zealand around this hotly contested issue of tax cuts and social spending that needs explanation.
What do tax cuts do for the economy?
The expert opinion is divided about the short term and the long term benefit of tax cuts on a country’s economy.
Tax cuts mean reduction in individual taxes, which largely benefits targeted tax payers by increasing their real income. Therefore politicians often see tax cuts as rewarding tax payers.
However, tax cuts largely results in decrease in the real income of the government, therefore leading to question that why a government would want to do that as a loss of income will directly impact government’s ability in social spending (things like health, education etc which are seen to benefit those towards the lower income bracket).
Generally, governments chose this pill (accepting a decrease in revenue) for a variety of reasons such as increasing the level of domestic spend in the economy to boost overall demand within country’s economy or just to reward tax payers.
It is not clear though, what is the driving factor behind National government’s proposed tax cuts.
Social spending: differences in priorities
Different political parties have different priorities in terms of spending their dollar.
While National Party’s stated goal is to use the maximum value of their earned dollar to service country’s debt and improve books. The Labour Party traditionally prefers to delay servicing of debt and use as much value from an earned dollar as possible towards spending more on social sectors such as education, health, etc.
Both these goals, servicing national debt and social spending are important political goals and are not necessarily mutually exclusive as many tend to believe.
While National Party also spends socially such as recently announced Accommodation Supplement for families to assist families (on benefit) living in relatively high-rent areas, the Labour party, on the other hand, seeks to catch up with National’s demonstrated preference of servicing country’s debt to GDP ratio.
Currently, 23 per cent of GDP (when the rich country average is 71 per cent), National’s target is to drive it down to between 10 per cent and 15 per cent of GDP by the middle of the 2020s. The Labour (and the Greens) has set a target of 20 per cent in five years of coming to power.
National’s and Labour’s promises on tax cuts and social spending
Against this backdrop, it is important to have a brief overview of what voters can expect in this election.
- Labour will spend an extra $17 billion over four years on health, education and family incomes in the Budget if it wins the coming election.
- $8bn on health (This is on top of what National has already committed)
- This extra health money would go to "mental health services, more affordable primary care, providing more operations and the latest medicines,” as the Party claims.
- $4b on education will mean a plan to end 'voluntary' school donations for parents, rebuilding outdated school buildings, addressing teacher supply issues and few other policy measures offered in 2014 campaign like requiring ECE centres to employ at least 80 per cent qualified teachers by the end of its first term and extending the 20 hours of free ECE education for 3-and-4-year-olds to 25 hours per week.
- Labour Plans to spend $5bn between Working for Families, Best Start package and the Winter Energy Payment.
- National Party’s promised tax cuts plan can potentially give an extra $1000 a year to many average Kiwi-workers and families.
Expectedly, both political sides are blaming each other for doing improper calculations and having differing priorities.
What will decide Kiwi-Indian votes?
Towards this goal, The Indian Weekender is focussing our next election special issue – Verdict 2017 (Friday, July 28)– on the debate between tax cuts versus social spending calling all political parties to put forward their views.
This will help Kiwi-Indian voters in making up their choices clearly for the forthcoming general elections.
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