Taxpayer Update: What to look for on Thursday | 18 days of reading about rock lobster
This will be a big week for taxpayers.
Thursday is Budget Day, when Grant Robertson will decide how to spend around $100 billion of your money.
As usual, we're sending staff to the Budget Day lock-up briefing. This event gives economists, sector groups, and unions a chance to read through the spending documents before the public release, so they can release independent analysis at 2pm to balance out the Finance Minister's spin.
But this year we were almost locked out. Speaker Trevor Mallard tried to use COVID-19 as an excuse to restrict access to the briefing and only invite selected journalists. It was only after we kicked up a fuss that he extended the invitation to 25 independent analysts, including our consulting economist Joe Ascroft.
This means we'll be bringing you (and the media) a taxpayer perspective on Budget 2020 shortly after 2pm on Thursday.
What should taxpayers look for in Budget 2020?
Ideally, the Government would provide economic relief to struggling households with tax cuts.
Slashing fuel taxes, for example, would encourage regional tourism and reduce costs for less well-off households. Another option would be a short term reduction to GST – similar to what Britain did to VAT just after the GFC. Cutting taxes means householders pick the winners (in what they spend the extra money on), not politicians...
However, the Finance Minister hasn't signaled any interest in tax cuts – and it's hard to see him dialling back taxes his Government increased.
So, assuming tax cuts are off the table, here's how we'll be judging the Budget Day announcements:
Principle one: Don’t bed in new spending.
New spending may be justified in the short and medium term but should come with sunset provisions to ensure the liability on taxpayers does not extend past the recovery period, after which we will need to pay down debt. Locking in long-term deficits will mean much more pain later.
Example: The $25 lift in benefit payments should be reversed once GDP returns to that of Q4 2019.
Principle two: Quality of spending still matters.
Spending should not be justified on the basis of 'stimulus' or 'relief' alone. We must demonstrate that new spending is effective and fair.
Example: Wasting money on make-work infrastructure schemes with negative cost-benefit ratios will make New Zealand poorer.
Principle three: Help businesses help themselves.
Many businesses will thrive if the Government simply gets out of the way. The Government should examine areas where regulation and spending projects can be rolled back on a trial basis.
Examples: Encourage development by suspending provisions of the Resource Management Act. Encourage foreign investment by reviewing Overseas Investment Office rules. Reduce uncertainty and protect productivity by deferring low-priority legislative programmes, such as 'Fair Pay' agreements and annual minimum wage hikes.
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