Wednesday, October 08, 2008

A very cunning stunt

Finally, after much slavering anticipation from the media hounds, the Nats have unveiled their tax policy. In a snappy two and a half page document with a two page "what's in it for me" index, Bill English has presented an eminently sellable bunny.

No extra borrowing, and the price tag is transparent enough. Anyone arguing over these esoteric costs are on a hiding to nothing. Even I/S sees sense in eliminating the KiwiSaver employer tax credit. The 2 percent minimum entry to KiwiSaver is correcting a serious blunder that Cullen should have fixed right from the get go. The R&D credit has been cashed up, but that's got me thinking about what's going to appear in the Tertiary Education policy. I've got a hunch that university research will get a boost.

The thresholds and tax levels are gradually adjusted over 3 years. Whilst I/S contends that the big winners from this will be the top income bracket, it's only a 2 cent retreat from the 39 cent rate that Cullen introduced, and can be dismissed as a long overdue fiscal drag adjustment. Everybody gets something, and it's noticeably more than what Labour have managed to return.

But wait! There's more! Instead of fiddling with Working for Families and asking for trouble, the Nats have turned the tables with the Independent Earner rebate. Starting at $24,000 (37 hours at minimum wage per week) and abating above $44,000, a significant chunk of voters got an extra little tax cut. The only criteria is that the recipient is not on any form of government welfare.

It's a policy that looks like it's aimed at all those responsible non-breeding taxpayers, as well as those Kiwis overseas who might want another reason to return to these shores. And it does that. But it's not just for singles and no-kids couples. It's for everyone. The policy is cleverly aimed at weaning families off welfare and back onto a simpler and cleaner tax code.
From 1 April 2009 the rebate will be $10 per week. From 1 April 2010 it will increase to $15 per week.
What happens in 2011 and 2012 with this rebate is left unsaid. It's fair to say that the incentive to continue on Working for Families will decline. In the long term, it will be scrapped not because the Nats want to, but because the dwindling recipients of state largesse make it unfeasible to continue. The policy will inevitably die through a lack of popular support, or be replaced with a more effective delivery vehicle.

But more curiouser still, and the most salient point I've found, is this little note in the KiwiSaver policy just before the "what's in it for me" charts :
National remains committed to continuing the New Zealand Superannuation Fund in its current form and with the current rules that determine annual contribution rates.

National firmly believes that security, stability, and predictability are vital in the area of retirement incomes. Bipartisan support and long-term commitments to the Superannuation Fund will ensure this.

Despite the recently announced losses from the fund, National believes it will make returns over the longer term that are adequate to fulfil its objectives.

In the longer term, National’s plan for the economy aims to generate the sort of investment opportunities that may enable more of the fund to be invested here in New Zealand.
Very bloody interesting.