No time for tax cuts

Admittedly we should not be surprised as it is part of the conservative ideology to withdraw the tax man as far as possible from ones life, preferring that expenditure be paid for using other means. Those means include user-pays, heavier fines, and so forth. Whilst it is true that there is certainly a place for user-pays and heavier fines, it is also true that sometimes there will be necessary expenditure that simply cannot come from these sort of payment methods

I also note that in New Zealand over the last two decades the tax regimes for both the Labour and National-led Governments in that time have been confined to a very narrow and perhaps not altogether appropriate band of brackets. When the Labour-led Government of Prime Minister Helen Clark was in office, the tax brackets were:

  • 39% for $60,001+
  • 33% for $38,000-60,000
  • 21% for $9,500-38,000

The National led Government of Prime Minister John Key set tax brackets as follows:

  • 33% for $70,000+
  • 30% for $48,000-70,000
  • 17.5% for $14,000-48,000
  • 10.5% for $0-14,000

It has been indicated by the Government that there maybe significant income tax cuts next year as an attempt to appeal to the voter going into the 2017 election. The shape of which is not certain, but most likely includes a cut of the top rate.

Both Governments introduced higher G.S.T. – Labour increased it from 10% to 12.5%, which National then increased from 12.5% to 15%. Philosophical arguments vary on whether or not to cut it. New Zealand First for example proposed in 2014 to take G.S.T. off food, which was costed at about N.Z.$3 billion. I personally like the idea of G.S.T. being removed from fruit and vegetables, the rationale being that if the cost can be lowered, it will be less of an impediment to putting healthy food on the table.

I am personally against income tax cuts, but also against the narrow spread of the income tax brackets, favouring a more even spread over a wider income range. Before we attempt tax cuts of any sort, a bigger effort needs to be made to get the higher income tax payers and corporate tax payers paying all that they owe. Also, New Zealand has racked up significant debt in the last five years. Some of this debt was caused by expenditure necessary to stimulate growth in the economy, to get it out of the recession. A significant part was racked up as a result of the 04 September 2010, 22 February 2011 and 13 June earthquakes. Although much of this expenditure was purely out of necessity, it has to be paid back at some point, and that has not yet really started. New Zealand, lest we have another major disaster, needs to improve our lending rating so that if we are forced to borrow for an emergency in future, our credit account is healthy enough to sustain it.

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