Tax cuts or debt reduction?

Today’s Herald editorial makes the case that Govt should use extra to cut debt, not taxes.

The Prime Minister, an endlessly agreeable politician, entertains talk of tax cuts whenever the Budget surplus turns out to be higher than expected. It is well past time that he stopped doing so and instead made the public better acquainted with its debt position.

John Key and his Government know very well that the reason they have managed to bring the economy through a recession and earthquakes in good shape owes just about everything to the very low debt left by the previous Government.

We have to hope the next economic “shock” does not happen before 2020, for it is not until then that National plans to have the debt back down to the level at which Labour left it.

Really? Government debt has risen from $10 billion in 2008 when National took office to $50 billion now. I don’t think there is any way our economy would allow for an average of $10b per year debt reduction for the next four years.

However reducing debt should now be a priority. But the Government still needs to spend, and they should seriously consider reversing the creeping personal tax increases we have had over the last eight years.

The calls for tax cuts today are not coming from opposition parties, nor from business lobbies who have seen how low public debt helped the economy weather the global financial crisis better than most others.

Business lobbies may well be happy that personal income tax increases while their rates remain static.

The Government should not base their tax decisions on who calls the loudest, they should do what is fair. And allowing personal tax rates to creep up is hardly fair on wage earners.

Repaying debt is important.

There is always pressure to spend more on things like health, social housing, education, crime – and some spending increases are unavoidable, like providing more prison beds.

But restoring personal tax parity should also be a serious consideration.

We can have both tax cuts and debt reduction from a fair and prudent Government.

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6 Comments

  1. Alan Wilkinson

     /  19th October 2016

    Labour reduced Govt debt with high taxation that resulted in high private debt. They also left a high spending legacy with no margin for contingencies. That was the whole picture which the Left ignore.

    Reply
  2. Zedd

     /  19th October 2016

    @AW

    ‘Team Key’ just keep shifting the tax burden to the middle & lower deciles. (bottom 49.9%)

    remember Key’s ‘promise’ to NOT raise GST.. hows that one going ?! :/

    Reply
    • Alan Wilkinson

       /  19th October 2016

      GST is 30% of total tax revenue. The bottom 50% pay no net income tax. It’s pretty obvious where the tax burden lies and it’s not the approx 5% paid in GST that you are claiming.

      Reply
  3. I personally believe that the $1.8 billion should be spent as $1 billion in debt reduction, and $0.8 billion on social housing and poverty alleviation in the Far North and West Coast regions of both Islands. Nothing for Auckland Wellington and Christchurch except for needed social housing and poverty alleviation.

    Reply

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