Thursday, March 27, 2008

Tax cut myths: "waste"

Radio New Zealand reports that National is talking up the affordability of large tax cuts for the rich, claiming that they will be able to fund them because they will "curb wasteful spending and rein in bureaucracy". But how realistic is this? Not very, it seems. Using National's own figures for their expected "savings" - "$500 million over three years that could be used for more ‘frontline’ staff and tax-cuts" - The Standard has calculated the size of the resulting tax cut. It comes out to a paltry 50 cents a week.

So where will National (and Labour) get the money? Despite all their efforts at denial, the truth is that tax cuts will be funded by reprioritising and redirecting other spending. Every dollar given to the rich in tax cuts is a dollar that could be spent on health, on education, on police, infrastructure or social services. The inevitable result is that those services will be worse than they otherwise might have been. Tax cuts for the rich mean fewer (and more poorly paid) doctors, teachers and police, more schools asking for "voluntary donations", poorer roads and public transport, and less assistance to families in need. Given that few people are satisfied with the present state of our public services (and the Opposition certainly isn't), cutting taxes at the expense of those services seems to be a very counterproductive idea.