Taming New Zealand’s Tax Monster - The Centre for Independent Studies

Since 2000 the amount of tax paid by New Zealanders has increased from $32 billion to $52 billion. This is a $20 billion increase, or 37% in real terms.
Tax revenue for 2007 is $7 billion higher than was originally predicted five years ago, representing a huge unexpected bonus for the government.
Because the tax thresholds have not been adjusted in nine years, more workers have been pushed up into higher tax brackets. This is unfair, given that benefits and pensions are adjusted every year to match inflation.
A person on the average wage is now paying an extra $2,400 a year in income tax than they were in 2000.
On a world scale, New Zealand is a high taxing nation. Our total tax burden (36.6% of GDP) is higher than the weighted OECD average of 31%. In particular, it is higher than Australia (31%), our trading partners and most English-speaking nations.
This level of taxation comes at a high cost because of the disincentive effects it has on investment, employment and savings. And the benefits it has delivered in terms of spending are disappointing, because most social indicators are unchanged from 2000.
There are unique pressures on politicians which encourage extra spending. Costs can be dispersed, while the benefits can be focused on certain groups. In addition, the mixed member proportional (MMP) voting system encourages bidding wars between parties.
There needs to be a proper review of government spending to assess its value for money, and effectively determine the costs and benefits. These kinds of benchmarks should be built into all new spending projects before they begin, not afterwards.
There needs to be a greater focus on the outcomes of spending rather than just the inputs or outputs. This would allow for a better quality debate on the proper role of the state, and the merits of tax cuts versus social spending.
The annual $2 billion slush fund for ‘unallocated spending’ should be scrapped because it weakens fiscal discipline. Arbitrary spending targets should also be scrapped; governments should define what they want to achieve rather than how much they want to spend.
Top-down controls on government spending, such as constitutional limits on tax and spending are worth debating. However, it would be undemocratic to remove too much of the government’s flexibility.