It is no surprise that the National Party is proposing to introduce tax cuts, should it win the next election. They usually do. But what is surprising is that many commenters on the left side of the political divide oppose tax cuts. They immediately do a quick calculation of how much the National Party leader (currently Christopher Luxon, but it happened to John Key as well) will gain for themselves, and imply strongly that this is the entire reason for doing it. Both Luxon and Key paid considerably more in income tax during their years in the private sector than most people will earn in a lifetime. So why do the left treat tax cuts with such scorn?
People on the left bear a sneering derision towards wealthy people, even though many of them are quite well-heeled themselves. Think of the late Michael Cullen, who famously described John Key as a ‘rich prick’, but was known for his considerable art collection. There is an implication here too: that they do not need tax cuts and by taking them they are depriving others. But what exactly would they be depriving others of? More of their own money? Why is that ever a bad thing?
The first proposal by National on the issue, unveiled by Simon Bridges during his tenure as leader, is to adjust the bottom three tax rates, primarily to eliminate ‘bracket creep’, of which all Labour governments are guilty. In 2000 the Clark government introduced a top tax rate of 39% on incomes over $60,000 but did not adjust this until 2008, when they were about to lose an election. During that 8-year period, thousands of Kiwis on fairly average incomes found themselves paying the top rate of tax, and Cullen only relented and pushed the threshold to $70,000 in 2008 to save his own political career. Since the tax changes enforced by the Key government in 2010, tax rates, particularly income tax rates, have hardly changed at all… except for the introduction of a new top rate of tax by the current government of 39% on incomes over $180,000.
Again, thousands of Kiwis are paying more tax proportionally than they should because of bracket creep. Now, with rising wages and high inflation, more and more Kiwis are paying more tax, along with significant cost of living increases.
And that is just fine and dandy with all of the socialists.
Socialists would rather hand out more welfare than give tax cuts. Their mistaken view is that the money is then going where it is needed. But what about low-income families? Well, they receive Working for Families payments, which is just welfare under another name. But what about people on low incomes with no dependent children? It seems that, according to socialists, they can just go fly a kite.
National also propose to remove the 39% tax rate, the 10-year Bright Line Test, and the Auckland fuel tax. They also propose to reinstate interest deductibility on residential rental properties. Obviously, this will require spending cuts but, after this hopeless government, that will not be hard. National proposes to scrap 3 Waters, the Auckland Light Rail project and stop health departments spending colossal amounts on consultants, just for a start.
The pattern has existed for decades. Labour governments tax and spend, while National governments cut spending (and sometimes services) but allow people to keep more of their own money. Labour employs thousands of consultants at huge cost, often producing little or nothing of value. Just think about the current ‘reform’ of the health service… reforming a system that was introduced, at great expense, by the Clark government. The cycle just goes on and on.
Socialists conveniently forget that everyone benefits from tax cuts. Everyone. All social welfare payments are taxed, meaning that beneficiaries and superannuitants also get more money. People on low incomes definitely benefit and tax cuts do not affect Working for Families entitlements. Middle-income earners probably benefit most, because of changes to all of the lower tax rates, but they are the hardest hit by most socialist policies. There is no downside to keeping a bit more of your own money. It makes fiscal and economic sense.
But those on high incomes also benefit, of course, which is what sticks in the craw of the average socialist. Wealthy people do not gain proportionally as much as those on low or middle incomes but that does not matter to the left. All those quasi-socialists who complain that they are not taxed enough (the biggest virtue signal of them all) can always donate to charity or make payments to IRD over and above their required amount but that is not good enough. They would rather tax the large numbers of middle-income people who would benefit so much from the extra income than allow one so-called ‘rich prick’ to have a cent more of their own money.
That is socialism for you. Time to bring the politics of envy to an end and let people keep more of their own money, whether they be rich or poor. The economy, in the next few years, is going to need it.