Mike Hosking: Tax cuts are a great sweetener

One of the report's suggestions is kill the top rate and have business trusts and everything over $48,000 pay 26 cents. Photo / Sarah Ivey

Tax is going to be a defining issue this election.

The debate has already begun, we have two reports just this week.

One into how multinationals allegedly aren't paying their "fair share".

And a report into various options for tax cuts the Government might like to consider in its budget in May.

That second report, by the way, is useful given it claims we are already paying more than we need based on the fact the tax brackets haven't been moved to cope with inflation, and we've ended up with the absurd scenario in which the average wage creeps into the top tax bracket.

Now here is your reality on multinationals.

We can't do a lot about it, the Government is trying, its investigating.

But the report claims we miss out on $700 million a year, internationally governments miss out on $700 billion.

But that's based on every multinational paying local taxes in local sales and here's your problem with that.

None of what they do is illegal.

They park themselves in jurisdictions that are the most convenient to them, and really who can blame them.

If you're everywhere, why not be where the bill is smallest? Until every country on the planet agrees that we need to have companies pay their tax in the local areas where the sales are made, this is going nowhere fast.

But on the domestic front, the personal tax report is going to make a difference, and given elections are won and lost on back pocket politics it's the Nats who are in the box seat.

How they deliver the cuts of course is key.

One of the report's suggestions is kill the top rate and have business trusts and everything over $48,000 pay 26 cents.

Now for companies and everyone on a good wage that's manna from heaven.

But it's not a vote grabber so it's not happening.

Another idea is to have a tax-free threshold up to $13,000 so everyone gets a slice of the action.

It makes a lot of sense.

All of these projections, by the way, are based on the premise that $3bn is going to be spent on tax cuts.

And the Government books are now robust enough to write that sort of cheque.

Now the trouble for Labour is they're going to run to September trying to tell us that the money we're about to get back, shouldn't be in our wallets, it should remain with them because they know what's best for our money, not us.

And there is a bucketload of work that needs doing and all contributions are not only welcome, but under their policy will be annexed for the cause.

This is a critical error and will bite them in the bum.

The simple truth is, if you're of a mind, there is always money needed, you can literally mount cases for never-ending sums of money for a never-ending series of causes and programmes and needs.

To give Labour credit, they at least have dropped the idea of increasing taxes. That would have been political suicide. And they are walking a fine line with the CTU this week arguing that the spending deal they've done with the Greens is too restrictive and they want more money made available for those aforementioned programmes.

But in an aspirational country like this, where hard work is rewarded, tax cuts are the result of success.

Mike Hosking

This country has been through a good number of tough days and has come out the end with an economy the envy of most of the world.

The payoff is a government that needs less of your money.

Tax cuts are perhaps a government's greatest political weapon or sweetener. History shows money in the pocket swings votes.

So with one doing it, and one not, guess who has got the easier path.