Labour are telling massive whoppers, such as the Government is borrowing $120m a week to pay for tax cuts for the wealthy.
The reality is that National’s tax and spending packages will in fact lead to around $2.8b less debt by 2014, than ehwt Labour were proposing. Bill English’s office has released this table showing the components:
Net fiscal impact of the Government’s tax changes ($million increase (decrease) in the operating balance)
|Election tax package1||(133)||(238)||(37)||188||198||198||176|
|Budget 2009 cancellation of 2nd and 3rd tranches2||105||553||956||999||999||3,612|
|SME tax package3||(294)||(189)||214||(108)||(108)||(108)||(593)|
|Budget 2010 tax package4||(460)||(90)||(40)||175||(415)|
1. Fiscal impact = revenue (removal of R&D tax credit + KiwiSaver changes + cancelling remaining tranches of Labour’s tax cuts) minus costs (personal tax + IETC). Source: Cabinet Paper CAB(08)585.
2. This is not an increase in taxes but the cancellation of future intended tax cuts which were already in the fiscal forecasts. Source: Treasury Report T2009/418.
3. February 2009 SME tax package. Source: BEFU 2009, Table 1.7.
4. Fiscal impact = revenue (GST increase + depreciation + LAQC + thin cap + WFF + GST base + tobacco + increased audit) minus costs (personal tax + company + PIE and savings vehicles + GST compensation). Source: Budget 2010 Executive Summary, Table 1.
The key thing to remember is that the combined tax and spending changes have been not just fiscally neutral, but in fact debt reducing. In the first two years they were slightly expansionary (which is not altogether bad) in a recession, but by the end of next financial year they would have been positive for the Government fiscally..