Tax is a short word but a long argument. It is a political calculation, a fiscal management calculation and an economic calculation and none of those calculations is simple.
Take the politics first.
To Nationalists less tax is better than more. That is an instinct and a tradition, besides a belief. It is also self-interest: National (and ACT) supporters tend to pay more of their income in income tax than other parties’ supporters.
Michael Cullen went out of his way on Budget day to credit United Future with his decision to link tax bracket thresholds to inflation. That said two things about the so-called poodle party.
One: United Future is Labour’s No 1 preferred partner in government in the next term (after Jim Anderton, of course). Helen Clark’s dream is enough seats for Peter Dunne to assure her a majority, just like now, which Labour thinks has worked excellently.
Michael Cullen has set a platform for personal tax: at least this year’s levels. His promise to raise bracket thresholds in 2008 and every three years thereafter — but not cut rates — embeds the huge rise in tax over the past five years.
And the platform will likely rise. Cullen is to raise thresholds by 2 per cent a year, the midpoint of the Reserve Bank’s target. But since inflation has almost invariably run above the midpoint and since wages run faster than inflation, the thresholds will continue to fall behind and most taxpayers will year by year pay a higher cut of their income in tax.
OK, Michael Cullen’s had his pleasure. Now the party is ending, what has this Budget set up for himself — or John Key — for the next term?
This next three years is the crunch. After the 1984-92 policy revolution came 10 years of expenditure-side efficiencies and then the export and consumer booms of Labour’s lucky past few years.
We have got to know the boxer in the pink corner pretty well over the past five and a-half years. His sixth Budget tomorrow will run along well-worn tracks. But what about the guy in the light blue corner?
John Key is at last getting a frame around his thinking. He has left it a bit close to the election but there is now a set of principles to go with his determination to fire public servants and cut tax rates across the board — a switch he reckons at about 2 per cent of GDP (about $3 billion), if you add up the overs and unders.
The past is the present in politics. Rodney Hide and Judith Collins last week reasserted that as a principle. Heaven help half of Parliament.
Hide and Collins fronted accusations that David Benson-Pope’s past behaviour as a teacher was inconsistent with his promoting an anti-bullying programme.
Benson-Pope denied inappropriate behaviour. Some ex-pupils fronted, with their names, in support. But his accusers came out of the woodwork and he is out pending legal advice — yet another casualty in this cabinet.
An eerie transformation began to steal over Michael John Cullen’s features a few years back. He came to look more and more like the sainted 1935-40 Labour leader, Michael Joseph Savage.
But underneath there has been another transmogrification: Cullen’s Budget’s bear a passing resemblance to those of Sir Walter Nash, Labour’s first finance minister from 1935-49.
Colin James address to Ngai Tahu planning summit dinner, 13 May 2005
A journalist has no whakapapa. A journalist is outside all groups, has neither past nor future, has no connectedness. A journalist looks in on events and people and transmits the picture the journalist sees to others so that they may look in on events and people.
Winston Peters was at his worst/best last week, flaying Saddamist Iraqis and Paul Swain. The result was panic-policy to hunt down and throw out “undesirables”.
We are in pre-election mode. Good policy is made on evidence and taking a broad and long view. But near an election the telescope is turned round and the long view vanishes.
A notice in a South Island country pub bluntly tells guests: don’t drink the water from the tap. A sly way to boost bar sales? No. Just as in India, the water might make you sick.
Tell that to tourists. Then tell them “100 per cent pure”. It doesn’t add up.
Tell them why: we need more exports to pay for our lifestyle and dairy farms are export stars. But cattle wastes seep into our waterways and pollute them.