If more tax is the answer . . .


The Treasury says the Government will need to raise taxes to keep providing health and education services, which are becoming more expensive by the year.

It also warned that house prices will continue to rise for some time yet.

The department’s briefing to returning Finance Minister Grant Robertson said the Government’s books weren’t sustainable thanks to rocketing public service costs.

The Treasury warned that the Government’s finances would be “unsustainable in the medium term if the costs of public services continue to increase at historical rates”.

That is unless tax revenue was “increased as a share of the economy”. . . 

If more tax is the answer, have they asked the right questions?

A business faced with this scenario would take a very careful look at every cent it spent, cut out luxuries and reassess exactly what were necessities.

This is what National did when it led the government through the GFC.

Can anyone point to any time since Labour was elected in 2017 where it so much as hinted at doing anything like that?

Despite its warnings about spending, the Treasury warned that the scale of the Covid-19 crisis was so big that in the short term the Government needed to spend more to stimulate the economy.

“At present, the risks of fiscal policy doing too little outweigh the costs of it doing too much,” it said.

The Treasury said carrying higher debt was the right thing to do as it would keep unemployment low and improve people’s wellbeing.

“Too little support will result in more job losses, firm closures and a permanently poorer economy.

“While the economy remains weak, higher debt from expansionary fiscal policy is likely to be welfare-improving, if expenditure is temporary, targeted and timely.” . . 

Temporary, targeted and timely are very important qualifiers.

When so much is being borrowed it is absolutely essential to ensure every cent is spent wisely.

Now more than ever the government should be focusing on the quality of its spending and doing every thing it can to reduce the burden of debt and repayment that future governments and taxpayers will face.

In doing so it should be mindful of Winston Churchill’s observation:  We content that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.

Taxes (Churchill Quote) – Simon Burrow

One Response to If more tax is the answer . . .

  1. adamsmith1922 says:

    Reblogged this on The Inquiring Mind.


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