Why Tax Cuts Are Good For Growth
Why Tax Cuts Are Good For Growth
In the wake of the government’s $11 billion budget surplus, a new report argues that cutting taxes could deliver a significant boost to the economy.
In a paper to be released on Wednesday 18 October 2006, Why tax cuts are good for growth, Phil Rennie looks at the economic case for lowering taxes.
‘Many voters support tax cuts because it means more money in the pocket. However, tax can also have a substantial impact on economic growth, which means more jobs, opportunities and a higher standard of living for all New Zealanders.’
According to Rennie, tax cuts can help
boost New Zealand’s economic growth in three main
ways:
• By making work more rewarding and encouraging
more people to enter the workforce
• By reducing the
deadweight cost of tax, which is the loss of potential
wealth caused by tax affecting people’s
behaviour
• By making New Zealand a more attractive
destination to invest and work in
‘Higher tax rates
reduce the potential return from risk-taking and
entrepreneurship, which means that many potential successful
businesses have never started up or
expanded.’
‘Growth is a big issue for New Zealand.
Since the 1950s our standard of living has slipped compared
to other countries, and the major reforms of the 1980s and
1990s have only really stopped the decline rather than
gained us any ground. Thanks to higher growth rates, incomes
in Australia are now a third higher on average than in New
Zealand.’
‘Taxes are necessary to run a civilised
society, but there needs to be more honesty around the costs
that taxation imposes.’
Phil Rennie is a Policy
Analyst working in the New Zealand Policy Unit at The Centre
for Independent Studies.
He is available for comment.
Embargoes copies of the report Why tax cuts are good for growth are available on request or from the CIS website:
READ IT ONLINE HERE http://www.cis.org.nz/IssueAnalysis/ia75/ia75.pdf
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