KEY POINTS:
The reactions to my Orewa speech (Brian Fallow, New Zealand Herald - "wealthy get tax relief" or John Key - "idea is fundamentally flawed") are disappointing but not surprising. Clearly, the politics of gesture or pigeonholing still reigns supreme while New Zealand's problems escalate.
Will the policy I outlined at Orewa help the rich? It will. But not nearly as much as it will help the poor. Why? Because rich and poor taxpayers alike get precisely the same tax relief, that is $6150.
That means someone on $30,000 a year will pay no tax at all, while someone on $100,000 will pay no tax on the first $30,000; and thereafter pay a flat rate on the balance of $70,000.
It is the current system, apparently supported by Fallow and Key, that denies options and opportunities to the poor; while the poor are forced to queue for healthcare (sometimes dying on the waiting list), the wealthy get the care they need through private provision.
How is it then, when I propose an option that puts the poor in the same position as the rich (that is, getting treatment when they need it) this is somehow hurting the poor?
The poor will also have $4000 a year inflation-proofed to save for their retirement compared with being unable to save under the present system.
For someone saving under this option from ages 18 to 65, that equates to $1.8 million or $850,000 in dollar-of-the-day terms.
How does this adversely impact on the poor? Or is it simply that there are some who want the poor to rely on the goodwill of the taxpayer or the whim of a politician? The size of government spending is set to balloon under National from 30 to 36 per cent.
The tax cuts will be financed by mortgaging our future with the interest on the increased debt having to be paid back by future generations.
Under Labour, we mortgaged our houses to buy consumer goods and under National we are about to mortgage our children's future.
New Zealand under Labour rules became a high-tax, low-growth welfare state. My speech at Orewa shows how to obtain a high-growth, low-tax welfare state. Labour moved the state from a growth-oriented model to an income redistribution model.
This saw New Zealand take a dive in productivity growth from 3 per cent to around 1 per cent.
In New Zealand we have come to believe that we are all getting a free lunch; but there is no free lunch.
Pensioners may enjoy free trips to Waiheke now, for instance. But unless you know what kind of trade-off has been made to obtain such free rides it is hard to think of this as bad policy.
However, let us go back to the cut in productivity growth and hence the foregone rises in the average wage resultant from the policies of redistribution.
For pensioners the dive from 3 per cent to 1 per cent productivity growth per year, over the last nine years, has meant they are missing out on around $100 a week per couple.
For wage earners, was the loss of around $180 a week really worth it? Or for pensioners, around $100 per couple? Perhaps we should stop fiddling with the cents and look to the dollars.
* Sir Roger Douglas is an Act MP.
