Selfish media campaigns against badly needed tax cuts.
The Labour govt and its media comrades claim tax cuts aimed at reclaiming the $4 billion extra collected (due to inflation and bracket creep) are a bad idea. Because they will increase inflation and because Liz Truss has backed down on a similar idea in the UK. The two arguments are completely fallacious, and here’s why-
First, some history. In 1891, NZ’s top rate of individual income tax and company tax (on profits) was 5%. This was roughly 4% of GDP, and averaged out at around $170 per head in current dollar value. Today the top rate is 39%, around 40% of GDP and we pay overall $28000 tax per head.
Taxes overall were relatively low up until 1939, when they almost doubled. Ostensibly for the war effort, but actually to stop NZ defaulting on the debt incurred by Labour’s post depression welfare spending. They never returned to previous levels.
Up until 1958 taxes were paid annually in a lump sum and were relatively stable around 25% of GDP. PAYE was then introduced, which meant the money was taken from a workers pay before he/she saw it, and by 2005, the tax take had risen to 38% of GDP.
Over recent decades, Labour has gradually make changes to tax and welfare that are difficult for any incoming opposition to reverse. National called Labour’s Working For Families “communism by stealth” when first implemented, but in power, they realized reversing the legislation would cost them too many votes. Instead they increased the payments.
Today, around 500,000 govt workers draw down on taxes for their salary and this number continues to grow. A conservative estimate of annual wages and expenses for this army of public servants sits at around $50 billion.
Figures released this week reveal the government is spending $NZ140 billion overall to keep the current govt operating and the recipients of their largesse satisfied. Yet on almost every core service, education, police, roading, health, the govt is failing to deliver.
We exacerbate this problem by spending billions on a myriad of govt depts and services that add nothing to our ability to produce goods. Leaving aside the billions wasted on a lemming like preoccupation with the myth of man caused climate change.
Today, due to inflation’s impact on tax thresholds, individual wage earners are paying $4 billion more in tax than a few years ago. The National Party’s plan to recover $3 billion of this (with $1.7 billion going to lower and middle income brackets) has been scorned by the Ardern govt. Supported of course by her faithful media comrades. Who receive millions in govt subsidies, and no doubt fear for these subsidies if taxes are cut.
Tax cut opponents claim they will lead to inflation, but where is the difference if the govt or those who earned it spend it? Especially when the govt is spending around $140 billion anyway. $3 billion in morally due tax cuts will have virtually zero inflationary effect.
Inflation is the result of the money supply becoming out of synch with production. Too many people are paid too much for producing too little. A problem massively exacerbated by Ardern’s unnecessary Covid19 shutdowns.
We need more goods delivered to the market, and to simultaneously stop handing out fake money to a legion of bludgers, pencil pushers and work for the dole recipients (for example Race Commissioner or Disinformation Project) who will not produce.
As for the “look at the UK” argument, it is a false equivalence. The issue there is not tax reductions, but markets worried by the unstable state of the govt. Like National in NZ, the UK Conservative party has been fully infiltrated by leftists, and the party could not unite on tax cuts. This instability will be their downfall at the next election. If they even make it that far.
The UK also has the same problem with media. Liz Truss could have stuck to her guns, but faced with the unrelenting negative propaganda from the left wing BBC and the instability within her party, she caved. Luxon will probably cave too.
An excess of misplaced faith in govt has led to this situation. Unless we start shrinking govt very soon, a future Tytler style economic collapse in NZ seems inevitable.
NZ badly needs an articulate and especially inspirational leader who can convince citizens of the dangers of the present path and importantly, is not intimidated by a corrupt MSM. From his garrulous and ineffectual attempts so far, it is painfully obvious that green lefty Christopher Luxon is not that leader.
Perhaps the only way we will ever see such a leader is when they arise from the dystopian ruins. So sad. New Zealand was once such a great little country. (link to blog Adventures in Paradise)