Tax and economic growth – Bill comes clean

John A
14 years ago
Categories: bill english, economy, tax
Tags: guyon espiner, Q+A

Here’s Guyon Espiner with Bill English on Q & A – a good question for the person who was also Treasurer in the 1990’s:

GUYON Well let’s talk about that change in the tax system. You’ve indicated pretty clearly that the top tax rate will come down to 33 cents, that was largely the signal that you gave this week. I mean do you really expect that to create economic growth, because that’s where the top tax rate was in the 1990s and we were hardly an economic nirvana then were we?

BILL Well the tax system doesn’t guarantee anything about the economy, what it does do is help people, it changes the incentives for people’s choices at the margins, so we want to create the opportunity for them to decide – that it’s easier for them to decide, to save more, to invest more, to create jobs.

So it’s official – the tax system doesn’t guarantee anything about the economy! He’s right of course – it’s just about making things easier for the few of “them” at one margin – the top. There’s no choice at the bottom.

So why is it one of Key’s six ways we get to be equal with Oz?

Guyon tries to find out:

GUYON Were things that much better though with respect in the 1990s when the top tax rate was 33 cents in the dollar?

BILL Well in some respects they were, I mean in the tax system what’s happened since then is we’ve had a loss of integrity where there’s different rates for different entities, people quite naturally try and reduce their tax rate, and the experts are telling us in the long run that’s going to erode a tax base we depend on, which is income tax, so we want to improve the integrity of the system, improve the fairness, so everyone is paying the right rate, but most importantly to adjust the incentives of the economy so that people have stronger signals about getting ahead rather than borrowing more because they’re spending more than they earn.

Why not just stop the rorts then if integrity is the problem?

Pity Guyon didn’t ask that question. He was probably trying to work out what on earth Bill’s answer meant.