Fallow on Tax

Brian Fallow writes:

There was a whiff of incrementalism, even complacency, about Finance Minister Bill English’s comments to the tax working group’s conference on Tuesday. …

Had he been able to stay for the rest of the conference and listen to the presentation by some of the working group’s members he would have got a clear message that the tax system has deteriorated beyond the point where tinkering and tweaking are enough.

I hope the Govt does more than tinker.

From the standpoint of maximising economic growth and living standards, the worst things to tax are those which can up stakes and leave, like capital and labour.

Labour sees lowering the top tax rate as opportunity for the politics of envy. But it is about getting the incentives right.

Taxing consumption is better, but tends to be regressive.

Actually over someone’s lifetime, GST is not as regressive as people think.

The best, least-distortionary thing to tax is something which is immobile and the supply of which is not sensitive to taxation, like land.

If it allows income tax to be lowered, I support a land tax. Not only does it provide an incentive to get better economic use out of land, it also brings foreign land owners into the tax base.

One feature of the status quo English singled out as unacceptable is that, within little more than a decade, fiscal drag will have pulled someone on the average wage into the top tax bracket.

Our top marginal tax rate cuts in at a massively low level compared to other countries.