John MacDonald: How’s that $20-a-week tax cut looking now?

How’s that miserly $20-a-week tax cut looking now that we know the country’s budget deficit is $1.8 billion worse than expected?  

You might be one of the few people who are actually better-off by more than 20 bucks a week, but you’re in the minority.  

And there’s no doubt that there is egg all over the Government’s face on this one. But I told you so. And it wasn’t just me who told you so, but I’ll get to that.  

There will, no doubt, be people hitting back on this one —pointing out that ‘they’re not tax cuts, it’s tax “relief”— and that all the Government has done is shift the tax brackets.  

But yeah yeah. Either way, same diff, most of us have an extra $20 in the pocket and the country has a $12.9 billion deficit —$1.8 billion worse than expected— the largest annual deficit since the pandemic in 2020.  

Not quite as bad though as the deficits after the Global Financial Crisis in 2007 and 2008 and the Canterbury earthquakes in 2010 and 2011. The deficit blew-out to $18.4 after the quakes.  

Not that that’s saying much because we’ve still got a $12.9 billion deficit and, yet the big brains in Wellington are still defending their tax cuts to the hilt.  

Now, to be fair, the Government’s books show that while the deficit’s gone pear-shaped, the amount of money the government got in through the door was actually higher-than-expected in the past year.  

But that doesn’t alter the fact that the deficit’s got worse and the Government has thrown caution to the wind and has voluntarily reduced its income.  

Which I find weird for a government that says it’s bringing some business nous to the Beehive. Because in business —aside from containing costs— the number one thing when you’re in business is to try and increase revenue.      

As soon as National started talking about tax cuts —or tax relief— before last year’s election, I could see then it was something the country couldn’t afford. And there was no shortage of experts lining up, saying the same.  

There was the farcical idea of taxing foreign home buyers. But, even then, as soon as that idea was put to bed, National and its subsequent coalition partners still signed-up to the dream.  

If I was being generous, I’d say that it was just politics. You know, it’s just the way it’s always been. Politicians promising to put more money in people's pockets. And, as people always have, they blindly swallow all the cheap talk without asking how it’s going to be paid for.  

But I’m not feeling generous, and, anyway, that wasn’t the case. When all this tax cut talk started there was no shortage of people lining up to shoot it down. Even after the government was formed, the experts were still shooting it down.  

Let me take you back to April this year when Gareth Kiernan from Infometrics wrote about it in the firm’s regular newsletter. Gareth is Informetrics’ chief forecaster, and he wrote back in April: "The Government’s plans to fully deliver its promised tax cuts must be in doubt, as the economy falters and the fiscal position continues to get squeezed."  

He went on to say: “Forgoing another couple of billion dollars in revenue and increasing the deficit further might seem irresponsible. That conclusion becomes even more valid when one considers that National’s broader pre-election fiscal programme has led to change through the coalition negotiation process, with some estimates suggesting an additional shortfall in net revenue of about $1.5 billion.”  

He was right then, and his view is even more spot-on now – now that we know that the deficit is $1.8 billion worse than expected.  

The tax cuts were unaffordable and shouldn’t have happened, and the state of the Government’s books proves it. 

See omnystud

Episode Transcript

Speaker 1 (00:06):
You're listening to the Kerry Wood of morning's podcast from
News Talk said, b.

Speaker 2 (00:11):
Got a question for you. How's that miserly twenty bucks
a week tax cut looking now that we know the
country's budget deficit is one point eight billion dollars worse
than expected. Hey, how's it looking? You might be one
of the few people you might be who are actually
better off by more than twenty bucks a week. But

(00:31):
I'll tell you what if you are, you're in the minority.
And there is no doubt that there is egg all
over the government's face this morning on this one. I'd
like to say, told you so, So I'm going to
told you so, and it wasn't just me who told
you so. But I'll get to that. There'll no doubt though.
There will no doubt be people heading back on this

(00:52):
one pointing out they're not tax cuts, it's tax relief,
and that all the government has done is shift the
tax brackets. Yeah yeah, yeah, yeah, yeah, yeah. Fine, you
can put it that way either way. Same diff Most
of us have an ex to twenty bucks in the
pocket and the country has a twelve point nine billion
dollar deficit one point eight billion dollars worse than expected

(01:14):
the largest annual deficit since the pandemic in twenty twenty.
Not quite quite bad. Quite as bad though as the
deficits after the global financial crisis in twenty seven or
two thousand and seven to two thousand and eight, and
not as bad as it was after the Canterbury earthquakes
in twenty ten and twenty eleven. The deficit blew out
to eighteen point four billion after the quakes. Not that

(01:38):
that's saying much because we've still got a twelve point
nine billion dollar deficit, and yet the big brains in
Wellington are still defending their tax cuts to the hilt. Now.
To be fair, they don't want to be fair about it,
and I don't want us to go down at the
same time a rabbit hole of numbers. But to be fair,

(01:59):
the government's books do show that while the deficit's gone
pear shaped, the amount of money the government got on
through the door was actually higher than expected through taxation
in the past year. But that doesn't alter the fact
that the deficits got worse, and it doesn't alter the
fact that the government has thrown caution to the wind
and has voluntarily reduced its income, which I find weird

(02:21):
for a government day. A government which says, oh, we're
bringing back some business now is to the beehive. I
find that weird what they're doing because in business, aside
from containing costs triggered word costs, when you're in business,
the number one thing to do is try and get
more revenue through the door, isn't it. And as soon
as Nationals started talking about tax cuts or okay, tax relief,

(02:44):
as soon as they started talking about it before last
year's election, I could see then it was something the
country couldn't afford, and there was no shortage of experts
lining up saying the same thing. Remember there was the
fascal idea of taxing foreign home buyers. But even then,
as soon as that idea was put to be at
National and its subsequent coalition partners still signed up to
the dream. I was being generous. I would say, it's

(03:08):
just politics, you know, It's just the way it's always
been politicians promising to put more money in people's pockets,
and as people have always been blindly swallowing all the
cheap talk without asking how it's going to be paid for.
But I'm not feeling generous, and anyway that wasn't the
case when all this tax cut talk started. There was
no shortage of people lining up to shoot it down.

(03:31):
Even after the government was formed, after the coalition talks,
the experts were still shooting it down. I'm going to
take you back to April this year when Gareth Khan
from Infometrics wrote about it in the firm's regular newsletter.
Now Gareth was the chief forecaster and he wrote back
in April, and remember this was just before Finance Minister

(03:54):
Nicola Willis delivered the tax cuts in this year's budget.
Gareth Keenan wrote, quote, the government's plans to fully deliver
its promised tax cuts must be in doubt as the
economy and the fiscal position continues to get squeezed. He
went on to say in the newsletter back in April, quote,

(04:15):
foregoing another couple of billion dollars in revenue and increasing
the deficit further might seem irresponsible. He said that conclusion
becomes even more valid when one considers that National's broader
pre election fiscal program has led to change through the
coalition negotiation process, with some estimates suggesting an additional shortfall

(04:36):
and net revenue of about one point five billion dollars
end of quote. That's what Gareth Keenan from Informetric said
back in April, and I tell you what he was
right then, and his view is even more spot on
now now that we know that the deficit is one
point eight billion dollars worse than expected. Not surprisingly and

(04:58):
quite rightly in my view, Labour is saying today that
the deficit being worse than expected proves the government's tax
cuts were wrong. Let me quite a bit of cris
Haapkins for you for your f he says, quite new
Zealanders will continue to pay the price for those tax
cuts well into the future, a price that's disproportionate to
any benefit that they might have got from it. This

(05:19):
is cut to the chase. This is what I'm saying.
These tax cuts, they were unaffordable and they should never
have happened, and the state of the government's books proves it.

Speaker 1 (05:29):
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