26/05/2017
Alex Eastwood-Williams
Opinion
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Budget 2017: National bribe voters with middle class tax cuts

Finance Minister Steven Joyce has delivered his first budget, one which can variously be described as "centrist", "Labour-lite" and "an election bribe". It's been criticised on the left and criticised on the right - and both sides have very valid arguments.

With only a few months to go until New Zealanders head to the polls, it came as a surprise to precisely no one that the government would announce $2 billion worth of tax cuts in this budget. National have after all been hinting at tax cuts since, well, before they were elected in 2008 - and there's a longstanding precedent of governments cutting taxes in election year to bribe people into voting for them (for example, Labour's Michael Cullen in 2008).

Unfortunately, none of the $2 billion worth of tax cuts are going to go anywhere hugely useful.

All Budget 2017 is offering is a middle class tax break, as National seek to maintain their grip on what has become its core constituency. The threshold for the bottom tax bracket is raised from $14,000 to $22,000, and the next threshold is raised from $48,000 to $52,000. In other words, low income and high income earners miss out on significant tax cuts, while the benefits will be felt most acutely by the middle class. 

And as great as the words "tax cut" always sound, the reality is that this is not so much a tax cut as an acknowledgement that inflation has pushed people into higher tax brackets despite the fact that they have not actually seen any real increases in wealth or living standards beyond nominal wage rises to account for inflation. 

This is also true of the other core components of the budget - National's increases to Working for Families, the Accommodation Supplement and Superannuation payments are nothing more than routine inflation adjustments, with some of these programmes having not seen an inflation adjustment since 2005. While the election year bribes sound great, in reality they're bare minimum. 

The Accommodation Supplement increases are particularly disappointing - not only has the government failed to address any of the root causes of New Zealand's housing crisis, but it is willing to use taxpayers' money to subsidise landlords and property speculators - and let's not forget, motel owners. 

With the housing crisis currently the single biggest issue facing New Zealand, you'd think a government in an election year would unveil something to do with building more houses, or reducing barriers to home ownership. After all, the National Party once believed in a "property owning democracy", and once campaigned against New Zealanders becoming "tenants in their own country". Bur far from addressing the contributing factors of immigration and foreign ownership, Steven Joyce instead dedicated a portion of his speech to extolling the virtues of globalism and condemning nationalism.

And far from addressing red tape and barriers to increasing the housing supply, when National reformed the Resource Management Act with the goal of removing red tape, they ended up adding a layer of "brown tape" by doing a dodgy deal with the Maori Party that demanded that one particular race of people be consulted before building consents could be given. 

Though I disagree strongly with Labour's Jacinda Ardern, who argued that the $2 billion 'tax cuts' would be better spent on social services (I remain as ever of the view that the people can spend their own money better than the government can), she does have a point when one considers the fact that the government have failed to address the strain that record high immigration levels are having on our infrastructure and public services. 

Worse than that though, there is no long term vision present in this budget. 

When one takes into account population growth, New Zealand's real GDP growth rate was just 0.8%, rather than the 3.8% Steven Joyce boasted of. If a government is seriously going to raise living standards, it needs a high rate of real, per capita, economic growth. 

Unfortunately National have offered absolutely nothing to the producers and job creators in New Zealand. While it may have bribed the middle class with $2 billion worth of tax cuts, their employers don't get a bean. Company tax remains the same. GST - which is a tax that does the most damage to small businesses - remains as high as ever. Nothing is going toward helping small and medium sized enterprises despite them being the largest employers in the country.

And our biggest wealth earners - exporters - get nothing at all from this budget. 

Cutting tax on productivity can boost economic growth - and ultimately lead to increased revenues despite lower tax rates. Sadly National seem hell bent on taxing productivity and subsidising consumption. 

Of course, not everything in the budget is completely bad. At last the government is investing in rail rather than roads, which is an excellent long-term strategy. Our chronically underfunded and under-equipped Defence Force gets an extra $1 billion. And Science and Innovation get a $373 million boost, which will lead to real jobs in the long-run. 

Unfortunately though, this is a budget designed to win an election. It's not a budget designed to actually grow the economy or make the long-term investments and changes that need to be made. 

The views expressed in this article are those of the author alone and do not reflect the position of RMNZ                                                                            
 

About the author

A failed artist turned to politics (because when has that ever gone wrong?). A right-wing populist, Red Tory, civic nationalist and Westie, railing on behalf of blue-collar people against the liberal globalist elite.