Perhaps the most frustrating aspect of the Tax Working Group report isn’t the report itself, but the course it sets our economic discussions on for the next three years. Our beloved Minister of Finance will make raising GST and reducing income and corporate tax rates as if it’s a ballsy change that will have a deep impact. Certainly, it will help move the burden of Government spending off the top 10% of taxpayers, who pay 76% of all tax, a situation that inherently discourages people to earn higher incomes and increase the nation’s wealth.
FCK takes the view that while raising GST to cut income and corporate tax rates is a good move that will increase the efficiency of our tax system, it’s only a half measure, and only part of the answer. To have any real impact, Mr English must cut wasteful spending and idiotic tax-churning policies, the worst of which is Welfare Working For Families. As Roger Kerr points out:
…taxes will have to rise to reduce prospective budget deficits and levels of public debt if spending is not cut.
All of this shifting the tax burden will be for naught if we don’t reduce our spending. Ironically, the previous Labour Government actually did a reasonable job at reducing the government’s share of spending as a part of GDP from 1999 – 2005. From 2005 – 2008 they greatly increased spending at unsustainable rates. For that I blame Winston Peters, students and WFF.