Growing out of it: Five policies to encourage growth and conquer debt
The New Zealand Taxpayers’ Union has released a new paper outlining a suite of proposals to lift economic growth and therefore reduce debt as a proportion of GDP.
On current forecasts, government debt is set to reach $150,000 per New Zealand household. There are two ways to slay this debt monster: cut spending, or grow the economy. While we need to do both, our latest paper hones in on the second approach.
Growing out of it: Five policies to encourage growth and conquer debt makes five recommendations, all funded from the $14 billion set aside in the Government’s COVID-19 Response and Recovery Fund:
• Cut GST from 15% to 10% for the next 12 months
• Permanently cut the $70,000-threshold rate from 33% to 30%
• Permanently cut the $48,000-threshold from 30% to 27%
• 15-month hiring trial periods from October 2020 to end of 2021
• Increase the $100 million overseas investment threshold to $500 million
Targeted tax relief will spur economic activity when we need it most. We propose a temporary GST cut which will incentivise New Zealanders to bring forward planned spending, and we also suggest cuts to marginal income tax rates that will reward productive work.
Traditional tax relief, however, should only be one part of a growth package. Growth can also be encouraged through relief from regulatory taxes. Specifically, we propose temporary but significant relaxation in rules that make employers less willing to hire staff, and foreign businesses less likely to invest in New Zealand.