Naked truth of Budget is we need to tax the Rich and expand the capacity of the State not cut jobs and give rich landlords tax breaks

The IMF have already warned us that borrowing for Tax Cuts will hurt us as National hurtle towards a Lizz Truss moment of reckoning with the Market, and the Market don’t like it…

Budget outlook ‘electioneering’, ‘light on details’ – economist

An economist says the Government’s latest economic declaration is “very light on details and very high on electioneering”.

Finance Minister Nicola Willis yesterday announced this year’s Budget Policy Statement, revealing tax cuts and getting the Government’s finances “back on a sustainable track” would be the priorities of the upcoming Budget.

Treasury’s forecast scenario – provided alongside the Government’s Budget Policy Statement – suggested the country’s economic outlook had deteriorated since the December Half Year Update.

Willis said tax cuts would be funded within the Government’s operating allowance through a combination of “savings, reprioritisation and additional revenue sources”. Her statement did not include what those additional revenue sources would be.

Labour leader Chris Hipkins said the Government “can’t even answer the most fundamental question, which is how much money they’re going to spend in the Budget”. He argued “tax cuts simply aren’t affordable”.

Economist Shamubeel Eaqub told Breakfast this morning: “Compared to previous years, this Budget Policy Statement was more of a pamphlet – very light on details and very high on electioneering.

…Bernard Hickey over at Kaka is scathing…

Borrowing even more to pay for tax cuts

The new Government’s Budget Policy Statement yesterday showed Treasury expects an economic slowdown will reduce forecast income taxes by $13.9 billion over the next four years. That means the Government’s borrowing programme over the next three years will have to be $10 billion to $15 billion bigger than forecast last December, according to notes from economists for Westpac and ANZ.

That’s if the Government goes ahead with its promised $14.9 billion worth of tax cuts over the same period, which Finance Minister Nicola Willis again committed to broadly, describing it as “responsible tax relief.”

Fiscal conservatives who normally support the new Government didn’t see it the same way. Former ACT Leader Richard Prebble yesterday joined NZ Initiative Executive Director Oliver Hartwich in calling for the tax cuts to be delayed, via his NZ Herald-$$$ column

“This Budget, if it contains unfunded tax cuts causing inflation and increased borrowing, will be both a political and economic disaster. Luxon must tell his Finance Minister and his coalition partners that the country voted for sound economic management. If that means the tax cuts and other policies must be delayed, so be it.” Former ACT Leader Richard Prebble via his NZ Herald-$$$ column

Here’s the Treasury forecasts for a lower nominal GDP than forecast at December’s Half Yearly Fiscal Update (HYEFU) and the resulting fall in tax revenue.

Bank economists see extra borrowing of same size as tax cuts

The slower economic growth forecast means Treasury sees less tax revenue, which in turns means higher Government borrowing over the next four years, as long as the Government carries through with its tax cuts. The amounts are almost exactly equal over the next four years:

• • Tax cuts proposed in National election policy costed $14.9 billion;
  • Tax revenue reductions due to slower real GDP growth and lower inflation total $13.9 billion; and,
  • Higher borrowing of $10 billion to $15 billion if the Government carries through with its tax cuts, say Westpac (up to $15 billion) and ANZ ($10 billion to $12 billion.

…they are borrowing for these tax cuts and will need to make cuts for their $2.9billion tax break for Landlords plus $100million for public servant redundancies!

That’s $19.1Billion we should be investing into schools, roads, hospitals, police, teachers, nurses, Cook Strait Ferry etc etc etc.

Yet here we are borrowing for Tax Cuts all because Nicola Willis was wild enough to stake her job on delivering Tax Cuts and Tax Breaks we can’t afford!

When Matthew Hooton, John Key, the IMF and the the NZ Initiative are all begging to stop tax cuts, you really have to wonder at who is pulling the strings in the background for Luxon to be this tone deaf.

Perhaps Christopher believes he’s entitled to a tax cut?

Bernard is very skeptical of Nicola Willis’ argument in all of this…

Willis went out of her way yesterday to say the tax cuts would not be paid for with borrowing. In my view, that would be true if the economic situation had not deteriorated since December, reducing the revenues elsewhere. The effect of that means a discretionary decision by the Government will mean it has to borrow almost exactly the same amount as the tax reductions.

Here’s how she described the mix of spending, taxation and borrowing in this statement:

“Tax reductions will be funded within the operating allowance through a mixture of savings, reprioritisation and additional revenue sources.

“Funding tax relief in this way means we won’t have to borrow extra to provide tax relief and we won’t be adding to inflationary pressures.” Nicola Willis statement

That is a disingenuous view at best. At worst it is misleading.

The pressure is now mounting from National’s own side of politics. Her comments around the scale of the tax cuts left some wriggle room to be less than the $14.9 billion promised next year, but not that much, given the changes to childcare rebates, interest deductibility and the bright-line test have already been legislated.

The irony of course is that the economy slowdown is due at least partially to the Government’s own actions. Its freezing of funding decisions by Waka Kotahi-NZTA and Kāinga Ora, along with refusal to help councils with funds for water projects, has plunged the development and infrastructure sectors into a state of suspended animation. Spending cuts across most Government departments of 6.5% and 7.5% has chilled consumer and business spending in many places, especially Wellington.

…So National have started the economic recession while needing to borrow for Tax Cuts we now can’t afford!

The lesson from Covid was that we need more State Capacity, NOT LESS!

We don’t just need more teachers, drs and nurses, we need new hospitals, now schools and new capacity!

New Zealand has an egregious infrastructure deficit in NZ!

The Left have to make the argument for a bigger capacity State funded by taxing the mega wealthy. They have to show where the money will come from and they have to show they will have a plan ready to go.

Because our under regulated capitalism has been robbed of revenue by a rigged economic system that benefits the rich, we are desperately needing more hospitals, more passenger rail, roads, schools, storm repair, tens of thousands still waiting for State Houses

The reality is that we are not spending nearly enough and we need a far larger State capacity, not less of it!

There is a class war happening right in front of our eyes as the wealthy pour millions in donations to National and ACT while Climate Denying Federated Farmers join ACT and National push for landlords to have the power to evict when some of their biggest donors are Real Estate pimps.

The political project of the right is to amputate the State’s capacity to raise revenue so that it can’t be redistributed in the first place.

There are 14 Billionaires in NZ + 3118 ultra-high net worth individuals with over $50million each, why not start  start with them, then move onto the Banks, then the Property Speculators, the Climate Change polluters and big industry to pay their fair share before making workers pay more tax!

When Treasury is being for a capital Gains tax, you know shit has gone cray…

Treasury’s warning to new Government: Consider Capital Gains Tax quickly to plug spending hole

Jobs and crayfish for us!

Austerity for you!

This is NuZilind now. This is what we have become because we were angry Jacinda saved 20 000 lives.

We have all the cultural maturity of a can of day old coke.

Increasingly having independent opinion in a mainstream media environment which mostly echo one another has become more important than ever, so if you value having an independent voice – please donate here.

If you can’t contribute but want to help, please always feel free to share our blogs on social media.