Finance Minister Bill English has placed a billion-dollar bet that his Budget tax-go-round will turbo-charge domestic growth and shift New Zealand out of the economic cul-de-sac so we can start closing the gap with Australia.
English argued his "once in a generation" package was needed to fire-up growth by switching the tax system towards the productive sector and away from property investment.
So he whacked consumers, property investors, foreign multinationals and smokers to help to pay for deep cuts to personal income and company taxes.
But the tax-go-round is still $460 million short of raising enough cash in the 2010/11 fiscal year to fund the big personal income tax cuts on October 1.
That funding shortfall grows to $1.085 billion over a four-year period on what Treasury calls a "static" basis and Labour leader Phil Goff calls a Great Tax Swindle.
But English is betting the big Budget tax announcements such as the decision to slash the top personal tax rate to 33 cents in the dollar and the company tax rate to 28 cents in the dollar (three years before Australia moves down that path on the corporate front in a two-step process and one year ahead of Aussie SMEs) will put NZ back into the game when it comes to competing for investment and talent.
Goff's allegations of a Great Tax Swindle are predicated on the static analysis.
But they are also extraordinarily rich for a minister from the previous Labour Government which opened the door to large-scale tax avoidance in the first place by allowing far too many higher-income earners to avoid its "envy tax" of 39c in the dollar through using trusts to get their "personal" rate to down 33c or lower; or tossing investment properties into LAQCs (loss attributing qualifying companies) to leverage the 30c company rate.
That's two areas of avoidance this Government is slamming shut.
But English - who has been encouragingly bold on this front - believes Kiwis will strive to earn and save more if they get to keep more of their own money as a result of the tax cuts.
Hence the Treasury predicts the real macro-economic effect of the package will be to close the $1.085 billion gap by $585 million by 2013/14 (aka the turbo-charge) with a net positive impact of $175 million being posted to the Government's operating balance in that fiscal year.
By moving down this path the Government is placing an important stake in the ground and nudging Kiwis along the path to an economy which is markedly more free enterprise in its approach.
Where the Budget falls down is in the lack of measures that will grow the Government's revenue line - particularly around research and development.
The top tax rate on savings vehicles such as portfolio investment entities and KiwiSaver will also fall to 28 per cent - which will incentivise savers.
What remains missing, however, is a move towards compulsory superannuation, a measure which markedly boosted Australia's savings pot and provided the fuel for that nation's companies to buy up a major swag of our own.
That trend is not going to be reversed any time soon.
But it may well be slowed. And other moves to curb the ability of multinationals to load up NZ subsidiaries with debt to reduce their tax bill here will ensure more "foreign" companies pay a fairer whack.
The Budget's "key facts for taxpayers" table cuts off at the $120,000 mark. At the $120,000 income level a taxpayer could expect to hold on to an extra $4630 a year through the decrease to his/her annual tax bill. The net gain is predicted to be $2916.03 after the GST hike is included.
Deloitte's more robust analysis (net of GST) indicates someone on a $150,000 income can expect to retain an extra $6129.76 in their pocket each year.
At $200,000 the figure increases to $8629.92 - not chump change by any means and $6630 more than they would get if earning the same amount across the Tasman. By the $240,000 mark the Australasian tax wedge opens to $11,430 in favour of Kiwi earners.
The bigger tax breaks on this side of the Tasman won't offset Australia's higher annual wage rates: A$66,040 ($81,179) average for an adult working fulltime against the NZ average of $49,874.
Of itself it also will not be enough to stymie the big outflow of New Zealanders which has resulted in 17 per cent of our skilled Kiwis going offshore - the third highest rate in the OECD. But the moves will help.
On the property front English has followed the old taxation maxim (plucking the most feathers from the goose with the least amount of hissing).
But he has stopped short of outright ring-fencing the ability of taxpayers to carry investments losses against overall income.
Commercial property investors will squeal on the depreciation front.
But the decision to retain the ability to depreciate "fit-outs" and buildings with a lifespan of less than 50 years will ease the pain.