National's u-turn on Kiwisaver should not be trusted

The National party attempted to make a swift u-turn today when its Industrial Relations Spokesperson Kate Wilkinson told an employment relations forum that National would do away with the compulsory employer contributions to Kiwisaver. "The National party is not a party of compulsion".

Under pressure from her boss, John Key, Wilkinson issued a later statement claiming she had "misinterpreted the question" (yeah right). "National will release its Kiwisaver policy later this year, but suggestions that National will do away with compulsory employer contributions to the scheme are incorrect.

According to Key, Wilkinson "got it wrong", and added that National's industrial relations spokesperson is not involved in the setting of National's Kiwisaver policy. Perhaps Wilkinson was only guilty of telling National's wealthy backers what they want to hear. Perhaps this is a also a sign many National MPs are currently sharpening their hatchets, desperately looking for ways to cut government spending to fund tax cuts, following a budget that tied up most of the cash.

Despite it not being National's day, I think the media have missed something important, and have subsequently let Key off the hook with his refusal to outline any further detail about National's Kiwisaver policy.

While employers have to make contributions to their employees Kiwisaver accounts, employers also gain tax credits for doing so. These tax credits reinburse 100% of employer contributions up to a maximum of $20 a week. In situations such as the 2+2 scenario (where employees put in 2% and employers 2% to make up the 4% minimum) Kiwisaver does not end up costing employers any money more money (than paying 1%) when the tax credits are taken into consideration (for those earning less than 52,000 a year). Labour have set aside a total of $2.4 billion to compensate employers for their 'contributions' over the next four years.

National's denials come with a pungent stench of weasel. National could keep the employer contributions, but give employers greater tax breaks so a greater proportion of employer 'contributions' actually end up being effectively subsidised out of the public purse. National could pay for this by trimming the government contributions, and dangle the prospect of greater tax cuts. This would be consistent with the comments made today.

The effect of such a policy change would also deliver to National's big business backers, who prefer corporate welfare when they can get it. The 650,000 New Zealanders who belong to Kiwisaver should not take any relief from National's blundering policy announcement today. As far as Kiwisaver is concerned, the National party still refuses to answer the key questions regarding their Kiwisaver plans.

Hat tip for some of the links NoRightTurn.

No recent posts due to internet issues

I haven't been able to post as much as I would like recently due to internet issues. Over the weekend my internet went from being slow to non-existent.

I hope to get it sorted soon.

Leading the tax system in a progressive direction

Vernon Small of the Dominion Post has made a cheeky post where he speculates on how Cullen could stop the very rich from taking the lions share of benefits from tax cuts.

His solution - introduce a new top tax rate of 42c in the dollar on incomes above $150,000, and thus allow greater tax relief to be given to those on lower incomes.

While I don't think its going to happen, I like it. The call for tax cuts could be answered, yet the left could claim a victory in making the tax system more progressive. If there are to be tax cuts, this does not necessitate complete submission to the screaming of the right.

There are many other ways the tax system could be improved. I would be happier about cuts to the top tax rate (39c at 60,000) if Cullen used the opportunity to introduce structurally useful changes such as a capital gains tax on secondary residential properties, and/or a financial transactions tax to discourage short term speculation. While the currency speculators may have means of avoiding the later (eg the EuroKiwi), it may still lead to a lower and more stable currency, which makes the Kiwi a less exiting toy for international currency speculators.

Many other countries have a higher top tax rate than 39c, but they generally apply at a higher threshold. If Cullen dared to introduce a new top tax rate, the National party would scream on behalf of its very rich mates, and Cullen could point this out with some of his trademark glee. Yet in order for this to work Cullen would be best to deliver tax cuts before the election, so voters can't be hoodwinked by the Nats into believing a $150,000 threshold is going to affect them.

As the Nats have called for the New Zealand tax system to be more like Australia, shouldn't we also have higher tax rates at higher thresholds? Kevin Rudd recently increased the threshold of 45c tax rate to $180,000 - why do the right wingers never mention the existence of the 45c rate?