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Thursday, September 08, 2005

Tax cuts or tax increases

Tax cuts or tax increases? Under Labour, they have raised or added over 42 taxes in the last 6 years. Should they stay in power, taxes will continue to increase. That's the way they think. When Cullen was sitting on a big surplus, he still couldn't consider a tax cut. The bureaucracy must grow.

Meanwhile, since the first country brave enough to try flat tax has done so well, more countries have followed suit. And the two latest countries to seriously consider flat tax? Britain and Germany:

Germany, however, [ ... has a] large, complex but efficient social welfare system that require vast amounts of public money. The German state accounts for more than half of Germany`s GDP. But the German system is in trouble. Most of its regionalized structure of national health insurance is technically bankrupt, and the high cost of paying for pensions and unemployment has thrust the government finances into constant deficit. The urge to tackle Germany`s problems through bold reform is strong.
Whilst you are considering the ramifications of Labour ramping spending up to 50% of GDP only to find Health and Pensions remain unaffordable, consider that Britain to is considering a flat tax regime.

The Adam Smith Institute worked out it was economically possible to introduce a flat tax rate of 22% for corporate and income tax. No more loopholes, no more complicated tax returns. No special write-offs and so forth. Well, there is one complication. They would exclude the first NZ$20,000 or so from tax, to help low income workers.

My point is this: As more countries use flatter and lower taxes to boost economic recovery and maintain growth, NZ will be left behind,and suffer for it.

Labour might be able to pretend our location will protect us from foreign affairs, but it only creates more pressure on economic affairs. In three years we will yet again be discussing ACT policy as if other parties knew it was inevitable. Unfortunately, being last into the market is sometimes not enough.

Posted by ZenTiger | 9/08/2005 09:02:00 pm