Monday, January 14, 2008

How Labour could win

I think it's fairly inevitable that the Nats will win the next election, failing some sort of amazing stuffup, like John Key flying off to Langley in election week to collect his updated CIA instructions.

However, this needn't be the case. Labour's excessive caution has given average NZ voters a fairly small set of reasons to vote for them. Where they have let go a little (interest-free student loans, 4 weeks holiday) it's been a win for them (the former probably gave them that little push over the line at the last election). What they need to do is a whole lot more like that - policies friendly to the average worker that will drive a wedge with the Nats and enable Labour to paint them effectively as the rich peoples party.

I'd suggest:

1. Zero tax for average families. We actually have this now - if you get Working for Families credits you pay no *net* tax up to just under average earnings. But because they can't be linked, people don't see this. I'd provide an option for anyone in that position to opt for either the current system, or to have no tax and a reduced tax credit.

2. Zero tax for average workers. This would maybe need to be phased, but I'd bring in a personal allowance that would take an increasing set of workers out of tax.

3. Free lifetime education. We should phase out tuition fees and introduce free education for everybody. This would be both degree level for those qualifying and also any other level, so if a 40-year old wanted to retrain for a new career, they would have the benefit of free tuition. Equally, those who have run up existing student loans would get their tuition components credited back.

4. Five weeks annual leave at a time of the workers choosing. Compulsory leave and compulsory work weeks would be banned. This would need to be phased in over a few years to avoid a sudden business impact.

5. Make the very rich pay their share of taxes. I'd introduce a 50% income tax rate on salaries over $200k and a capital gains tax on assets of $1mln. This would have zero effect on ordinary people, would raise a bit of useful revenue and would take the top off the property market, making houses more affordable for ordinary Kiwis.

This would all make the Nats and ACT spin out and blow steam from their nostrils. Good. The more they froth, the more people would realise that they are batting for the guy with the Porsche and the Omaha beach house, not for them. Especially when they start moaning that they can't spend more than $120k on campaigning.

But it won't happen, sadly.


Genius said...

As I have said for a long time
Labour can outbid national in terms of tax cuts - just like you are suggesting here - make big cuts to low income levels.

3) problem is that there are already thousands of people in NZ doing useless courses (particularly those silly tourism, business and management courses). I suggest degrees like medicine, engineering, Btech, computer science could be free - then you don't subsidize ones that are a waste of time.

4) I would think it would be better to do that when the economy is not running hot...

5) also one needs to tighten up the tax system a bit so that money doesn't just get flushed through a company or property investment. But yes we have a very low top tax rate.

my simple suggestion is a new top tax rate around 80k or so (I want quite a bit of money from this), and a big cut to the low rates - a net tax cut of a fair size but something that national can't compete with in the low to average income bracket. (a zero tax zone plus a cut elsewhere)

I wonder if labour could get away with a "we will match or better any offer made by national for the average income". Or present a basic tax package and some ill defined credit system that will be gerrymandered to just beat nationals tax cut package.

They could then argue they are being better for the average voter's pocket AND more fiscally responsible.

George Darroch said...

The Greens have been arguing for a bottom zero tax bracket for years, and quietly been ignored by Labour)

The sheer stupidity of the three bracket tax system astounds me. A bottom tax rate of zero should be instituted, all the current brackets should be moved, and this move funded by a top tax rate commensurate with pretty much every other developed country in the world.

And dental care. If Labour spent half as much on subsidising the nation's teeth as they did roads... people care a lot more about their teeth in my experience than they do about motorways through Mt Albert.

As you and I have written, if Labour lose this election, it will be their own fault, for failing to mark themselves out as anything but "not National" (which is certainly true).

George Darroch said...

This is what a three band tax system results in -

"In New Zealand, for example, only the richest tenth of households pay much more under the country's progressive income tax than they would under a 25% flat tax (see chart on page 71). Most of the redistribution in New Zealand is carried out on the other side of the government's ledger, by spending more money on poor people."