Taxes Up – And Then No Money!
Tax cuts! Michael Cullen has failed to deliver on the one thing that could boost the economy and put more money into the pockets of working people. “We are now out of step with the US and Australia who are both cutting taxes.
“Last year, he put taxes up. This year he has run out of money – exactly as predicted. The government is now so cash-strapped that its resorted to bouncing cheques and changing tax laws to claim tax back to 1986. That’s a desperate predicament.
“The biggest ‘spend-up’ in this Budget is $2,559 million over four years – that’s the forecast drop in tax revenue since the December Update (Table 3-4, p.78, B2&B3). It’s now official – Cullen’s tax hike produced less tax! The surplus for the coming year has been pegged back nearly $1 billion.
The country needed a Budget that celebrates business and entrepreneurship. Instead the Labour-led government has delivered a ‘plodder’s Budget’ without vision or direction. “Michael Cullen’s spin is that the Budget is fiscally prudent while he trumpets $692 million sprinkled about over four years.
“These dollars don’t add up to a strategic direction for the country. The problem is that Cullen hiked taxes, spent up last year, and now he’s struggling. He should have done what other countries have done and cut taxes and grown the economy.
“He’s had the opportunity. His $6 billion three-year spend-up is enough to halve the company rate of tax. That would give a major boost to business in New Zealand. Even if he had split the money between spending it himself and giving it back to taxpayers, we could have had a major tax cut. That would be a boost to business, help our competitiveness, and put money into workers’ pockets.
“Last year’s goal of ‘Closing the Gaps’ was hastily abandoned. I predict that this year’s goal of ‘Economic Transformation’ will likewise soon face the chop. It will prove just as elusive.
“The government is heading the country in the exact opposite direction to the one required to transform New Zealand into a high-growth, high-wage productive economy. We are now completely out of step with best practice in the rest of the developed world,” Mr Hide said.
“The Labour-led government is:
* Re-regulating, not deregulating. Employers must now negotiate collective contracts through third-party unions and meet vague ‘good faith’ provisions;
* Re-nationalising, not privatising. The Accident Insurance Industry has been re-nationalised, privatisation of TVNZ and NZ Post has been abandoned;
* Increasing expenditure, not cutting it. The $5 billion NZ First extra spending has been topped by another $6 billion;
* Increasing taxes, not cutting them. The top rate was hiked to 39 cents, $100 million in tobacco tax, roll-back of tariffs and a $200 million retrospective GST grab;
* Expanding welfare , not curtailing it. Income related rents favour those in a state house over private accommodation, student loans favour rich students as well as poor, pensions have increased at the expense of the young.
“The Government’s prescription can be summarised as more state direction and less personal freedom,” Mr Hide said.
“The result is that the outlook is for New Zealand to be piddling along at 2.5 percent or so growth when we should be striving towards 5 percent or more. We have hit 5 percent before. We need to do so again. Otherwise, we are destined to see our relative standard of living continue to slide.
“Labour and the Alliance along with the Greens have turned their back to the free market and to private enterprise. The result is now becoming sadly all too plain to see,” Mr Hide said.