Is Tax Sustainable
SageNZ quotes Murray McCully reporting that total government tax revenue has increased from 30.2 billion in 1999 to 42.5 billion in 2003 and asks whether the 40% increase is sustainable. The short answer is (mostly) yes. In 1999 GDP was 101 billion and in 2003 it had grown to 126 billion (a 25% increase). The growth in GDP includes inflation and population increase (which government revenue needs to match for sustainability) and real growth (which needn't but can afford to match). Revenue would have increased to 37.7 billion just to match gdp growth leaving a net increase of only 4.8 billion (about 12% over the four year period). In fact this increase is all reflected in the surplus - government expenditure has remained constant at just under 28% of gdp.
The government has therefore held expenditure as a proportion of GDP but increased taxes or allowed taxes to rise by about 4% of gdp or 5 billion dollars. This includes about 3 billion to cover future superannuation liability and about 2 billion which (along with future revenue growth) could be returned to the public. SageNZ and Murray McCully would no doubt like to see this returned as a reduction in the top tax rate (Murray even suggests an 18% flat tax) but imho most New Zealanders would prefer it to be returned through the sort of measures in the Working for Families package, improved health and education services and universal student allowances. 1999, after all represented the endpoint of a massive redistribution of purchasing power from beneficiaries and low to middle income earners to the wealthiest. And we (or at any rate most of us) didn't vote for that.
It's also hard to argue that a 39% top tax rate is damaging economic growth. The last four years have been some of the highest growth years in our history (and we've actually caught up some of the ground on Australia). Besides Australia has a 47% top tax rate, New Zealand had a 33% top rate only for the period 1988-1999. Before that the level was 48% and for most our post-war history it has been over 60%. The decision on whether we want lower taxes or a "decent society" should be based on the preferences of the NZ public. History suggests we will advance the cause of growth far better by scrutinising the quality of public expenditure than blindly adoption a low-tax, low-spending strategy.