National's Tax Cuts [updated]

 

UPDATE: Eric Crampton:

"Paring government spending back to what Labour had promised, pre-Covid, would ... free up over twelve billion dollars, or about seven thousand dollars per household.
    "Instead, they're embroiled in disputes about the amount of money that would be raised by a tax that never made much sense in the first place....
    "The only real tax cut is a spending cut. ... Is it crazy to expect a National-led government to not want to outspend Ardern 2019?"

Punters are questioning National's promised tax cuts at this election. But National promises tax cuts at every election. 

Do they deliver?

Do their figures add up? 

Do they even care? 

Because when we look at promising tax cuts before an election, and breaking that promise thereafter ... well, on this very thing National has form. Just think back to the election in which John Key came to power ...

Out of power for 9 years before that 2008 election, and desperate to get back in, National in opposition had been promoting tax cuts for six of those years. "Significant" tax cuts. In May of that election year, after the delivery of Michael Cullen’s budget, John Key reaffirmed that “We believe in tax cuts. We believe in the power of tax cuts. And we will deliver them.” Asked to quantify it, Bill English promised “significant personal tax cuts” of “about $50 a week to workers on the average wage."

And as they watched their poll numbers go up on the back of that pledge, they kept right on promising.

But 2008 was also the year the Global Financial Crisis began, remember?

Didn't bother them in the slightest. They kept right on promising those tax cuts even as the housing collapse hit the US economy and the Dow Jones began its year-long slide. They kept up with the promises as NZ was declared officially in recession and our own housing markets began to slide.

And as John Key's former employer Merrill Lynch collapsed, and the US Federal Reserve started bailing out banks and bond buyers with billion-dollar loans, Bill English promised voters “a credible economic package to take account of the changing economic climate.” “Our tax cut programme will not require any additional borrowing,” he lied, comparing Michael Cullen’s record with his own promise to deliver “an ongoing programme of personal tax cuts.”

The promised programme never arrived. The borrowing did.

Even in October of that election year, after “the books” had been opened and several more dead rats fell out, Key and English both said “the pledge to deliver about $50 a week to workers on the average wage remained on track." And then 18 days before the election, they doubled down: "National is not going to be raising GST," John Key told journalists. "National wants to cut taxes, not raise taxes."

Readers, he lied. After the election, he broke that promise without even blinking.

GST was raised.

No taxes were cut.

And instead of those tax cuts of about $50 a week, with "no new borrowing," they delivered lots of the latter,* very little of the former, and a whole raft of tax increases and new taxes,:from rises in GST to increases on ACC levies and excise taxes, topped off with Nick Smith’s "ETS taxes" on fuel and power to counter climate change, and Steven Joyce's fuel tax hike to pay for more roads.

They flat-out-lied to voters. Baldly. (And no fear saying they couldn’t know about the economic crisis when they made their promises.)

Here's what I said back in April 2009, 

Significant tax cuts were a key election-winning promise for National, remember?
    And now they want to recant on that promise, just as I told you they would back in October. “Economic conditions” and a projected "decade of deficits” make it impossible, say Prime Minister John Key and his Finance Minister Bill English, to deliver the latter two of the three rounds of tax cuts they promised so loudly back in November.
    Excuse me boys, but isn’t it the case that these tax cuts, promised less than five months ago, were a key reason that the public gave you the jobs you have now? Shouldn’t you be doing now what’s necessary to do what you promised then?
    Isn’t it just a bit rich to say that “economic conditions” now make it impossible to deliver what you promised back before the election, because it was obvious back then to anyone with eyes to see that economic conditions were going to make it necessary to cut the government’s coat according to the cloth it could afford.
    To say that it wasn’t obvious to you back then is not an excuse not to deliver now, it’s a reason for your supporters to realise that you're either not competent enough to do your jobs -- since the whole world and his grandson could see back in October what was coming -- or else you’re a pair of liars.
    No other alternative explanation is possible.

So: can you believe this Party this year when they promise significant tax cuts? That you'll ever see their promised "Back Pocket Boost"? Says Michael Reddell, who has been examining one part of it:

When the fiscal deficit as it as large as it is, a major political party promising tax cuts really should be able to convincingly suggest to the public that the cost will be fully covered and that if their programme was adopted it would not worsen the already-large deficit. National’s package does not pass that test at present.

Fool me once ...

* Taking the debt from ten billion to sixty-six billion dollars...