Cutting social spending should come first

Cutting social spending should come first

8 January 2010

Likely tax changes affecting property investment –– the expected outcome of a report from the Victoria University Tax Working Group –– are an excuse for not reining in state spending, claims media commentator Graeme Hunt.

“If the government were serious about tax reform, it would spend less on welfare by scrapping or putting a cap on some benefits, not least the Working for Families scheme, and reimpose interest on student loans.

“Instead it, and the Victoria University Tax Working Group, talk about ‘widening the tax base’ in isolation when the real villain is a state sector that operates on a cost-plus mentality.

“Tax changes on property investment will not drive investors into the New Zealand sharemarket or other so-called productive areas and will not make housing any cheaper to the lower paid.

“Indeed, possible outcomes, if property investment becomes uneconomic, include fewer houses being built, rundown rental properties and higher rents.”

Hunt says property investors are being victimised at a time when serial criminals have their court-imposed fines wiped, the legal aid scheme continues to be a giant rort and gang members and welfare cheats retain life-long entitlements to state houses and benefits.

“Where is the equity in this?”

Hunt says the market is the greatest arbiter for those property investors who have acted foolishly or are over-extended.

“These people simply lose their investments by way of bankruptcy or forced or mortgagee sales.”

He says if the government slashed non-productive state spending it would be able to lower overall tax rates without imposing new taxes.

ENDS

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