Overall, the changes are minor. Yes, many people would be able to earn more before moving into a higher tax bracket. And yes, there are some further tax cuts for low- and middle-income earners.
These tax cuts will cost $14.6 billion over five years.
But still, this is only a small reduction in the government’s expected tax revenue. It makes you wonder, why National would not go for bigger changes? Perhaps it will when Treasury’s pre-election forecasts are published.
But the signal for now is that National broadly plans to maintain Labour’s current spending levels. These spending levels are high. And big spending means little room for tax cuts.
This is disappointing because New Zealand’s government is too big. And it is getting bigger.
Figure this: Budget 2023 projected that Government spending during the next five years would be 33% higher on average than in 2019. And it is not as if we would get better government services from all that spending.
The state of New Zealand’s finances is concerning.
By the way, it is not just that the state is too big. It is also that a lot of spending happens without proper scrutiny.
There is another problem because we are also running big fiscal and external deficits. Not even the high taxes we pay are enough for the government to pay for all the things it does. And, as a country, we are spending more than we earn.
But deficit-spending is risky, especially when our earnings from exports like dairy and tourism are declining.
Of course, politicians want to get elected. And so they like promising things like tax cuts. I get that.
But the country actually needs something else.
As a nation, we can only move forward if we become more productive. That means becoming better and more efficient at in everything we make, do, build, design or produce.
If we look at this bigger picture, the real question is not about minor tax adjustments. It is about the policies to help New Zealand prosper in the long run.
For instance, improving education and skill development. Supporting businesses to innovate and grow. Does hard work get rewarded?
While tax tweaks grab headlines, these issues need voters' attention.
Instead of finding different ways of slicing a meagre pie, how about baking bigger and better pies?
Dr Bryce Wilkinson is a Senior Fellow at The New Zealand Initiative, Director of Capital Economics, and former Director of the New Zealand Treasury. His articles can be seen HERE. - Where this article was sourced.
But the signal for now is that National broadly plans to maintain Labour’s current spending levels. These spending levels are high. And big spending means little room for tax cuts.
This is disappointing because New Zealand’s government is too big. And it is getting bigger.
Figure this: Budget 2023 projected that Government spending during the next five years would be 33% higher on average than in 2019. And it is not as if we would get better government services from all that spending.
The state of New Zealand’s finances is concerning.
By the way, it is not just that the state is too big. It is also that a lot of spending happens without proper scrutiny.
There is another problem because we are also running big fiscal and external deficits. Not even the high taxes we pay are enough for the government to pay for all the things it does. And, as a country, we are spending more than we earn.
But deficit-spending is risky, especially when our earnings from exports like dairy and tourism are declining.
Of course, politicians want to get elected. And so they like promising things like tax cuts. I get that.
But the country actually needs something else.
As a nation, we can only move forward if we become more productive. That means becoming better and more efficient at in everything we make, do, build, design or produce.
If we look at this bigger picture, the real question is not about minor tax adjustments. It is about the policies to help New Zealand prosper in the long run.
For instance, improving education and skill development. Supporting businesses to innovate and grow. Does hard work get rewarded?
While tax tweaks grab headlines, these issues need voters' attention.
Instead of finding different ways of slicing a meagre pie, how about baking bigger and better pies?
Dr Bryce Wilkinson is a Senior Fellow at The New Zealand Initiative, Director of Capital Economics, and former Director of the New Zealand Treasury. His articles can be seen HERE. - Where this article was sourced.
4 comments:
Some time back both Act and National spoke of zero-basing the public service. Yes, support for education is very necessary, preferably a complete overhaul of teacher training and our dreadful curriculum. Also support for business/farmers/exports, growing the pie and increasing productivity. But this time let’s also cut the bloat and huge waste in the public sector. It’s like a runaway train absconding with our taxes for very little, if any, return. National hasn’t been previously been good at this. Act however would love to make real change happen - and boy do we need real change this time.
Well said Bryce. NZ needs massive spending cuts in the right areas. Tinkering, as you correctly say, with taxes is so "last century" as the young people say.
We will see what happens after the books are opened in mid September, but I'm not holding my breath for a major set of policy changes, from anyone.
Where is the incentive to become more productive, when there is a constant stream of low wage workers allowed to enter our country?
Perhaps it is time to cut the flow. It would cause some pain initially, but lead to more investment creating productive workers. Instead we are still going through the pain, just with no end in sight.
Yes - by now, both the problems and the solutions are well known on the technical level.
What remains unknown is which political party (or coalition) will address this - in depth and beyond the spin.
This is what is so alarming.
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