Tax cut rubbish

Published: July 17, 2005

by frog

There’s been a whole lot of rubbish said about tax cuts in the past few months. National is trying to – and, to an extent succeeding – sell Kiwis a big, fat lie. It is saying to Kiwis: “While Labour wants to take all your money and spend it on what it thinks is important, National wants to give you your money back because we think you are better at spending your money than the government is.”

A column in the Sunday Star-Times today, by Auckland philosopher and author Jamie Whyte, expresses this view:

Labour’s compulsory purchases are aimed neither at increasing aggregate wealth nor at redistributing it. They simply force us … to spend our money in the way Labour wants us to, usually on services provided by state monopolies…

I occasionally suggest to friend and colleagues that the government should provide no services at all, but significantly increase cash benefits for the poor…

[Labour] must think we are stupid and corrupt. What else could explain its belief that it makes us better off by making our spending decisions for us?

On Labour’s policies, only two types of New Zealanders are clever and good enough to enjoy spending autonomy – the very wealthy, who even after paying their taxes can afford to buy non-governmental services, and Labour ministers, who may decide how to spend not only their own money but everyone else’s too.

Labour should be more honest in its campaign posters… It should state the real justification for its policies… “Vote Labour: We think you’re stupid”.

Of course, when National runs this kind or argument, it’s being completely dishonest. Why? Well, because it’s not like National is proposing to stop taking taxpayers’ money under compulsion and using it to provide services. They’re going to just take a little less of your money than Labour. Both parties believe that there’s justification in taking money from taxpayers to pay for core public services on a compulsory basis. Thus, both parties are committed to the view that, in some sense, the Government has the right to take and spend some of the money you earn as it sees fit.

Take someone earning $50,000 of income a year. Currently, Labour takes $11,388 of this. If National decides to cut the 33c tax rate to 30c and the 19.5c tax rate to 16.5c (meaning $2 billion lost revenue for the Government a year), then it will take $9,880 of it. They may be taking a little less of your money, but they’re still taking it.

The point is: both parties are taking money from you without asking. Both are saying, The Government is better at spending this money than you are. Any attempt by National to try and paint its approach on tax as somehow philosophically different from Labour’s is just deceitful.

However, the rhetoric National is using to promote its policies is encouraging Kiwis to ditch the view that there is value in paying income tax in order to provide quality public services for all. National is practically begging the public to turn against public spending, and start thinking more about the “me” than the “us”.

Indeed, amidst all this hot and heavy rhetoric from National about the people wanting their money back from the greedy government, we should point out what would happen if, as Whyte suggests, the Government stopped providing services, stopped taking money from people in the form of income tax, and paid large cash benefits to the poor (presumably paid out of a sales tax or some such).

Well, what would happen is that, to a much greater extent than is now the case, the quality of the health services you get, or the schools and universities your kids go to, or the roads you drive on, or the ambulance that picks you up when you have an accident, or the speed the private police force responds when you’re stabbed, would depend entirely on how wealthy you are.

Beneficiaries, notwithstanding the more generous cash amounts paid to them by the state, would get to see second-rate doctors months after they fell sick, their kids would go to overcrowded schools with no teaching or reading resources, they wouldn’t be able to afford to drive or get a bus anywhere, and if they got stabbed, no-one would come and save them from death because they wouldn’t have paid their subscription to the 111 hotline.

There’s a reason we pay income tax, and why the Government collects it, and it has nothing to do with the greediness of Helen Clark and her ministers. It has to do with our social contract, established by Michael Joseph Savage back in the 1930s, which said that we pay a certain amount of income tax because we want to live in a society where no-one is left to rot in poverty and destitution and because we want to be sure that, should we fall on troubled times, there will be a safety net there waiting for us.

National’s blathering about tax cuts, its constant banging on the “the government is stealing your money, you should have it back” drum, is tearing at this social contract, and threatens the fundamentals of what makes New Zealand a fair, decent society.

UPDATE: David Farrar berates me for this post here.

frog says

Published in Economy, Work, & Welfare by frog on Sun, July 17th, 2005   

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