PM Key argues quake levy would have to last 15 years as Greens say 57% of NZers support proposal

PM Key argues quake levy would have to last 15 years as Greens say 57% of NZers support proposal

By Alex Tarrant

Prime Minister John Key is attempting to pour cold water on the Green Party's calls for a five year levy to help pay for the Christchurch rebuild by saying it would need to be applied for 15 years.

His comments came as the Greens released a poll where they claimed the majority of New Zealanders support their proposal.

The Greens say 57% of New Zealanders support their idea for a temporary levy on personal income taxes to help pay for costs from the February 22 quake, although there could be questions on the drafting of the poll the party used to guage public opinion on different options to pay for the rebuild.

Early estimates have the quake costing the government about NZ$5 billion as well as another NZ$5 billion in reduced tax revenue over the next four or five years.

The government has increased its borrowing programme to pay for the immediate costs arising from the earthquake, such as business and wage support packages, as well as civil defence and temporary housing costs. Treasury said last week it was increasing the government's borrowing programme by NZ$1.5 billion to NZ$15 billion for the year ending June 2011.

Government has indicated it will then tighten its budget spending as it looks to get its books back to a "meaningful" surplus by 2015/16 to start repaying debt. So far, only the education, health and justice departments are in line for nominal spending increases, with savings having to be found from other areas. It is not yet clear whether those three departments would receive real increases to cover the costs of inflation, although Key has signalled moves should be "fairly consistent" with government's previous plans to cover for inflation.

'Levy would mean less borrowing'

Green Party co-leader Russel Norman has called for a temporary levy on incomes over NZ$48,000, and a slightly higher levy on incomes over NZ$70,000, to help reduce the government's borrowing requirements in the face of the threat of a credit rating downgrade from international ratings agencies.

A series of different scenarios prepared for Norman by the Parliamentary Library show a levy could raise between NZ$229 million per annum with just a levy, to NZ$1.026 billion per annum if government reversed its April 1 corporate tax cuts and applied a levy. The top scenario would see a 1.5% levy placed on current taxes on incomes over NZ$48,000, and 3% on incomes over NZ$70,000.

Five years of such a levy would cover the government's estimated costs from the quake, Norman claims.

But Key this morning continued to say a levy would have to be applied for much longer than the Green Party was proposing.

"Let’s say you follow the Greens, choose to put a levy on, it will raise around NZ$600 million a year. Well, you’ve still got to borrow. The earthquake’s going to cost a hell of a lot more than NZ$600 million," Key said on Radio Live this morning.

"So if you went to people and said, well you’ve got to borrow, the question is how you repay: Either by the government spending a little bit less than it otherwise would do, or sending you a bill, by the way, for 15 years, then I think you might find that the majority of people would say, ‘I’d rather have the government trim its expenditure a little bit’," Key said.

Greens say public supports levy, Key questions poll

The Green Party last week commissioned a UMR poll to try and guauge public opinion on how to cover the government's NZ$5 billion cost from the quake. The full poll can be viewed here.

The headline question asked:

Several options have been suggested for helping to pay the cost of rebuilding Christchurch. One option is introducing a temporary levy on top of the current personal income tax rates. This levy could be an additional 1.5 percent for those earning between $48,000 and $70,000 and an additional 3 per cent on money earned above $70,000. Do you strongly support, somewhat support, somewhat oppose or strongly oppose a levy along these lines?

Of the 750 respondents, 18% indicated they strongly supported the idea, while 39% said they somewhat supported the idea, giving 57% in the 'total support' category. Seventeen per cent said they somewhat opposed a levy, while 22% said they strongly opposed a levy, while 4% were unsure.

The second question from the poll was:

The government estimates it will have to spend around $5 billion to rebuild Christchurch following the earthquake there. Would you prefer the Government fund the cost of rebuilding Christchurch by:

A) A temporary levy on New Zealanders with incomes over $48,000,

B) The government borrowing, that is taking on more debt to fund the rebuild,

(OR)

C) Making big cuts to government spending on programmes likeWorking for Families?

Forty per cent of respondents said they supported (A), the levy option, 22% supported (B), the borrowing option, and 29% said they supported (C), the spending cut option. Nine per cent were unsure.

However, although the first question said a there were several options to help pay the government's costs, the second question was worded in a way as to signify only one of those options would be possible to pay for the quake costs.

“That poll, like any poll, if you don’t ask the right question you get the wrong answer," Key said on Radio Live.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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17 Comments

How it was reported in the NZ Herald -  http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10716936

 "That respondents favoured the levy over increased debt or spending cuts showed New Zealanders understood the economics of the matter "and support a fiscally responsible approach".

"Kiwis get that more debt is very bad for the country and deep spending cuts will be catastrophic."

"Spending cuts increase the chances of a new recession so you think from just a rational policy point of view that's a pretty silly thing to do. A big increase in debt risks a credit rating downgrade and that's a real problem."

New Zealanders don't understand the economics of the matter at all - they don't realise that other options exist and that our pollies are unwilling to think outside the box.

Our media are also adding fuel to the fire with their misinformed reporting of government expenditure cuts referring to frontline cuts rather than the need to get rid of the "waffle" that doesn't provide any service.

 http://www.nzherald.co.nz/economy/news/article.cfm?c_id=34&objectid=10716883

meh, what are the other options that you refer to?

Gareth, I refer to ideas that have been posted here, specifically that by Raf/Sustento.   http://sustento.org.nz/wp-content/uploads/2007/05/A-New-Financial-Deal-for-Christchurch1.pdf

I have added additional ideas to the above to use the unemployed for the extra labour requirements for rebuilding, and also restricting the likes of Fletchers etc from making profit from rebuilding.  Limit the inputs to the cost of wages/materials and so forth.  I don't believe anyone should be making a profit from this situation.

The point of my post was that our politicians are unwilling to think outside the box and even look for other options.

Thanks meh. Was just wondering what you had in mind.

Between PAYE , tax on interest , GST, ACC, Fuel Levies, and municipal Rates  I already pay  over 60% of my income in taxes.

Quite simply , we cannot go back to 39% income tax , I will simply be forced to take my Capital and skills and become a financial refugee in Australia.

Hopefully they dont throw us in a refugee detention centre  over there 

oooh Boatman I wouldn't go there unless you are in the finance or mining industry where there still is a lot of money to be made but for the rest it is not that good and getting worse.  I like the levy and the reversal idea instead of borrowing yet again.  While our public borrowing is not that bad, the private is terrible and is just getting worse.  But we need to look after ourselves and all work together to clean up Christchurch.  Mind you I like the idea of 1/4 cent of every dollar that is deposited in a bank account, with no tax deductability, going towards the Christchurch restoration.

Patricia, I dont mind contributing , but I am a Baby Boomer , and will retire in a decade although I plan to carry on working unitl my 70's .I dont want to retire into poverty , and I need to accumulate as much as possible while I can work , so as not to be a burden on my children or the state.

Remember another  tax / levy simply takes away each dollar taxed and re-directs spending to somewhere else , having a draining effect on the rest of the economy . 

An additional tax will not help you or I  or any New Zealander.

The idea of a tax of 1/4 cent over every dollar banked is ludicrous , peoplle will simply keep their money in safe deposit boxes, having a severe knock-on effect on the Banking system . The big retailers and petrol stations ( many owned by the NZ  Super fund) will carry the burden of this .

To avoid this , I will simply deposit  all my income in my Aus $ account to avoid the tax .

So what? Popularity doesn't make a policy right, any more than being right makes a policy popular. 

In supporting this proposal people are not saying that they themselves want to pay more.  This proposal is not necessary to enable them to pay more.  People who wish to sacrifice a proportion of their own income to help Christchurch already have that option, through numerous means, for example making donations to the Christchurch Mayoral Fund. 

What they are therefore saying is that they want other people to be made to pay more for the purposes of helping Christchurch.

No sh*t Sherlock! People always want more of other people's money to be spent on all sorts of things. That doesn't make them right, or generous, and it certainly doesn't mean a good Government should always respond to their wishes.
 

That's an old argument, from the era of old ideologies.

Yes, there were once two general groupings, ones who 'had it good', and ones who 'wanted to'.

Bosses vs workers, Left vs Right, rich vs poor, call it what you will.

They all assumed an infinite supply of potential future 'wealth', and whether they thought it through or not, that wasn't always going to be available.

At this point, the Greens are the ones most likely to understand that future repayments are going to be increasingly compromised. Without being aligned to any party, I made this point to the DCC re their stadium (which this Govt casually threw 15million at to seed it) - they will never get to pay it off - energy depletion sees to that.

Same with Chch debt - better here and now, it's cheaper in relative terms. Beyond peak energy, money becomes exponentially harder to come by.

'money' or the effective ability to produce goods will become harder to do but I think that will focus us on the requirements of life, ie food & shelter, The is a lot of fat in the western economies that can be lost before we default on these.

The problem will be that rather than a gentle acceptance of this fact there will be pyrrhic battles fought to retain the dream

Neven

The term "temporary" is very misleading. Temporary is several years. 15 years is not temporary.

Let me guess 18% of the respondents earned less than $48K

@Neven 911 Yes , they pay virtually no tax whatsoever, and what they do pay they get back in Working For Families .

Actually more than 80% earn less than 48k. Hardly surprising that people are voting for other people to pay a levy.

http://www.stats.govt.nz/Census/2006CensusHomePage/QuickStats/AboutAPlac...

The survey by Green's is flawed as included within the statistics were people who would not contribute a cent to the levy. Of course, they are going to vote for the levy when someone else is paying for it!!!

Surely, any credible survey would only survey those who are being asked to pay for it.

Typical Greens policy, how about the 57% actually paying some tax, because they would pay very little with the present system, rather than slug those earning c $60,000 plus who pay huge proportion of income tax

As a rich prick Christchurch resident who pays a fair whack of tax and uses very minimal state provided service it will really annoy me having to pay out even more money that I don't get value for.

Time to cut out these state service buildings in Wellington. Plenty of Ministry's in the capital that serve no worthwhile purpose other than slowing down progress and keeping academics in a job.