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Tax cuts unrelated to Government spending

One thing that really riles me up is political parties acting as if taxpayers’ hard-earned dosh is their own.

The latest example to raise my ire was in a media release by the Greens, which made the point that their proposed $100 million School Hubs Programme pales in comparison to National’s slated $1.1 billion worth of tax cuts.

Fair enough. But sometimes, it is not what you say, but how you say it.

A seemingly harmless line like do we want to prioritise Government spending on tax cuts for the top 10% of income earners? betrays at best a certain sense of economic forgetfulness; at worst, a sense of smug entitlement.
How? The hidden implication here is that tax cuts and government spending are identical; apples with apples.

Morally distinct

Sure, the Government’s balance sheet will look the same, whether they cut taxes by $1 billion or spend $1 billion on new initiatives. In this sense, it is the same, but to treat these two distinct processes as morally equivalent is a slap in the face to all who have contributed to the Crown.

Why? Because the Government’s money is not its own. Before tax dollars are spent, they have to come from somewhere. They do not miraculously appear and descend into treasury coffers from, but come out of the pockets of every worker in New Zealand, rich and poor alike.

Furthermore, if these dollars are not taxed and spent by the Government, they do not just disappear, but are saved or spent in other ways by those who earned them.

Tax cuts are not government spending. They simply mean that the Government is taxing less, and having less to spend, and New Zealanders having more.

Taxes essential

Yes, we need taxation to fund legitimate Government functions and worthy initiatives. And yes, there are distributional issues to attend to, of course. But before we look at these, let us not forget where the money comes from.

And let those who are responsible for spending it not forget it either.

Kieran Madden is a Researcher at Maxim Institute, Auckland, with whose permission the above has been reproduced here.

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