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Dr Muriel Newman

Dr Muriel Newman

Taxing Choices


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Last Sunday, the Governor-General issued the writ, which is the formal instruction to the Electoral Commission to hold the general election on Saturday 17 October 2020. Under the Electoral Act, the writ must be issued within seven days of the dissolution of Parliament, and it must be returned with the final election results within 60 days – by Thursday 12 November unless a recount application is received.

Advance voting starts on Saturday 3 October.

Writ day also marks the beginning of the ‘election period’, when party-political election broadcasting can begin. The Electoral Commission allocates taxpayer-funded time to parties based on factors such as previous election results and polling.

A key fallacy that often emerges at this stage of an election cycle is the notion that tactical voting can strategically influence coalition outcomes.

We saw this at the 2017 election, when voters of all political persuasions supported New Zealand First on the basis that if Winston Peters was part of a new government, he would introduce a referendum on the future of the Maori seats.

Although New Zealand First was indeed part of the new government, the referendum was conveniently dropped from the political narrative leaving many voters disillusioned.

This election, it appears the prospect of a government with the radical Greens in a more powerful position is causing some to consider voting for Labour to ensure they can govern alone.

However, they should reflect on the fact that no single party has ever managed to gain sufficient votes to govern alone throughout the entire 24-year history of MMP.

Furthermore, there is no guarantee that Labour would not ‘reach out’ to the Greens and bring them into government, similar to what happened in 2014. At that election, National had enough MPs with ACT and United Future to govern without needing the support of the radical Maori Party. It nevertheless drew them into government and adopted many of their extremist policies, much to the horror of those who had voted for National to keep them out.

In other words, there are no guarantees that Labour would not bring the Greens into some form of governance arrangement.

As the country looks to the future, the question for many voters is which party will best help New Zealand recover from the recession caused by Labour’s hard-line lockdown.  

Three new surveys have shed light on the way voters are thinking.

TVNZ’s self-selected Vote Compass survey shows respondents rate the economy as the number one issue of concern, followed by the Government’s response to the pandemic crisis, then health.

This compares with the last election, where health was the top issue, followed by the economy, then housing. 

The Westpac McDermott-Miller Consumer Confidence Survey of 1600 people shows public confidence has fallen to its lowest level since the global financial crisis. It indicates consumers are extremely concerned about rising joblessness, the ongoing border closure, and the recent flare up in Covid-19 infections. Lower consumer spending is expected throughout the rest of the year.

The 2020 Deloitte and Chapman Tripp Election Survey reveals that 91 percent of business voters do not want higher income tax, 88 percent don’t want higher corporate tax, and 86 percent believe economic well-being should take priority over social (7 percent), environmental (6 percent) and cultural (less than 1 percent) well-being.

Of the survey participants, 80 percent think building infrastructure will be useful to the recovery, 79 percent believe more should be done to reduce regulations on business, and 60 percent are uncomfortable with New Zealand’s debt reaching 53 percent of GDP by 2023.

While over 65 percent of respondents think the Government does not have a coordinated plan for raising New Zealand’s economic performance, this problem is not new.

This week’s NZCPR Guest Commentator, businessman and former Director of the NZIER Dr Kerry McDonald, believes the country has lacked good economic management for decades, largely as a result of poor political leadership:

“In 2003 a comprehensive study of the NZ economy concluded that ‘Compared to other OECD countries, New Zealand’s growth in real GDP per capita was slow. New Zealand went from being one of the richest OECD countries…. to one of the poorest’.

“So this paper is not a prediction of future problems but a documentation of what has already gone seriously wrong, over some decades and a why things will now only get worse. It is also a highly critical judgement on the incompetence and ineffectiveness of New Zealand’s political leadership over some decades…

“The fundamental cause of the problem is the lack of capable political leadership to implement the necessary policies, and politicians’ strong preference for the personal rewards of being in power ahead of improving National living standards.”

In reality, New Zealand’s only periods of genuine economic reform occurred during the late eighties and early nineties, when the country emerged from the ravages of years of protectionism culminating in a three-year wage and price freeze imposed by Prime Minister Sir Robert Muldoon.

In 1984 Labour’s new Minister of Finance, Sir Roger Douglas began a comprensive economic reform programme – floating the dollar, reducing taxes, eliminating subsidies, and introducing a multitude of changes including the State-Owned Enterprise Act, the State Sector Act, the Reserve Bank Act, and the Public Finance Act.

These, together with the Employment Contracts Act and the Fiscal Responsibility Act – later passed by National’s Minister of Finance Ruth Richardson – transformed New Zealand from an economic basket-case to a prosperous modern economy.

But as Dr McDonald says, over recent years, the political leadership needed to keep the country on the path to prosperity has been lacking. Instead of doing what’s right, leaders have become obsessed with doing what’s popular.

A few years ago the Economist attributed the economic successes of Sweden, Denmark, Finland, and Norway to the fact that they had reduced government spending and balanced their budgets by lowering taxes, ensuring greater flexibility in the workplace, encouraging entrepreneurs, and restricting welfare entitlements.

So, if that is a winning strategy, how do the main political parties, who are claiming they intend to rescue us from the economic crisis Labour has created, stack up?

Abysmally, as far as the Greens are concerned. Even though lower taxes are the key to economic growth, the Greens plan to raise them. They would penalise wealth creators with two new higher tax rates of 37 percent on income over $100,000 and 42 percent on income over $150,000 – along with a wealth tax of 1 percent of all assets worth over $1 million including the family home payable each year, and 2 percent over $2 million.

Labour also wants to penalise wealth creators with a tax increase. Emulating Helen Clark’s Labour Government, they would raise the top rate of personal income tax from 33 percent to 39 percent on income over $180,000.

These parties are ignoring the lesson from the economic reforms of the eighties – when the top rate of income tax was halved from 66 cents to 33 cents, within two years income tax receipts were higher. As Treasury has explained, by discouraging investment, hard work and entrepreneurship, “high marginal tax rates on personal and company income are the most damaging to growth”. Especially in a recession.

ACT is the only party to have prioritised lower income taxes with a plan to drop the 30 percent rate to 17.5 percent.

At this stage, all National has said is that they will not increase taxes nor introduce any new taxes if they win the Treasury benches in October. 

Sadly, the promise that “Crusher Collins” would revive the fortunes of the National Party when she became their leader has failed to materialise. In their race to the centre, National’s strategists appear to have become so obsessed with trying to out-do Labour’s ‘niceness’ that National’s new leader is fast losing her point of difference.

What they are missing is that many voters are hankering after that straight-talking style that was part of Judith’s brand – a leader not afraid to call a spade a spade, speaking out against the creep of race-based privilege, opposing the climate extremism that threatens to bankrupt the country, and refusing to kowtow to the PC brigade that is trying to silence our freedom of speech.

The harsh reality is that unless National comes to their senses soon, Judith Collins will lead the party to a resounding election defeat.

What the country needs right now is a modern-day Kiwi equivalent of Margaret Thatcher, who revived Britain from its post-war economic stupor. She had the courage to introduce a fearless policy agenda that injected new life into their moribund economy.

And what were the radical policies that kick started Britain’s revival?

Nothing more than a belief in the drive and resilience of the British people – and the knowledge that if the government backed them to unleash their energy and expertise, then got out of their way, they would have the freedom to forge a better future for themselves, and in the process lift the fortunes of all.

The question is whether any of our political leaders have the courage to step up and do the right thing – lower taxes to unleash entrepreneurialism, creativity and growth; slash the red tape and regulations that are holding back progress; and put government spending under the microscope to reduce waste.  

At this stage, the only party coming close to the policy agenda used by Margaret Thatcher to rescue Britain from its economic malaise is ACT, which may explain why UMR has them rising in their poll to over 6 percent – at the expense of National, which remains mired under 30 percent.

Margaret Thatcher’s stirring speech to a small business conference in 1965 gave so much hope for the future that it is worth repeating extracts here:

This Government believes in small business. Because small firms are indispensable to the creation of jobs and of wealth. Firms with fewer than 200 employees produce about a fifth of our national income; employ one in four of the total workforce; and provide one job in three in the private sector.

Small firms can be a seed-bed for new ideas and a testing ground for new ways of working. They often lead the way in new products and new services. They put the customer first. They have to, to survive in a fast-changing world.

We support small businesses because they embody freedom and independence. They are the roots of a free society. For in the words of one American President: “Energy in a nation is like sap in a tree; it rises from the bottom up; it does not come from the top down.”

We seek a society

— where people make their own choices and take responsibility for their decisions.
— where rewards are related directly to one’s efforts.
— where people have a stake in its success.
— where individual initiative rather than the diktat of Government provides the driving force…

Running a small business involves great risks. But to run those risks the rewards must be there. That means that taxes must be cut.

If we are to reduce taxation, we must hold down public expenditure.

The pressures for more public spending are remorseless. But the Government will resist them. Even though we may be opposed by powerful interests our duty is to speak up as well for the taxpayer, the ratepayer, the businessman, the wealth-creator. In a free society, government must leave more in the pockets of the people, to spend as they decide.

I came to office with one deliberate intent: to change Britain from a dependent to a self-reliant society—from a give-it-to-me, to a do-it-yourself nation.

A get-up-and-go, instead of a sit-back-and-wait-for-it Britain.

This means creating a new culture—an enterprise culture—which accords a new status to the entrepreneur and offers him the rewards to match; which breeds a new generation of men and women who create jobs for others instead of waiting for others to create jobs for them.

That is why this Government has given so much attention to the promotion of the small business. It is not simply that tall oaks from little acorns grow. Small businesses are the very embodiment of a free society—the mechanism by which the individual can turn his leadership and talents to the benefit of both himself and the nation.

The freer the society, the more small businesses there will be. And the more small businesses there are, the freer and more enterprising that society is bound to be.

So my message to you today is quite simple: we will do our best for you, so that you can do your best for Britain.

While Jacinda Ardern’s Government is busy using the election campaign to dish out millions of our tax dollars to their politically motivated interests, Kiwis are already tackling the future by starting new businesses in record numbers.

Imagine the boost a Thatcher-type plan would give to them and all of the other New Zealanders with good ideas, who just want the opportunity and the freedom to do the best they can for their families – and for their country.   

Please note – you can register for our free weekly newsletter by clicking HERE.

THIS WEEK’S POLL ASKS:

*Do you believe higher taxes or lower taxes are the best way forward for New Zealand? 

 

*Poll comments are posted below.

 

*All NZCPR poll results can be seen in the Archive.

 

Click to view x 120

THIS WEEK’S POLL COMMENTS

With lower tax rates and a government that will tell the PC brigade and racial separatist tribes to go get stuffed, then you will see this country flourish again. Stuff the socialistic whinging mob. Peter
People should be encouraged to work not penalised Robbie
At this time of financial crisis and excessive government spending raising tax would further damage any recovery. Lowering taxes may increase investment and consumer spending thus aiding a slow recovery. Graeme
Obvious! This site has great support basics from well sought out commentators, but you let yourselves down by weak questions. Huge build up for blatant and obvious answers. Pity… wasted opportunity. Robyn
Act is absolutely in the ball park on this one, hope the Nats are keeping the powder dry on this one until shortly before polling day Phil
The Swiss have stated that the tax rate of 10% will be paid by all and will therefore increase the overall tax collected . Didn’t even those terrible thieving mediaeval barons impose tithe ? Vivian
Along with FOCUSED assistance to those with genuine need. A reduction in the staffing levels of government departments, to meet their needs rather than the salary package of their Chiefs. A rationalising of the healthcare regime to far fewer DHB’s (if not just ONE) to reduce replication of effort, and cost….. Lionel
HAVE A LOOK AT New Conservative POLICY. Why the public cling to the belief that National are different to Labour, even after the last Nat government added another layer of Apartheid to the mix, & refused to repeal unwanted laws introduced by Labour is beyond me. Even endorsed the ZERO CARBON BILL, & now Collins is promising to subsidise the electric car industry, while promising no let up on food producing farmers, with the demand to plant more soil & environment destroying pine trees, to off set a mythical carbon footprint, that billionaires use to increase their wealth by trading ,carbon credits,. That is ONE instant where the tax rate should be set high enough to destroy the dishonest traders of nothing. . A.G.R.
we have too many chair warmers in the beehive. cut government expenses. stop giving money to the maori. go to work, grow veggies, built something. stop moaning and begging. for the country to survive we do need lower taxes. Johan
Higher taxes in the past have discouraged hard work Anon
Create incentive and reward hard work Jeff
The only way Graeme
It has been proven beyond a doubt that lower taxes help the economy. Dennis
It will stimulate the economy to prosperity John
Lower Tax is the only way to lower unemployment and in turn give the population more money to spend, which would in turn boost the economy. Jude
Follow the Thatcher mantra Peter
Higher taxes reduce the average spend which small and new businesses require to get going and succeed. Higher taxes will be distributed within Governments and only lead to more brainless dummies in the bureaucratic sector with no drive to succeed for the good of the country – just keep their jobs as they are dismally doing now. – no progression in sight. Garry
ONLY ACT is following Margret Thatchers advice to STOP giving OUR MONEY AWAY & let us be free to start new businesses & lower taxes.WHY aren’t labour & national listening. If anyone is silly to vote labour they can expect them to invite the greens into govt. & that will be a REAL DISASTER for NZ.WAKE UP PEOPLE, do things for yourself don’t expect govt. to rule your life. Cindy
Higher tax will kill incentive. John
follow thatcher norman
Lower taxes would encourage and stimulate job growth and therefore the economy. Darryl
Lower taxes will allow people to spend more and boost the economy Colin
simple math. Shopkeepers have sales & specials during quiet & trying times. What does this do? It brings in much needed cash, the same would happen with a government hell bent on kickstarting the economy. Taxing the wealth makers is stupid & short sighted. Nick
lower taxes will prevent money going over seas and even entrepreneurs leaving michael
we need more people back in the workplace, firstly for more money to be circulating so as a bigger tax take and secondly for peoples mental health and wellbeing. Graeme
You cannot tax your way out of a recession Jan
Obviously Mark
High taxes always slow growth disproportionally. Michael
Must provide economic, emotional, & moral encouragement & initiative along with freedom & freedom of speech. This government is absolutely clueless, terribly incompetent., & abysmally fascist. New Conservatives have easily the best policies. Jack
You cannot tax a community(or country) into prosperity, that is what eventually brough down the Roman Empire. Every time has been in power in New Zealand they have moved towards this and failed!!! Labour Les
Apart from lower taxes– what really will bring the country back on it’s feet is only one thing: Get rid of these red green perverts who are driving us to ruin. People will only wake up when their pants are on fire and – if the looney brigade makes it back into the house-will have a rude awakening very soon. Michael
Power to the people to spend their hard earned dollars as they please. The present government plan is to centralise spending in the state as they know best. Most of them have never had an hones real job in their lives. Shame on this coalition mob! chris
It has always revised a moribund economy. so why not now. Otherwise the same old same old will not achieve real , needed growth John
Higher taxes will only lead to a hidden economy, why would people want to declare their real income if they are on the threshold of a higher tax bracket just because they work hard? Sue
The more money moves the better the economy and the more tax gets made Andy
Lower taxes. Judith does admire Thatcher greatly so here is hoping she is brave and does something similar. Also said the New Conservatives not mentioned in their take on tax- reducing taxes, bureaucracy and red tape and have first $20,000 tax free. Laura
I lived in Hong Kong in the eighties where there was a flat tax rate of 15% – and no dole or other social welfare and this was one of the most buoyant and successful economies in the world. Mark
we need to encourage entrepreneurship and business development. No farmer and few businessmen can afford a 2% tax on wealth – that would mean disaster. Gerry
It’s a no-brainer! Lower individual tax so people have more money in their pockets. Lower the taxes that businesses pay so they have more money to re-staff and get higher productivity. Also, EVERYONE must pay tax. The idea that a small ethnic group pays no tax is ridiculous. Jenny
Higher taxes if you want radical Socialism. David
No contest.Margret Thatcher said it all. Come on Judith, do the right thing.Wave your big stick and get rid of the fairy dust imposter who has no idea what an economy is. Ross
I don’t have a problem with the proposed small increase in tax over $180k. But more than that invites those earners to hide income in all sorts of ways, processes well known to them all. Lawyers/accountants get a huge jump in business! Hugh
That will encourage small businesses, & lift the economy disaster Anna
Always lower taxes. The less legalised theft the better. Rule number two, drastically cut regulations and controls – another incentive killer. Read about how post war Germany%u2019s finance minister Ludwig Erhard created what came to be known as the West German Economic Miracle. Economists across the world condemned him for the actions he took and also those within his own party. He proved them all wrong. Don
Higher taxes mostly kills incentives and individual’s business investment to develop and grow their business ambitions. – and thus potentially pay more in income taxes. To simply enforce Government taxes higher to subsidize those ‘without’ or to fund more (mismanaged) Government authorities leads to an unproductive society. Just look at socialist totalitarian countries! Just look at how the American economy has grown – twice – as a result of wide spread reduced taxation PLUS reduced Government’s inhibiting regulations. Stuart
Lower Taxes will get things moving again. Maurice
Stimulate growth with lower taxes, greater incentive to profit, more employment due to better business confidence, greater tax take resulting from more people employed and more business’ working. Bruce C
You would think it is pretty obvious but most can not comprehend. Mark
Government is incapable of generating wealth for the nation. Taxes take! Martin
Higher taxes only take more money out of circulation. The Labour party has to realise it needs to spend less, not tax more Neil
If Lange had not had his cup of tea, NZ would be top! Chris
of course lower taxation is the best way for all, a big vote for act to become the boss is imperative, go act go. james
International Businessman. There is no doubt at all that encouragement works far better than punishment tony
Taxing or lower tax has in the past not fixed anything. Get rid of the RMA as it is and open up our export and make it easier to gain overseas markets. colin
we have sufficient taxes now do not need them to go up good idea would to be take GST off of food to help the needy Russell
Most definitely Lower Taxes are the best way to genuinely promote enterprise and achieve higher GDP growth. Instead of raising taxes The NZ Govt should be first scrutinizing their largess spending habits. Mark
If you don’t have any money you can’t spend it. More money in the wallets of the people is the only way to kick start the economy. Chris
If the Govt had any brains they would look at what Donald Trump has done for the USA by lowering taxes and follow his example of how to expand the economy David
Lower taxes please, but govt has to cut out all wasteful spending and keep a check on those abusing the welfare system. Frank
Release the entrepreneurs. Judy
Cannot tax our way out of Civid19. Time and smart policies will get us there Kevin
This Labour Government have given away the gains and reserve that had been built up under 10 years of a National Government. Carl
You can’t tax a country into prosperity! Mark
Lower the taxes, remove government bureaucracy and watch Kiwi’s rebuild our economy. However this Socialist government modus operandi is to tax the rich pricks and redistribute this to the poor (the voters they keep bribing with more and more free stuff), which isn’t a way forward, unless that is you don’t give a shit about the economy or Kiwi’s, just the maintenance of power! John
Where is our Maggie Thatcher. It has been proven time and again that the reduction of taxes along with the reduction of regulation means a faster growing economy and in the not too distant future an increase in the overall tax take. I would support a flat rate of tax with an effective tax free allowance and if necessary an increase in GST and along the way get rid of Working for Families and other government subsidies Robin
provides individuals with either some, or increased, discretionary spending which can only assist economical growth and confidence. John
It is just not on to tax in order to cure a recession. Christopher
Higher Taxing would be a waste of time anyway. With a deficit of 269.3 Billion if you payed back $1.00 every second non stop until the debt was paid, it would take 8617.6 years: 1 Billion seconds is 32 years, do the sums!! I think our Grand Kids kids, better start learning Manderin. Allen
No high taxes for working hard and long hours. Our small biz earned us $3 per hour for 105 hours each for 2 people per week. For 9 years!! Gain came only from capital gain. Prue
Lower Tax for the lower wage earners….lower GST….No tax for NZ pensioners ….and no tax for interest on Bank deposit accounts… Chris
encourage people to earn more they spend more and pay more GST Common sense for a change ray
And a massive reduction in Government. Ditch MMP, even first past the post is more democratic Richard
That question is like asking if the turkey would vote for Christmas. Tim
Higher taxes just punish the people who are creating jobs and growth Chris
Encourage spending to help local business to grow and provide stable employment for others. Carol
Initially, lower taxes will provide insufficient government funding for their ‘pet’ projects, some of which have no benefit to Kiwis in general. As entrepreneurs increase their earning capability and worker salaries increase, government tax receivables will increase as the country becomes more productive and hence more wealthy. Increasing taxes will not increase productivity – it will kill the golden goose. Martin
Only if coupled with less Government expenditure Romi
To pay any tax you must have earned an income. Higher taxes are not going to increase production or create employment opportunities. Hoskings and his ilk have had nothing constructive to say about the situation the country has been forced into. We are all scared for the future and what it hold for us all, the younger generation in particular. Better scared than dead though. Thank you Jacinda and Ashley! Bruce
Absolutely Greg
no government has ever taxed its way out of trouble. Remember the disaster created by high tax policies in this country culminating in the Muldoon governments policies. The longer this goes on the greater the pain to correct it. Willy
IT would provide more cash to invest and share around Warren
You can not create a healthy economy by raising taxes. Don
Lowering taxes is the only sensible way forward. When we see our hard earned tax dollars being thrown recklessly around like confetti it is time to reduce taxes, leaving the cash to be better spent in growing the economy. Lee
Tax is a penalty. Andrew
Productivity is better increased by incentives – not taxs Maurice
Margaret Thatchers summary spells it out in black and white. National and Labour have got to stop pandering to Maori and harden up on Social welfare. Wayne
Without doubt..! Grahame
Lower taxes means more disposable income, which in turn will help the economy to recover. Heather
Not much of a choice really as neither will help. Until we have some real leadership at a national level the train wreck will continue. Alan
We need to cut govt spending and bureaucracy, lower taxes area a major incentive for growth David
Absolutely lower taxes – we earned it, why should they steal it off us? Andrew
Raising taxes in a recession is madness. Julie
Kerry McDonald is spot on with his analysis of New Zealand’s political leadership – they are so obsessed with staying popular that they have forgotten that they have a duty to do what’s right. Higher taxes might appease their voters but it will be another nail in the coffin for our economy.  Michael
What idiot would vote for higher taxes? Oh, I forgot – those driven by envy and those too lazy to work themselves!  Dan
Like Margaret Thatcher found, lower taxes, less regulation, and reducing government waste would allow NZ to pull itself out of the economic mess Jacinda Ardern has created.  Simon