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Home / New Zealand

<i>Paula Oliver</i>: Cullen and English walk the tax cut tightrope

By Paula Oliver
26 Mar, 2008 04:00 PM3 mins to read

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Opinion by

KEY POINTS:

A sense of deja vu surrounds Finance Minister Michael Cullen's argument that public services will suffer to fund the tax cuts National will promise in this year's election.

It's the same argument Dr Cullen made against the tax cuts that National trumpeted in the 2005 election battle.

Remember
the lines? National's plan was "just crazy" and people should think about how many teachers and nurses would have to be chopped to finance those cuts.

But this time, there is a glaringly obvious difference and it's one that could make it harder for Dr Cullen to convince the public.

The difference is that this time he, too, is going to deliver tax cuts.

In exactly eight weeks, Dr Cullen will reveal his latest Budget and in it he will announce a programme of personal tax cuts for the next three years as well as outlining a longer-term plan.

Of course, Dr Cullen is arguing his tax cuts will meet four carefully worded tests he has thrown into the media - they won't require borrowing, they won't exacerbate inflationary pressures, they won't lead to greater inequality and they won't require cuts to public services.

But the fact is that when taxes are cut by any amount, however big or small, that amount automatically becomes money that could have been used for something else.

It's a question of priorities.

Both Dr Cullen and National Party finance spokesman Bill English will be choosing tax cuts over something else when they finalise their fiscal plans.

And that is something that a party like the Greens will be only too keen to emphasise as the election campaign starts.

It will become an argument about degrees - how big a tax cut is too big.

That is not as clear-cut an argument for Dr Cullen to win as it was in 2005, when the argument was about whether to cut taxes at all.

The noise that will come from the Greens and other sources on the left is likely to blunt the argument Dr Cullen is trying to make.

A significant risk still remains in all this for National, though.

If it goes completely over the top and comes up with a plan that is far bigger than Dr Cullen's programme, National will leave itself more open to arguments of the type the Finance Minister is trying to push.

It will be much easier for Dr Cullen to convince voters that National is being irresponsible if the difference between his plan and theirs is colossal.

Both National and Labour know that National will offer bigger tax cuts. Both admitted as much yesterday.

How much bigger is a fine balancing act, and one likely to play a major role in deciding the election.

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Opinion

What tax cuts are you expecting? Is this just an election bribe?

25 Feb 12:07 AM
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