Very disappointing – no tax cuts

David Farrar

The Herald reports:

The May Budget will have no plans for , Prime Minister John Key confirmed yesterday, and he sought to dampen expectations that there would be anything significant in the future.

I’m very disappointed that there will be no tax cuts. Hard working New Zealanders deserve a boost to their after tax income.

In no way do I expect tax cuts for the 2014/15 year as the surplus is so small. But I was hoping that the Government would signal tax cuts in the future years.

When the Government’s accounts move into surplus, Governments have basically three things they can do with the surplus.

  • Increase spending
  • Reduce tax levels
  • Pay off debt

I believe a good Government does all three. If for example your projected surplus is $4 billion you might increase spending by $1 billion, reduce taxes by $1 billion and retain a surplus of $2 billion to pay off debt.

We’ve yet to see the size of any future projected surpluses, but if they are projected to be greater than say $2 to $3 billion (which allows contributions to resume into the NZ Super Fund) then tax cuts are affordable and desirable. And I want to see National commit to them.

Political commentator David Farrar posts at Kiwiblog.

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