David Farrar: Joyce on tax cuts

Steven Joyce writes:

If you believe most of the commentariat, and apparently a majority of economists, the Government’s much-signalled and much-promised tax cuts are a very bad thing. Yet according to a Taxpayers’ Union poll, 74 per cent of New Zealanders surveyed want tax thresholds adjusted for inflation. In other words, a tax cut. How has the public managed to get so out of step with the thought leaders in our society?

I’m no unalloyed fan of the Taxpayers’ Union. It used to take more than occasional potshots at me when I was a Cabinet minister, casting me as a spendthrift adrift on a sea of profligacy. Of course, that was before it met the most recent Labour Government, but I digress. It does seem to have cottoned on to something which has eluded many people. And that is, members of the New Zealand public are roundly sick of being fleeced by their Government.

You don’t have to look too hard to see why. The 17.5c in the dollar tax rate has cut in at $14,000 of income and the 30c rate at $48,000 since 2010. Meanwhile, rampant inflation has driven people up the nominal wage scale so they have ended up paying ever more of their wages to the taxman.

Losing 30c in the dollar or even 33 cents (the rate at just $70,000) gets tedious pretty quickly, particularly when you lose a further 15c in GST when you actually buy something. Between cost increases and this stealthy increase in taxation known as fiscal drag, the much-discussed middle-income New Zealander has been well and truly squeezed.

Someone who was on $70,000 in 2011 will be paying $3.000 a year more in tax now than in 2011, for the same income in real terms. New Zealanders have had 13 years of stealth tax increases and these should stop.

David Farrar runs Curia Market Research, a specialist opinion polling and research agency, and the popular Kiwiblog where this article was sourced. He previously worked in the Parliament for eight years, serving two National Party Prime Ministers and three Opposition Leaders.