I love this excerpt from Vernon Small’s story about the Goff vs Key fiscal debate:
Goff had signalled Labour would look at ring-fencing losses on investment property so they could not be offset against other income tax.
Key said National had considered and rejected it. At most it would raise $260m a year, but once sophisticated investors restructured their financial affairs ”you might raise $130m if you are lucky”.
He said the Government was borrowing $300m a week.
If Labour borrowed the full $1.1 billion that could rise to about $320m a week.
”Exactly which little pixie is going to deliver that? The answer is a foreign pixie that we have to borrow from.”
Labour countered today, saying Key was planning to ”sell the family silver to foreign pixies”.
Emphasis mine. See, Key is being wise and prudent and fiscally conservative by only borrowing $300 million dollars a week, while crazy, irresponsible Phil Goff might increase that amount by almost 8%! Pixies! Elves! Crazy time!
That point made, while I think the income free threshold is good policy I think it’s a daft idea politically and a textbook case of a general trying to fight the last war. Tax cuts played a crucial role in the 2008 election, when we had nine years of budget surplus without a single tax cut and voters were salivating at Key’s promise that he’d give them an extra $50 dollars a week. Fifty bucks a week! John Key! John Key! John Key!
Three years and three rounds of tax cuts later I think people are jaded about the magical powers of tax relief: each cut has been swallowed up by inflation, GST and various mandatory fee increases, they’ve failed to bring the economic stimulus we were promised and they’ve left the government with a terrifying deficit. I don’t think this idea will be a winner, and I suspect Labour now regrets their GST free fruit gimmick, which didn’t win them any points in the polls but means they’ve got to scavenge up an extra $250 million dollars a year to try and fund it.
These policies preclude Goff from attacking Key on one of his most vulnerable points: the deficit. Key is using the government’s debt as an excuse for the partial privatisation of state assets (of course, if we weren’t in debt he’d introduce the same policy on the pretext of growing the economy). But Key and English are the reason we have this gigantic deficit. John Key’s perceived strength during the election was that his financial genius would transform the national economy, and English was supposed to be this shrewd, wise guardian of the government’s books. In reality they’re proving to be a pair of colossally irresponsible, incompetent fuck-ups – but Goff can’t attack them for their irresponsibility if he’s just going to piss away even more money.
Imagine if Goff had promised to raise taxes on high income earners, crack down on tax evaders and use the money to restore payments into the Super fund and pay down the Key-English deficit. Sure, all the feather-weights in our political class would still be gushing about the color of his hair but I think the wider electorate would respond well to a demonstration of basic competence when it comes to the economy.