Overtaxed?

Written By: - Date published: 9:57 am, October 12th, 2007 - 17 comments
Categories: economy - Tags:

tax-gdp.jpg

There’s a lot of talk on the right about the surplus being evidence of ‘overtaxation’. But where exactly is the Government’s huge tax grab? According to Treasury, tax as a percentage of GDP has barely moved since 1998 – when we had no Working for Families, no Cullen Fund, no Kiwisaver, virtually no investment in transport, no cheap doctor’s visits and prescriptions, no interest-free student loans, and no assistance for first-home buyers. That’s right, tax as a percentage of GDP has risen from 30.7% in 1998 to just 31.8% in 2007.

If there’s anything remarkable in these figures, it’s why a centre-left government hasn’t increased tax revenue even further as a percentage of GDP after eight years in power. One thing is certain – the surplus is not evidence we’re being overtaxed. So why aren’t National, the media and business crying out for more spending on public services instead?

17 comments on “Overtaxed?”

  1. Thomas 1

    The right can’t come to terms with the fact that Cullen has been a very successful finance minister.
    The economy is in excellent shape despite 7 years of leftie control
    They seem to be reduced to chanting TAX CUTS TAX CUTS TAX CUTS at any available opportunity. This unfortunately has got a too much traction in the media. So much so that Cullen will have to announce them next year or our election prospects look slightly dicey.
    I expect him to do so
    I wonder what I’ll spend my tenner on

  2. Tane 2

    I’m saving mine for the toll roads National’s going to build, or I might spend it on increased GP fees. So much choice in how I get to spend my money! That’s what I love about National governments.

  3. An excellent post. This illustrates well that fiscally this Labour Government is more of a continuation of the previous governments rather than any swing to the left or rolling back of the neoliberal approach.

    So let’s not hear any more rubbish from National supporters (or Labour supporters) that Labour is economically left-wing or radical.

    It’s good to see The Standard for once showing the similarity of Labour and National.

    Bryce
    http://www.liberation.org.nz

  4. Sam Dixon 4

    Bryce – you make me smile.

  5. Sam Dixon 6

    mancap – that graph shows a totally different aspect of crown accounts.

    also, as you will see in comments on that post, an operating surplus is not simply a pile of money ready for tax cuts.. its used for the Cullen Fund, infratrucutre, paying down debt, and other capital investment

    .. cut the operating surplus, cut investment

    … thats why professionals look at cash surpluses instead of operating ones.

  6. can we please refer to them tax cuts as ‘toys and candy’ http://thesproutandthebean.wordpress.com/2007/10/10/toys-and-candy/.

    Ta muchly and thanks to the Standard for an intelligent analysis

  7. Sam Dixon 8

    the bean – i like it

  8. ahod 9

    Mancap, your balancing two different things, on two different scales. No comparison between the two can be made.

  9. r0b 10

    I have the impression that any survery that has asked Kiwis which they prefer, social services or tax cuts, there has always been a strong preference for social services. But as I said, this is only my impression. Can anyone help me out (or, of course, cure my delusions) with some concrete references?

  10. Shane 11

    Referring to comments made by Thomas above..
    Cullen has been a successful finance minister and we have done well under this government (that includes you righties).
    I agree that Labour have been painted into a corner over cutting taxes, and it now seems inevitable one way or another.
    Personally I don’t agree with cutting taxes as history shows that this means higher costs in other areas, making the extra ($10) weekly money worthless.
    If it is done under a National government, wages and salaries will increase more slowly due to an increase in unemployment, attacks on trade unions, and attacks on worker’s rights. This may seem like scaremongering but its what they did in the 1990s and I see no evidence that they have changed from this failed and destructive path.
    At least I can build on top of a payrise!

  11. Sam Dixon 12

    PC gone mad? http://nobelprize.org/nobel_prizes/peace/laureates/2007/ Gore and IPCC win nobel peace prize

  12. Roger Blunt 13

    Cullen is not a successful finance minister. He is the most successful tax creep in the history of New Zealand. Anybody who refuses to change tax rates to at least match inflation is cheating the hardworking kiwi. Cullen’s salary makes him totally insensitive to the plight of the workers who suffer unnecessarily under his regime. Bring back Buck!

  13. Tane 14

    Roger, tax revenue doesn’t just disappear into a hole, it gets spent on public services like health and education that benefit everyone. And with WFF, many working families actually pay no net tax at all.

    Now I have my issues with Cullen, and I’ve had my disagreements with Labour. But I’ll tell you one thing – if John Key gets in next year it’ll be workers who will suffer the most.

    Who do you think stands to gain from National’s plan to smash the unions, slash public services, sell off our assets and cut taxes for the rich? Not you and me mate, that’s for sure. As the old saying goes, follow the money. Who’s paying for John, and what do they want from him?

  14. Roger Blunt 15

    Tane, I am sufficiently familiar with government income and expenditure regimens over the years to view the current lot with a very jaundiced eye.

    I am retired, on my personal pension scheme, so have no real stake in personal taxation. But it sticks in my craw to see things like “Working for Families” subsidising so many people who do not need it, especially when the work income going into those families (before the W for F top-up) far exceeds anything I get. My and my wife’s needs are just as real as theirs, yet we are excluded.
    If the Labour Government was intent on raising personal incomes, it would provide a business climate that encouraged businesses to pay people what they are really worth. Go no further than Australia to see how this works.
    However, like you, I see no solutions for increasing personal wealth in National either. Except that I can’t see them smashing unions – the Bill og rights still applies, in my book.

  15. Robinson 16

    Roger, wages in Australia are beginning to stagnate due to changes in employment law (workchoices) that were designed to smash unions. National’s employment policies in the ’90s did the same thing. Improving the business climate does not raise wages businesses just increase their profits (and have been for some time). The problem with the trickle-down theory you espouse is that it fails to take into account the fact that most businesses see their workers as “labour costs” and have no incentive to raise wages if they are not compelled to. To argue that a better business climate will see wages rise is akin to arguing that companies that do well will voluntarily chose to pay more for raw product. It’s like me saying, Hmm I’ve just got a pay rise – I think I’ll ring telecom and ask them to increase my phone charges to make up for it.

  16. Shane 17

    Roger
    People that earn what Cullen gets would stand to benefit the most from a tax cut. Therefore, wouldn’t you think that a person in his position would be keen on cutting taxes?
    Cullen and Labour deserve credit for this.

    “But it sticks in my craw to see things like “Working for Families” subsidising so many people who do not need it”

    Isn’t that what a tax cut will do? It will put more money into the hands of the rich and give peanuts to low income people.
    For what its worth I don’t get any Working For Families money either.

    “If the Labour Government was intent on raising personal incomes, it would provide a business climate that encouraged businesses to pay people what they are really worth. Go no further than Australia to see how this works.”

    Are you talking about “Workchoices” in Australia? Similar to National’s Employment Contract Act of the 90’s? Designed to smash trade unions and lower wages/conditions?
    I can see how this would force people onto individual contracts and allow businesses to pay people less than they are worth, which is exactly where the National Party want to take us again.

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