Labour’s announcement on its financial plan shows it has learned nothing from the mistakes it made when it was last in government.
Labour’s tax and spend ‘plan’ released today is the Opposition’s usual approach to public finances, Finance Minister Bill English says.
“After nearly six years in Opposition, all Labour can come up with is a re-hash of its failed old recipe of taxing more and spending more,” Mr English says.
“No one will be surprised – or impressed – by that.
“Labour want to increase taxes so they can spend more without any focus on better results. They are out of touch with New Zealanders’ expectations that the measure of good government is better results, not more spending.
“Labour’s complex capital gains tax would be full of holes, slap a new tax on 2.3 million KiwiSavers and on every New Zealand farm and business without addressing the real issues around housing affordability.
“As for the proposed new top tax rate, it’s just the politics of envy. It wouldn’t actually raise much money, it would encourage those who could do so to shelter money in companies and it would ignore the fact that these taxpayers already pay 22 per cent of income tax – even though they are just 2 per cent of taxpayers.”
Labour still hasn’t learned that lower tax rates lead to higher tax takes and the reverse also applies.
The biggest problem with the last government was its failure to realise what it was doing wrong. David Cameron, by contrast, often doesn’t seem to realise what his government is doing right. . .
It sometimes seems that even Conservatives are surprised by just how well conservatism works.
Tax cuts, especially, have been viewed with deep suspicion by those around Mr Cameron. . . This was about tribalism, rather than economics, and it took some time for the Prime Minister to realise that tax cuts are often the surest route to recovery and stability.
But, then, the top rate of income tax was lowered from 50p to 45p in the pound, and the Liberal Democrats forced the Government to lift three million of the lowest earners out of income tax.
It has been politically difficult – Ed Miliband chastises Mr Cameron for his “tax cut for millionaires”. But something remarkable has happened: those millionaires are now paying more tax than ever. The best-paid “one per cent” are spoken of as if they all employ clever accountants to wriggle out of paying any tax. Yet figures show they now earn 13 per cent of all paid income, and provide 28 per cent of the income tax collected.
This is higher than at any point under the last government, and twice as high as under the Callaghan government (when the top rate of tax was 98 per cent). We are witnessing what John F Kennedy called the “paradoxical truth” that lower tax rates can mean higher tax revenues. When people are taxed less, they tend to earn (or declare) more. It has taken Britain into a golden era of milking the rich. . .
Here it’s similar with the top 2% already paying 22% of the total income tax.
Labour’s planning to increase the tax rate on trusts to circumvent the wealthy channelling money into them to avoid higher taxes.
But it’s not just the wealthy who have trusts and those not so well off will have to pay the higher rates too.
Labour will be taking more money from everyone for KiwiSaver and reducing the return from those savings with their Capital Gains Tax too.
Their plan is the same old tax and spend, driven by envy that put New Zealand into recession before the Global Financial Crisis.