Tax and spend harms not helps

New Zealand is coming through the Global Financial Crisis better than most other countries for several reasons.

One of those are policies put in place by previous governments which have made us a relatively free and open economy.

Another is the sound financial management of National-led governments since 2008.

Among the policies which have helped are lower taxes and as a result of that lower government spending.

Government departments have been required to do more with less and it’s working.

Unlike the Labour-led governments before it which increased spending with no increase in services or other positive result, this one has required government departments to become more efficient and more productive.

If Labour is in a position to lead the next government that will change.

Tax and spend is in that party’s DNA.

David Cunliffe has already said if he’s leader he’ll increase taxes for the wealthy.

Labour leadership candidate David Cunliffe says wealthy people should pay more tax.

He won’t go into detail about the policy he’ll develop if he wins the contest but he’s giving clear signals.

Asked at his press conference on Monday whether taxes on wealthy people should be raised, he replied: “You bet. I’m not going to put a number on it but I worked hard when I was finance spokesman to get a capital gains tax across the line.”

The next question was whether he would raise income tax.

“Labour’s policy argues for a more progressive tax and I support it,” he said.

“I’m not going to pre-empt the process of finalising our policy but I certainly believe we need a more equitable society – we will finalise our manifesto and everyone who earns a fair share should pay a fair share.”

Sigh.

Wealthy people already pay a great deal more than poorer people, many of whom pay no net tax at all.

You’d think a man with his undoubted intelligence and education would understand that the tax take doesn’t mirror tax rates.

Increasing tax rates can and does reduce the tax take. Higher taxes are a disincentive to higher earning and people and businesses waste time and money trying to reduce what they pay.

Reducing tax rates can and does increase the tax take because it incentivises higher earnings.

There are two other leadership aspirants.

It’s very unlikely that Grant Robertson would favour lower taxes and less spending.

The third candidate, Shane Jones who is in a very small minority of Labour MPs who appears to understand the importance of business, might be more likely to do so but he’s also least likely to be leader.

National’s policies which are reducing the burden of government are the ones which do most to help the poor.

Labour’s big government tax and spend policies are those of the Clark-Cullen governments which put us into recession before the Global Financial Crisis.