Innumerate Greens
I honestly cannot believe that the Greens have made such a simple mistake, in a document which is intended to set out how they will finance their plans to significantly increase Government expenditure.
A Time for Choice
Click here for a downloadable copy of this speech.
Keynote address to the ACT Upper South 2011 Regional Conference
14 August 2011
On November 26 this year, New Zealanders face a choice.
That choice is often couched as “left” or “right.”
The ACT Party and I are often portrayed, by those who don't like us, as "far right."
Allegedly, we'd find Attila the Hun collegial company.
This of course is a shabby smear of a party that stands for individual freedom, by those who don't.
And in fact, as Ronald Reagan once famously observed, the choice today is not so much between left and right as between up and down; between a future … and no future worth speaking of.
America faces that choice again now. So do we. And it was never so stark.
In essence we can move up to a future where we have choice ... or down to a black hole where we don't.
Up to a future where the state exists for people … or down to a black hole where people exist for the state, as depicted in such frighteningly realistic novels as George Orwell’s 1984.
Up to a future unshackled by Big Government … or down to a black hole where communism and fascism have won politically what was denied them militarily: the subjugation of individual citizens to Big Brother.
Up to a future where enterprising New Zealanders are free to prosper by their own efforts … or down to a black hole where prosperity is something we're supposed to be ashamed of.
Up to a future where tall poppies flourish … or down to a black hole of Tall Poppy Syndrome, triumphant.
Up to a future where governments spend responsibly … or down to a black hole where we and our children are lumbered with involuntary debts foisted on us by governments borrowing recklessly to finance their bribes.
Up to a future where industrious New Zealanders are free to keep most of the money they earn, to spend (or save) as they choose, or down to a black hole of ... Phil Goffism: "If it moves, tax it. If it doesn’t move, pass a law to make it move. And then tax it."
Up to a future where people are free to do as they please on their own property provided it doesn’t damage the property of others … or down to a black hole where little Hitlers tell you what colour you may paint your house.
Up to a future where Kiwi kids come out of school fully able to read and write and equipped with all the skills needed to flourish in an open economy … or down to a black hole where too many teachers are themselves ill-equipped to teach.
Up to a future where all children are born because they are wanted … or down to a black hole where breeding unwanted children is a taxpayer-funded meal ticket.
Up to a future where all New Zealanders are genuinely equal before the law … or down to a black hole of racial separatism, where people have special statutory status based not on the content of their character but on the colour of their skin.
Up to a future where New Zealanders are free to air their differences in robust and fearless debate … or down to a black hole where free speech has been shut down by the stifling constraints of political correctness.
Ladies and gentlemen, this last is the most ominous threat from those who would take us on the downward path to a black hole. (Let's call them "Downers." If that makes the rest of us “Uppers” … well, I can assure you it’s an entirely legal high!)
By an insidious process of attrition, the Downers have achieved a double-whammy in recent years. By dumbing down education and the media, they've trivialised political debate to the point where it’s no longer a contest of ideas but a quest to establish which politician is the most "cool." That leaves the Downers free to get on with their agenda. That’s one whammy.
Then, if someone does rise above the mush and say something meaningful and challenging, he or she gets chopped down for being "polarising." That’s the other whammy. Polarising!? For Heaven's sake! Isn't the whole idea of having political parties that they put forward differing ideas – even radically differing ideas – and fight them out? That they set out precisely to polarise? That we take it in our stride as intelligent adults and choose among our competing suitors?!
Salman Rushdie, himself the object of an ayatollah’s fatwa, pointed out that freedom of speech is nothing without the right to cause offence. Of course, this is not to say we should go round causing offence all the time; just that being offended is not a licence to censor.
I urge you to immerse yourselves in the spirit of Voltaire: "I disagree with what you say but defend to the death your right to say it."
I'd also commend to your attention Section 14 of our own Bill of Rights, which says:
"Everyone has the right to freedom of expression, including the freedom to seek, receive, and impart information and opinions of any kind in any form."
That includes my right to say separatism is wrong, even if supporters of separatism are offended by my saying so! Let me say in passing I shall go right on saying it whether it causes offence or not. But I shall also defend to the death the right of separatists to disagree with me. May we please just have the debate without all the infantile umbrage, without people trying to close it down by whining that they’ve been offended?!
The right to impart opinions of any kind in any form even includes the right to say women are less productive because of their periods. The statement might be wrong, and the hapless Mr Thompson produced not a shred of evidence for it, but one shouldn't be able to be so readily destroyed by the Ayatollahs of Screech for expressing an opinion that is wrong. Voters should ask themselves what has happened to us as a society when such lynch-mobbery can prevail by sheer decibel power.
In this regard, I was reassured by news that several businesses had pulled out of the Employers and Manufacturers Association not because of Mr Thompson's comments but because of his dismissal for them. Of course the EMA had the absolute right to dismiss Mr Thompson – don’t get me wrong about that – but it augurs very badly for a future of "up" if it did so less out of genuine conviction that Mr Thompson's comments were wrong and reprehensible, than out of fear of the Ayatollahs of Screech.
I could, and shall, make similar comments about Lord Monckton's recent visit here. His Lordship is a distinguished critic of the view that climate change is man-made. He thinks we're being had by the Global Warmers, and produces powerful arguments to that effect. Astoundingly, almost no one in New Zealand was prepared to front up to him! The Greens initially agreed to debate with him on TVNZ's Q&A programme. Then they pulled out, prompting me to comment that the Greens had turned yellow. Being unable to find anyone who would debate Lord Monckton, Q&A itself pulled out, apparently not confident that its interviewers were up to the task of playing devil's advocate with someone they already disagreed with. Same deal on Close-Up.
In other words, one of the key figures in the debate on one of the pivotal issues of our time came to New Zealand … and was ignored by our main television network! Again, it's their prerogative, but it bodes ill that the state-owned channel is so beholden to politically correct theology. I congratulate TV3’s The Nation, and Leighton Smith’s programme on Newstalk ZB, for showing that, once again, it takes private enterprise to do the job.
Actually, freedom of speech should be indelibly etched into our DNA via the Treaty of Waitangi. Freedom of speech is foremost among the "rights and privileges of British subjects" bestowed on all New Zealanders by the Treaty of Waitangi. In the nineteenth century, the British prided themselves on valuing eccentricity over conformity, on untramelled freedom of speech. Thousands of New Zealanders went on to give their lives for this freedom. We should rage, rage and rage again against anything which threatens its demise.
What else, then? What else does ACT New Zealand say is necessary for a Future of Up?
Since this is a speech about the basic principles which alone can secure such a future, I can do no better than quote from ours:
The […]Party seeks a safe, prosperous and successful New Zealand that creates opportunities for all New Zealanders to reach their personal goals and dreams.
We believe this will be achieved by building a society based on the following values:
• Loyalty to our country, its democratic principles and our Sovereign as Head of State
• Equal citizenship and equal opportunity
• Individual freedom and choice
• Personal responsibility
• Competitive enterprise and rewards for achievement
• Limited government
Oh, wait! That doesn't seem to be the one. It sounds like us, but ...
Ah! In fact it's the National Party's statement of principles! No wonder I had something to do with the National Party at some point! It's an excellent statement of principles. I absolutely endorse those principles. The problem is, the National Party itself too often ignores them.
A government whose spending is 36% of GDP, higher than at any time during the Clark/Cullen Government, can scarcely be called "limited."
A government that continues to tax at punitive levels can hardly be said to be promoting competitive enterprise and rewarding achievement.
A government that is contemplating forcing us into KiwiSaver can hardly be said to be upholding personal responsibility.
A government that denies young people the right to work at youth rates can hardly be said to be upholding individual freedom and choice. Nor can a government that forces parents to send their children to the local school, even if it is poorly performing, or is single sex when parents would’ve preferred co-ed, or vice versa.
A government that appears to have no intention of honouring its promise to scrap the Maori seats and that tolerates the continuation of other race-based statutory privileges can hardly be said to be promoting equal citizenship.
And so on. You get the picture.
Of course, ACT's statement of principles is very similar to National's. And we actually mean them.
We start from the classical liberal premise that individuals own their own lives; government doesn’t. Self-ownership means individuals have certain inherent rights and responsibilities; government's role is to protect those rights … and not assume those responsibilities.
Now, since this proposition bucks the statism inculcated by stealth in our schools and other institutions over generations, it's not possible to achieve a society that conforms fully to it overnight. But the upward path is one that goes in that direction: individual freedom and responsibility, limited government. ACT is wholly committed to that upward path.
Over the next few weeks, I'll be outlining policies that will help get us on it. In fact, I’m happy to announce some of them right now:
* We'd make serious inroads into government spending, so that we don’t have to keep borrowing $300 million a week, and can reduce and flatten personal and company taxes.
* We'd scrap the ETS. Whatever you believe about the human influence on the climate, why should New Zealanders be lumbered with an all-sectors, all gases, tax on greenhouse gases when none of our major trading partners is?
* We'd make sure schools were places of learning, not social engineering. Learning would include the basics, including grammar, spelling and punctuation. Parents would be given vouchers with which they could choose which school, state or private, they sent their children to.
* We'd radically reform the welfare system so as to provide a simple, sensible and secure safety net for those in genuine need, but not a hammock for those who could support themselves. We'd change the rules around the DPB, to avoid its being used as a lifestyle choice by under-educated young women to their own enormous detriment, and the detriment of thousands of children born unwanted, often to be abused and even killed. That cannot go on!
* We'd abolish the Maori seats in Parliament and get rid of all other forms of race-based statutory privilege. All New Zealanders would have the equal rights guaranteed by Article III of the Treaty of Waitangi.
* We'd overhaul the RMA so that the current presumption that property owners must seek permission to do anything on their own land was reversed.
* We'd amend the Bill of Rights to include property rights. This is an old idea whose time has certainly come.
* We'd restore Youth Rates, and the 12,000 jobs that have been denied youngsters by their absence.
This list is not exhaustive. It is indicative of the approach ACT New Zealand takes toward the parlous situation confronting the country. We opt for freedom rather than coercion. We treat causes rather than symptoms. We know that, at this critical juncture in our nation’s history, boldness rather than timidity is needed.
We already have some significant runs on the board from our time in partnership with our National Party colleagues: Three Strikes, slightly more business-friendly employment law, the 2025 Taskforce, the Productivity Commission, nudging the Government toward liberalising ACC, regulatory reform, and so on. But there is much more to be done, and the need is urgent.
Ladies and gentlemen, I am passionately ambitious for our country. I don't want to see it simply catch Australia; I want it to give Australia the same trouncing it does on the rugby field! I don’t want it to be a place where our children come to visit from time to time, but a place where they choose to live because here they can get rewarding job opportunities, a world-class education for their children and a safe environment.
Once, we were such a place, with policies that rewarded the pioneering initiative for which we are rightly renowned. We can be so again. Free people are unstoppable. Together we can restore Paradise.
Down with Down. Let’s choose … Up!
Why a capital gains tax is a very, very bad idea
All taxes are economically damaging but the capital gains tax is easily the worst of the lot.
Taxes on capital gains doubly tax savings and investment, they are brutally unfair, they are complicated and costly to administer, they are easy to avoid, they raise very little money, they choke the economy and harshly penalise entrepreneurship and innovation.
Capital gains taxes double-tax income
The value of say a business is simply the net present value of its expected income stream. The income stream is taxed and so the capital value of the business is after tax. This is a key point.
Cut the tax rate and the business will be worth more. That shows that the capital value of productive assets is always after-tax. Let’s show a simple case.
A business generates $100 a year. The going discount rate is 10 percent. The value of the business is $1,000. That’s if there’s no tax.
Introduce a tax of, say, 30 percent, and the business now yields only $70 a year. The business is worth only $700. The tax liability is capitalised into the value of the business.
Now let’s say I buy the business and fix it up. I double its income to $200. In the absence of any tax the business is now worth $2,000 and I can sell the business and pocket a $1,000 capital gain. However, if there’s an income tax of 30 percent the increase in the business’s value is from $700 to $1,400. My capital gain is now only $700.
My gain is not tax free even though I appear to pay no tax on my gain.
That’s because the capital value reflects the extra tax the extra income the business generates.
A capital gains tax of 30 percent reduces my gain from $700 to $490. I am doubly taxed.
Capital gains aren’t tax free and a capital gains tax doubly tax savings and investment.
Capital gains tax is brutally unfair
There are plenty of ways a capital gains tax is unfair. Imagine a young widow with children whose husband poured his heart and soul into his business. Following his death the young widow has no choice but to sell the business. She has no income and no other assets.
The business was a start up. It generates $200 a year. After tax, that’s $140. The business sells for $1,400 upon which capital gains tax has to be paid at say 30 percent.
She nets $980. In the absence of any tax she would net $2,000.
The widow is taxed at 51 percent. That’s brutal.
Capital gains tax complicated and costly
Capital gains taxes for practical and political reasons are invariably riddled with exemptions and exceptions making them devilishly complicated to administer and to comply with.
We see that with Phil Goff’s proposal with exemption and exceptions already and having to be sent off to an 'expert panel' to be worked out.
The big complication is determining the true capital gain net of inflation after netting out the purchase price and the cost of maintenance and investment in the asset over the years. It’s hard to do financially let alone in terms of writing and then administering tax law.
It will be a great tax for tax lawyers, tax accountants, tax consultants and tax bureaucrats. But bad for everyone else.
Interestingly, but not surprisingly, Phil Goff’s proposal is not to net out inflation. That makes the tax somewhat simpler, but means New Zealanders will be taxed on their nominal gains.
The government-induced inflation rate over which you have no control will determine your tax liability. It’s not a trivial amount.
BERL who provide Phil Goff with his analysis estimate the return on New Zealand shares at 2.6% with inflation at 2%. The bulk of the tax to be raised is on nominal gains, not real gains.
Capital gains tax easy to avoid
The decision to pay a capital gains tax is entirely up to the taxpayer.
It’s the easiest tax to avoid because you just don’t sell your asset.
Besides high-priced consultants will always outwit the complex and complicated law that will always have to be amended and reviewed in the vain attempt to keep up with perfectly legal tax minimisation.
Capital gains tax raises little money
Capital gains taxes don’t raise much money. BERL assume no change in behaviour as a result of a 15 percent tax on the nominal gains in many trades.That’s a heroic assumption.
But even accepting that, they estimate that by 2028 Phil Goff’s capital gains tax will raise $3.7 billion. That’s a lot of money.
In its first year, it only raises $17.5 million – leaving Phil Goff a big hole in his budget.
But Treasury’s Long-Term Fiscal Model estimates the total tax in 2028 as $120 billion.
Phil Goff’s capital gains tax fully matured raises a measly extra 3 percent in tax assuming no change in the number of trades and with the tax taxing nominal gains not real gains.
Capital gains tax chokes the economy
The heart of a vibrant, prospering society is wealth-creating trades that shift productive resources to ever higher valued uses.
A capital gains tax chokes those trades and bungs up the economy. That’s the big problem with a capital gains tax.
Imagine you can an increase the value of a productive asset by ten percent. That’s a big gain that the economy can ill-afford to miss out on.
In the absence of a capital gains tax you would easily make an offer to the present owner in which both of you are better off through the trade and the economy gets a ten percent gain.
That gain won’t happen with a capital gains tax.
The tax at 15 per cent proposed by Labour more than wipes out the gains from trade and the wealth-creating trade does not proceed.
Multiply that result a million times over and the incredible wealth-sapping effect of a capital-gains tax is obvious.
Phil Goff’s capital gains tax will lock up New Zealand resources in low-valued uses. It’s an incredibly damaging tax.
Capital gains tax harshly penalise entrepreneurship and innovation. Entrepreneurship and innovation are key to a dynamic and prosperous economy.
The incentive to entrepreneurship and innovation are capital gains. The capital gains tax is a double tax on entrepreneurship and innovation.
Politicians like Phil Goff talk up the need for entrepreneurship and innovation but their policies invariably hobble and hinder them, and there’s no greater disincentive than a capital gains tax.
But what about economists backing a capital gains tax?
Back in the day economic text books used to back a capital gains tax because it was argued capital gains are income and that the absence of a capital gains tax is itself distortionary. The latter point is the important point. It derives from a note Nobel Prize winning economist Paul Samuelson wrote in the 1960s.
It showed that a true capital gains tax was neutral alongside a comprehensive income tax. The trick is in the assumptions.
The model assumes perfect information, no entrepreneurship or innovation, a closed economy so that critically the income tax drops the cost of capital rather than grosses it up, and that the capital gains tax is an accruals tax payable every year on gains with all losses netted out.
I wrote to Prof Paul Samuelson about his conclusion and he readily accepted it didn’t apply to an open economy like New Zealand in which the income tax rate here grosses up the cost of capital.
I suspect the New Zealand Treasury now accept that point.
There is a section of the New Zealand population that are always up for taxing the rich and the successful. That’s who Phil Goff is targeting.
It’s certainly not about improving the economy.
The promise of a capital gains tax also allows Phil Goff to bluff and bluster through how he is going to pay for his spending promises which is where he hopes to win his votes.
The great thing about political promises is that the numbers don’t have to add up.
That’s because as H. L. Mencken observed an election is an advance auction in stolen goods.
This was first published 15 July 2011 on interest.co.nz.
GST Doesn’t Need To Go Up
ACT New Zealand Finance Spokesman Sir Roger Douglas today released his latest poster criticising today’s GST increase and calling on the Government to cut wasteful spending on such programmes as the ETS and the Families Commission.
“When I introduced GST, my goal was to bring taxes down – not put them up or leave them the same,” Sir Roger said.
“Neither Labour or National will lower taxes, because they insist on spending money on programmes that sound good but do no good.
“Only ACT would lower taxes and cut wasteful spending,” Sir Roger said.
Sir Roger Douglas’ latest poster can be found here.
Heather Roy's Diary
PAYE Refunds: The Right Of The Over-taxed
It is said that only two things are certain in life - death and taxation. When I was a student studying to become a physiotherapist I paid my way by working as a cleaner in the summer holidays. The wages were high by comparison with my usual student income and, living with my parents, I was able to save a high proportion.
The tax I paid was levied on the assumption that each week's income was evenly distributed throughout the year, so I was being 'overtaxed'. In a good year I would earn $4,000 and have a negligible tax liability so, around May, I would receive a second instalment of my wages as I received a refund on tax paid. It was typically about $500 and, at the time, that was a major contribution to my income.
Pay As You Earn (PAYE) taxation certainly isn't an exact science, and even for those working a full financial year there are 'unders and overs' that affect the amount they should be taxed. Last year I was entitled to a refund of a couple of hundred dollars and it was welcome - even for someone on my income.
So the negative reaction of many to IRD's proposal to make the PAYE deducted from each pay packet the 'final tax' for most taxpayers is entirely understandable. It would end the refunds that many receive as the result of lodging a tax return. It is proposed for those who work for most of the year.
The IRD says the proposal, contained in the 'Making Tax Easier' discussion document (http://taxpolicy.ird.govt.nz/publications/2010-dd-making-tax-easier/over...) earlier this year, would reduce costs. IRD spends a lot of money processing small refunds or debts, but this does not make for fair or equitable policy if workers can't apply for a tax refund when they have been overtaxed through no fault of their own. The discussion document says the year-end square-up would no longer be available for the 528,000 people who receive PAYE income for 11 or 12 months of the year.
All those who have been overtaxed by more than a trivial amount should have the right to seek a refund.
The history of PAYE is very interesting. Many are surprised it was developed by an economist with impeccable right-wing credentials - Milton Friedman, in 1944. It was war-time and he was working for the US Government. The financial cost of WWII was very high and taxes needed to rise to fund it.
Friedman found that workers had real difficulty paying a large tax bill at the end of the financial year, but a smaller amount deducted from each pay packet was easier and more palatable to individuals. Once the war concluded, the regular income tax deductions on wages and salaries continued and were adopted in many other countries.
The US has a complicated array of taxes and income tax is generally referred to as Federal tax. In Australia it is called Pay As You Go (PAYG), and in New Zealand PAYE. By any name, it is an efficient way to collect tax but Friedman later called it his greatest ever mistake. This was because most people regarded their 'after tax' income as their total income.
Research shows that most people significantly underestimate how much tax they pay and, intriguingly, women are more likely to underestimate their tax burden than men. By comparison, most people who own a home can tell you exactly what their Council rates are.
The problem with PAYE is that tax is calculated for each pay period. As tax rates rise with income brackets many people pay, temporarily, too much tax. It used to be routine to fill out a tax return until 1995 - remember IR5s? Now it is voluntary, but this proposal will make it impossible for over half a million New Zealanders.
ACT proposed many years ago that every worker should receive a tax statement at least at the end of the financial year so they knew how much tax they had paid. Currently you can request a statement but last year only a small proportion of earners did.
People should know how much they contribute compulsorily and they should be able to claim a refund when overtaxed - end of story.
Lest We Forget - James McKie Receives Conspicuous Gallantry Cross
Lance Corporal James McKie has been awarded the Conspicuous Gallantry Cross - the second highest award after the Victoria Cross - for bravery while serving with the British Army in Afghanistan. He had previously served in the New Zealand Army as a medic.
James saved the lives of two British soldiers in March this year - a live grenade landed next to the three, and James threw it back at the Taleban. He described it as "Conscious decision backed by instinct. I think that's the only way you can say it ..."
Yesterday James said the award was for his platoon from 3 Rifles: "We had four killed and eight injured - 23 of us went to Sangin and 12 of us came back."
Formerly from Wellington, where his family still lives, James was told of his award in London yesterday and will be formally presented with the Conspicuous Gallantry Cross later in the year by a senior member of the Royal Family.
ENDS
Tax Rates: Must Try Harder
ACT New Zealand Finance Spokesman Sir Roger Douglas today questioned why the Government had not moved to align the top personal tax rate, the corporate tax rate, and the trustee tax rate.
On February 18, 2010 Finance Minister Bill English reconfirmed the statement from the National–ACT Confidence & Supply Agreement that ‘the Government’s medium-term goal remains to align and reduce the top rate of personal tax, trust, and company tax rates at a maximum rate of 30 percent.’ Revenue Minister Peter Dunne also stated on September 25 2009 that ‘the Government is committed to moving to an alignment of top personal tax rates, company rates and trustee rates at 30 percent.’
"The Government has gone back on its promise, instead keeping differential rates. From April 1 2011 we will have a PIE and corporate income tax rate of 28 percent, and from October 1 2010 we will have a top personal income tax rate of 33 percent. If we do not align, then we merely encourage tax planning. The Government seems intent on increasing profits for the lawyers and accountants who devise complex tax schemes," Sir Roger said.
"Moreover, the rate of progressivity of the tax scale, although slightly lower, will still incentivise income splitting for those who operate trusts and corporations. We must flatten the tax scale in order to stop this economically wasteful practice.
"While I am pleased to see tax rates on income reduced – which will have a positive effect on incentives to gain skills, work ahead, and seek better jobs – the structure of the tax system should be improved to stop avoidance behaviour. This has been a missed opportunity," Sir Roger said.
ENDS
Tariff Act Repeal Bill Pulled From Ballot
ACT New Zealand Economic Spokesman Sir Roger Douglas was today pleased that his Tariff Act Repeal Bill was drawn from the Ballot, which, if successful would see the removal of all remaining tariffs on imported goods.
“A tariff is a tax imposed on all imported goods and hurts all consumers. It forces us to pay higher prices for goods than we otherwise would, leaving us with less money – if any - to spend elsewhere," Sir Roger said.
"In 2008-09 alone, tariffs cost New Zealand consumers over $52 million more than they would have paid for consumer goods if there were no tariffs in place. Why is the Government taxing people for buying imported bed linen, pots and pans, cutlery, shoes, and iPods? In the current economic climate, that money would have been much better left in consumers’ hands, rather than lining the Government’s pockets.
“Worse still, tariffs hinder our productivity and reduce real wages. Our economy is most productive when we use our resources to produce and sell things we make well, using the proceeds to buy products that would otherwise be very costly for us to make.
“Tariffs artificially protect industries that would otherwise be unable to compete, encouraging continued investment in inefficient industries at the expense of investment in industries in which we are efficient. By removing tariffs investors will no longer have an incentive to invest in industry that requires Government protection to survive.
“This Bill will be another test for a National Party which is increasingly adopting economically unorthodox positions. They have long been advocates for free trade, and so it is time for them to step up and affirm their commitment to open markets,” Sir Roger said.
Key to Tax Cuts is Expenditure Cuts
Prime Minister John Key claims to believe in the power of tax cuts - so it seems odd that he is only willing to decrease taxes on income if we increase taxes on consumption, ACT New Zealand's Finance Spokesman Sir Roger Douglas said today.
"I asked him today why he wasn't willing to reduce Government expenditure by $1 billion - the amount expected to be raised by hiking GST to 15 percent, after taking into account the planned benefit and compensation package changes - in order to pay for personal income tax reductions," Sir Roger said.
"Unfortunately for us all, the Prime Minister confirmed what has become increasingly obvious: there will be no reduction in the real size of Government under National.
"The reality is that $1 billion amounts to approximately 1.5 percent of Government expenditure. The idea that it is too difficult to reduce expenditure by that much is nonsense. Half of that amount would be raised by scrapping the ETS, and other revenue could be raised by scrapping nonsense agencies like the Charities Commission, the Ministry of Youth Affairs, the Ministry of Women's Affairs, and many other bogus entities.
"In fact, we could secure massive tax cuts if we ended welfare programmes like Working for Families, which the Prime Minister again today called communism by stealth. Why he's not willing to do anything about it is puzzling," Sir Roger said.
ENDS
Tax Report Good Effort Despite Handicap
The report of the Tax Working Group is an admirable effort to deal to the numerous distortions that crept into our tax system under Labour, but the only way to drastically improve our growth prospects is through lower levels of tax revenue, ACT Finance Spokesman Sir Roger Douglas said today.
"Labour took one of the best tax systems in the world and slowly undermined it over nine years by ending the alignment of the trust, corporate, and personal income tax rates. Then they locked the least well off into poverty with the high effective marginal tax rates that came with Working for Families. All of those problems must be addressed," Sir Roger said.
"Unfortunately, the Tax Working Group has been hobbled from the outset with the requirement that their recommendations should be revenue-neutral – that is, National are unwilling to curb their desire for big Government. That is why the cuts they have recommended to personal income tax are made up for by other taxes.
"No matter how you slice the tax burden, it is the size of Government spending that is crushing ordinary New Zealanders under its oppressive weight. We may get lower personal income taxes, but if those reductions are funded by increasing GST, then we are merely pushing more of the burden onto lower income New Zealanders. Equally, if we fund it by introducing a land tax, then we are pushing the burden onto our export industries like farming.
"New Zealand's tax burden is forecast to be higher in the next 5 years than during any period in the last 20 years, and no amount of tax shuffling is going to change that fact. The only way out is by lowering Government expenditure," Sir Roger Douglas said.
ENDS
