Wednesday, March 25, 2009

Out of the mouths of fools...

Roger Douglas is useful for something: he says the things the government would rather were unsaid. For example, the other day the government announced that it had a long-term goal to give billions to the rich by slashing the top tax rate to 30%. Today, Douglas points out the obvious:

National's goal of a top personal, company and trustee tax rate of 30 cents in the dollar is laudable - but it must remember that there is no such thing as a free lunch, ACT New Zealand Finance Spokesman Sir Roger Douglas said today.

"It is pointless setting goals around tax revenue without first looking at the other side of the Government's accounts - the expenditure side," Sir Roger said.

"If we cut taxes without reducing the overall levels of Government spending, then the difference will need to be made up by future generations of tax payers.

"Get real New Zealand - you can't have tax cuts AND big Government," Sir Roger said.

(By "big" government, Douglas means the whole structure of publicly funded health, education, and a decent social safety net rather than leaving the sick, the out-of-work and the old to starve and die on the streets.)

According to Treasury's 2008 detailed model data, cutting the top tax rate to 30% would cost $1.6 billion a year. That's 6% of the total personal tax take, a huge budget hole. According to the Budget 2008 summary tables [PDF], that's more than we spend on the entire Ministry of Social Development; its more than we spend on the police, its more than we spend on courts and corrections combined. Slashing government revenue by that much when we are running enormous deficits is a recipe for bankruptcy. So why do we let the government pretend it can do it without gutting government services or lumping everyone with debt?