“We just don't believe in tax cuts - it's against our fundamental philosophy - after all we are socialists and proud of it.”
— Dr Michael Cullen
No wonder Dr Cullen found it difficult to announce his meager tax cuts in this weeks 2008 budget announcement, because his party simply does not fundamentally believe that personal tax cuts are deserved by the working people of this country.
Cullen of course believes that he knows best and that he should hold on to most of your money because he knows best how to spend it. He has done that for 9 years now and simply because it is election year he is giving your money back at an average $16 per week. The price of a ticket to the latest Indiana Jones movie.
We all know that tax cuts do stimulate economies but this is far too little and far too late. Costs imposed on individuals and business by Labour put us way behind where we were in 1999 and most workers would require $200-300 to have them back at status quo.
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We can exclude so-called "working for families" from the tax equation because it is welfare and we are talking about tax cuts here and not handouts.
The focus of this budget on yet more welfare, through working for families, higher student allowances and unemployment benefits and higher profligate spending on embassies, Governor General house renovations and train set purchases just shows where Labour's priorities lie. The extra spending on these u necessaries far outweighs their meagre cuts in taxes and in these dire economic times you cut back on spending, you don't spend more on luxuries.
That is where the wriggle room for National comes in promising more money going back to those who earn't it in the first place.
A far better tax cut regime would have been the first NZ$10000.00 tax free and a progressive rise to around 20% tax rate to $30,000 of income then a tapering off to 10% after that as incomes go higher-an incentive to work harder/smarter, instead of the current disincentive as the tax rates go higher the more you earn. That ain't going to happen under National either but one can dream nonetheless!
If this was a budget to help pout those in need because of the current blow out in oil, food and service prices then the October 1 cuts would have been brought forward to June 1 but there will be an election not long after Oct 1 and as Michael Cullen rightly says:
My view is that tax cuts are largely offered as a political bribe, not because of beneficial economic or social effects.
Cullen's maxim doesn't not apply to National as they have always been consistent on personal tax cuts. They believe in them, they always have and it has always been one of that party's main economic tenants-that is, kiwis know best how to spend their own money, not the government.
A chorus that has been sung by Labour since our economy went pear shaped and reiterated in the budget is that "global economic conditions" have affected our economy. Sure they have, but the largest negative affect by far has been Labour's mis-management of the economy for the last 9 years. Hard work by our businesses and middle classes (those that provide the bulk of taxes) provided the best economic conditions in generations but the good times were squandered by Labour. High taxes, regulation and reckless government spending have led to a doubling of mortgage rates, higher food and energy prices and inflation. These things happed before any global slowdown and it is simply a lie to say otherwise.
What was needed in the 2008 budget was a vision for its people. That is, a strong focus on hard work and personal responsibility and incentives to enable that. What we got was more of the same. Energies channeled on State involvement in our lives and a tax and spend policy that would extend into a Labour 4th term should we all be unlucky enough to have them foisted upon us again for another 3 years.
We will leave the second to last word(because I always get the upper hand over her) to our Aunty Helen:
Tax cuts are a path to inequality. They are the promises of a vision-less and intellectually bankrupt people.— Helen Clark, speech to 2000 labour Party Conference
Tax cuts are actually the path to fairness, equity and personal responsibility, the intellectually bankrupt tag goes to those who disagree or would cut personal taxes weeks before an election.
c Political Animal 2008
