$1000 cash payments tipped as tax wildcard

[Perry]

In another PT thread, there's been talk of taxation and the
'ideals' that governments should consider when pondering tax
policy. Loosely speaking, one is that tax should not influence
business decisions. I see that as unduly optimistic. Rather like
the observant person who opined:

In theory, there's no difference
between theory and practice.
In practice, there is.

I also suspect that tax and decisions generally are very
carefully considered by the W'gton Comrade Commissariat,
not on the basis of being business neutral, but on how it might
have any impact upon Comrade Commissar Cullen's re-
election prospects. I suspect Dr Michael is a very shrewd and
cunning manipulator.

Paul points out the $1000 'hand-out' that comes along with
Kiwisaver. How fast will Dr Michael claw it back? Here's one
way - (All figures are rudimentary)

A year or so back, if a family spent $60 per week on petrol, it
would now be spending double that. The increased revenue
for the Comrade Commissariat, from excise, duty and tax-take
on that increased cost of petrol is – well, golly-gosh: $1000-00!!

Then (even allowing for the deductibility of the GST
component) throw in business activity that uses fuel and wow!
My guess is that there's more coming than going from the
social engineer's coffers.

As always, there's the latent re-election desire lurking in
Comrade Commissar Cullen's largesse and most Nzzzzzzzzrs
are unlikely to see the Reds election bribes for what they
really are.

[RentMaster]

Lower-paid earners are tipped to receive lump sum payments of up to $1000 as part of this month's election year Budget.

... to reach taxpayers most under pressure from rising fuel and food prices.

I dont think a lump sum to help out with rising food prices and fuel costs would work. It would get spent within 24 hours on a big screen TV or a big booze-up. Drip feeding the benefit would be better for people who dont know how to handle money.

[Keys]

Where's the McGillicuddy Serious Party when they're needed?

Nowhere. It's because there was serious chances that they would actually get into parliament due to MMP.

[SuperDad]

Many people don't realise that Labour has already given nearly all of us a $1000 lump sum. 600,000 or so have already claimed their's, which leaves around 3 million (excluding those over 65) who have yet to claim this free money.

I have mine, as do my children.

It is, of course, the Kiwisaver kick start.

Paul.

[mortgage broker]

I think we need to realise that we do not have to vote only National or Labour.

[Perry]

It's a legal bribe, that's it. I am so fed up with the govt BS.
Why do we the general public accept such crap?

Because - lamentably - there seems to be no choice.
Frying pan? Fire? Sell NZ? Horse & Cart? Pushmepullyou?
Where's the McGillicuddy Serious Party when they're needed?

[Rem]

It's a legal bribe, that's it. I am so fed up with the govt BS.
Why do we the general public accept such crap?

[Perry]

You're right . . . . .

Comrade Commissar Cullen could 'promise' the $1k as an
election bribe, but not payable until April 2009 and get
re-elected as a result; Suckers!

Labour's penchant for breaking promises - one way or
another. Nordy's Black Budget was one. Promise it, pre-
election, claw it back with a tax-hike, post election and
ride off into the political wilderness, not long after.
(Oh, and get a knighthood for it - Roger Douglas style,
perhaps?)

It could be history repeating itself, with different actors,
different lines, different scenery, same plot, if it goes the
way you suggest it might.

[Davo36]

Yes, they would make it payable in say April next year.

Then if (and in fact there's no way they're getting back in) they get back in, they say next March that things have deteriorated so much it would be irresponsible to pay out that money and they have to look after us better than that.

Did you hear Helen saying on the Sunday programme that she has removed the burden of the new fuel tax?

Ummm, so she says she won't allow a new tax which she set up. And she manages to make it sound like a good thing, like she's just made everyone's life a bit easier. The consumate politician.

David

[whitt]

They can always back down on the promise too.
Just like the tax releif promise last election.

Have there cake and eat it too??

[PC]

Probably only payable if Labour is re-elected.

Wonder if it counts as election advertising?

[essence]

From STUFF 11/5/08. Bold highlighting is mine.

Lower-paid earners are tipped to receive lump sum payments of up to $1000 as part of this month's election year Budget.

Top tax expert John Shewan said a cash "social dividend" payout in the May 22 Budget would be the "wild card " that would allow the government to reach taxpayers most under pressure from rising fuel and food prices.

The payout, which could be worth $500, $750 or $1000, could be paid as soon as October this year based on income to March 2008, or in April next year.

Shewan can't say what income level might qualify for a payment, but 47 per cent of taxpayers over 15 earn a taxable income of $20,000 or less many of them beneficiaries or superannuitants.

The government is also likely to want to change tax thresholds to target other income earners.

"A social dividend is the one major possibility that has not been ruled out," says Shewan.

"It's a cash payout to a particular group of taxpayers determined by reference to their income for the last year. It's not what I would call good tax policy, but it does pinpoint relief at a particular group," said Shewan, chairman of PriceWaterhouseCooper.

Shewan said Finance Minister Michael Cullen had limited options for reaching his stated goal of helping lower income earners, having last week ruled out the introduction of a tax-free threshold at the bottom of the income scale.

Cullen also ruled out abolishing GST on food in his speech last week. He said those at the bottom of the income ladder were his top priority in his Budget, but that "all taxpayers" would benefit. Cullen also said he would not spend recklessly on tax cuts for upper and upper-middle income groups in the package.

He said his Budget would need to demonstrate "that the Labour-led government is serious about managing the harsh edges of economic pressure points, even though we cannot pretend to compensate for them completely".

But he warned against hyped up expectations of the financial plan, saying it would not be a "big-bang Budget".

Asked to comment on a "social dividend" payment in the Budget, a spokesman for Cullen said the minister had "decided not to rule anything in or out until Budget day" apart from those policies ruled out in last week's speech.

Shewan said many in the lowest income-earning group effectively paid little tax already, so cutting tax rates would give them little extra in the pocket.

Either Working for Families tax credits could be boosted, or a cash payment could go to individuals so that single and childless people could benefit too.

Shewan said the cash payment could be one-off or a rolling payment.

In the United States, the federal government is currently using similar cash payments to taxpayers as part of a $168 billion plan to stimulate the economy, the second time it has done so.

Payments started going out on Friday to American taxpayers, with $600 for individuals and up to $1200 for couples, with an additional $300 per child for families. The payments are reduced or not available at all for higher earners.

Fifty-nine percent of New Zealand taxpayers have a taxable income of $30,000 or less, according to projections to June 2008.

Shewan said with an overall purse of $1.8b to $2.8b, the government could afford to deliver a social dividend, move tax bands upwards and cut the middle tax rate from 33c to 30c. He expected the middle tax band, which currently starts at $38,000, could be moved upwards to $45,000 or $50,000, and that the top tax band could be moved from $60,000 to $80,000.

The government has not said how much it will spend on tax relief, although speculation has centred on a $2b package.

If the top tax threshold were moved from $60,000 to $80,000, 248,000 taxpayers who earn between those amounts would stay in the middle tax bracket.

Another 200,000 taxpayers who earn more than $80,000 would benefit by not having to pay an extra 6c in income tax between $60,000 and $80,000, amounting to a $1200 cut each in their tax bill.

Prime Minister Helen Clark has said Labour was looking at its overall "social wage'' to help families under pressure.

These policies included Working for Families, the cost of childcare and doctors' fees.

PRE-BUDGET TAX

Current effective tax rates (with low-income rebate)

15c per $1 on income up to $9500

21c per $1 between $9500-$38,000

33c per $1 between $38,000 and $60,000

39c per $1 over $60,000