So Bill English has said there is now no room for tax cuts, specificially:
New Zealand had to get out of the tax-cut “mode” it had been in for the past five years, he said, because of the new economic conditions, which see budget deficit forecasts of up $12 billion for the next 10 years.
So since not cutting taxes in the face of inflation is actually “increasing real taxes” Bill English is saying we need to get rid of the Budget deficit by gradually increasing taxes.
There is another way – cut real spending. If New Zealanders are in “tax-cut mode” because they think real spending is too high, and would rather have a government that is a smaller share of GDP, then we should cut taxes and actually do something about spending.
Mr English is attempting to soften the ground for what could be some radical ideas emerging in the next few months from the comprehensive tax review being undertaken by leading tax experts.
I am glad to see that they are looking at ways to improve the tax system. But this is only part of what needs to be looked at. I know that we are being told they are cutting spending, but I’m not sure if there is much more scope for cutting morning teas to public servants.
We need to look at the hard issues (namely: Working for families, interest free student loans, our high level of infrastructure spending) and then we need to ask, is this what we should be spending societies effort and production on?
Note: To be fair I have a lot of respect for the fact that Bill English admitted the limits on tax cuts and spending. That sort of transparency is an important part of good government, so it is awesome to see.