The tax cuts that National are implementing today are more generous to high income earners, and less generous to low income earners, than the tax cuts that they cancelled (Labour’s already legislated for package, see for example here, here, here and here). That’s business as usual for National, stiffing those with genuine need to take care of the already well off. In some ways it’s water under the electoral bridge.
But the story is far from over. Recall that National’s tax cuts were going to be not “North of $15”, the figure that is implemented today, but “North of $50”. This promise was repeated even in the context of the emerging economic crisis. To meet this promise two further rounds of tax cuts are scheduled for 2010 and 2011.
None of these tax cuts are affordable in the face of the ongoing crisis and the ballooning budget deficit. Now that they have won the election National has begun softening us up to cancel the 2010 and 2011 tax cuts. Expect to see more of this softening up in the months ahead.
Apart from a few greedy die hards, National will be praised for its “realism” when it cancels the cuts. But the chorus of praise will come from many of the same “commentators” who leapt aboard the mindless bandwagon that made tax cuts the defining issue of the last two elections. Labour was incessantly berated for its caution in holding off on cuts for so long. It should be obvious by now that this was realism on Labour’s part. While National has to respond to an obvious crisis, Labour was planning ahead for these hard times. That is why NZ is currently so well placed to weather the economic storm (according to Treasury, the IMF, and even National). It may get bad, but it won’t get nearly as bad as it would have if Labour (thanks Dr Cullen) hadn’t planned ahead.