Monday, February 11, 2008

Rich demand tax cuts for the rich

The Business Round table and its usual allies have taken advantage of Michael Cullen's promise of tax cuts to demand tax cuts for the rich. Under their proposal, both the top and middle tax rates would be cut to 30%. Unmentioned in the Herald story is the cost: $1.75 billion a year, according to the Treasury's ready reckoner. To put this in context, according to the Budget 2007 summary tables [PDF] that's about the size of the entire annual defence force budget, or (since people like to think that's small), the combined annual budgets of the police, courts, and ministry of justice.

More amusing is their claim that the tax system "should be designed to promote economic growth, rather than as a tool for redistributing wealth". Given that at least 75% of that annual cost would flow directly into the pockets of the rich, 40% into the pockets of the 3% who earn more than $100,000 a year, and (by my rough calculations) 20% into the pockets of the richest 1% of New Zealanders, it's hard to regard the scheme as anything other than a tool for redistributing wealth, from the poor to the rich. In other words, the 90's all over again. But then did we really expect anything different from the BRT?