John Armstrong is the Herald's chief political commentator

John Armstrong: Cutting tax tempting for National

Tax cuts would differentiate the two main parties in marked fashion, writes John Armstrong. Photo / Ron Burgin
Tax cuts would differentiate the two main parties in marked fashion, writes John Armstrong. Photo / Ron Burgin

It is easy to picture National's billboards at next year's election. Something like: "Vote Labour if you want more tax; vote National if you prefer to pay less." But more punchy.

The question is how much bite such advertising will have.

Releasing the latest update on the state of the Government's books, Bill English did his utmost to play down any notion that tax cuts will necessarily flow from the increasing Budget surpluses that the Treasury is forecasting from 2015 onwards.

The Finance Minister and his Cabinet colleagues would be neither human nor true blue National disciples if the thought of tax cuts has not crossed their minds.

You can also understand why they have avoided speculating on such a possibility. English has spent the past five years preaching the virtues of fiscal rectitude. He wants the debate to focus for now on how difficult it will have been for National to meet its target date of surplus by mid-2015 - and how difficult it will be to stay in surplus.

To suddenly talk about tax cuts would send a very mixed message about the need for continued restraint in government spending, while offering Labour considerably more flexibility in terms of being able to promise more in election year.

But with real wages rising only very slowly and interest rate increases inevitable next year, National must be tempted to flag tax cuts for cash-strapped households as a possibility, if still some way down the track.

With Labour promising a capital gains tax and also likely to lift income tax rates for the well-off, tax cuts would differentiate the two main parties in marked fashion.

Despite noting a more positive outlook for the domestic economy in the short term, the fiscal update issued yesterday is also laced with warnings about growth slowing and the fragility of the global economy.

Overall, English will not want to tie himself to future tax cuts without more solid evidence they can be sustained.

- NZ Herald

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John Armstrong is the Herald's chief political commentator

Herald political correspondent John Armstrong has been covering politics at a national level for nearly 30 years. Based in the Press Gallery at Parliament in Wellington, John has worked for the Herald since 1987. John was named Best Columnist at the 2013 Canon Media Awards and was a previous winner of Qantas media awards as best political columnist. Prior to joining the Herald, John worked at Parliament for the New Zealand Press Association. A graduate of Canterbury University's journalism school, John began his career in journalism in 1981 on the Christchurch Star. John has a Masters of Arts degree in political science from Canterbury.

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