It has been treated as gospel that if the Australians, for inadequately explained reasons, drop their corporate tax rate from 30% to 25%, then we, for inadequately explained reasons, will have to follow suit.
Where is the proof that the $900 million a year that cut would cost us is justified? Did the economy fall apart when we had higher corporate tax rates than us for most of the last decade? Do the Aussies feel compelled to cut their top income tax rate from 45% to 38% to match ours for fear of losing their ‘best and brightest’ to our shores? Where is the proof that this would be a better expenditure of money than, say, giving every New Zealand taxpayer their first $2,500 of income tax-free, which would cost the same amount? Where is the proof we wouldn’t be better off spending that $900 million a year on green technology and infrastructure, or on health, or on education?
Why should we take it on faith that the corporate rate must come down if the Aussies drop theirs or, for that matter, that revenue raised by a land tax must go to cutting income taxes for the most well-off?
Why isn’t anyone asking these questions? Why in their otherwise excellent, informed, and intelligent pieces on tax reform do Vernon Small, Fran O’Sullivan, Rod Oram, and others fail to challenge the core assumption – that the benefits of tax reform must go overwhelmingly to the wealthy. Why don’t they ask ‘why’?