On Monday, Key said his tax cuts have been “literally fiscally neutral”. In Parliament yesterday, Russel Norman showed Treasury documents showing the 2010 tax changes were to forecast to cost $1.1b in 4 years, actually cost $1.1b in 9 months, and the cost has grown since. Key didn’t want to hear the Treasury numbers, instead waving some ‘billshit’ put together by the Finance Minister.
Key responded that you have to include all the tax changes National has made. In particular, how they credit themselves with a billion dollars for cancelling Labour’s tax cuts that hadn’t come into effect yet when National took office, ie. they preserved the status quo and credited themselves with a billion dollars for it, and how they sneakily started making us pay income tax on our employers’ contributions to our Kiwisaver last year.
But that rather misses the point. Key said that the 2010 tax changes were fiscally neutral. They’re not. Key says you have to consider the other tax changes he’s made. You don’t. They were different decisions. Just because they did some dodgy accounting on cancelling Labour’s tax cuts in 2009 and increased tax on saving in 2011, doesn’t mean they had to give away a net billion plus dollars a year in tax cuts (mainly to the rich) in 2010 at a time when the Crown is running record deficits.
The opportunity cost to National’s 2010 tax package is a billion+ less borrowing each year.
It was National’s choice to make tax changes in 2010, the cost of which has blown out and is running at well in excess of a billion dollars a year. Key should man up and explain why sticking with that tax package is a good idea.