Politics of power starts to tax PM

Politics is fashion. A good politician is one who discerns and then rides the trend. Knowing that, eventually, it will desert as quickly as it found them.

This is no great mystery. Think of power as a mercurial mistress and you understand its allure and its compulsion. To its devotees, politics is not better than sex. It is sex.

And not just for the players but for the peripheral voyeurs as well. The advisers, the press secretaries, the lobbyists. Parliament is their Versailles – nothing that exists outside, really exists at all.

This is why governments end up trapped. They begin to disassociate from the forces that brought them in and be beguiled by the bureaucracy. They start to believe the policy papers they are handed instead of the constituents they used to see.

Lo, opposition. It is an utterly predictable cycle. Made worse if the wind starts blowing in the opposing direction – be it liberal or conservative, interventionist or hands-off. Ultimately, all prime ministers and governing parties are struck down, not so much by the talent or tenacity of their opponents, but by their own aloofness and their inability to associate.

So it is that a government is at its most dangerous in its first term. It has an agenda unpolluted by experience and a desire to execute it. So the Nats have imposed national standards upon primary schools, adopted tougher law and order legislation and are about to open national parks to mining.

None of these are bad things. In fact, they are broadly in step with public opinion. But their instincts are tempered by two things. And both have an infinite capacity to derail.

The first is their alliance with the racist Maori Party. Their demands can only taint by association. Especially if they are succumbed to. A new Maori flag, the forestry emissions bribe, Whanau Ora ... each are concessions that no sane government would normally make. Similarly, there was nothing inherently wrong with the Seabed and Foreshore Act.

But National is now pledged to its repeal with no workable alternative. There will be tears. And Whanau Ora is just craziness. Devolution to inadequate and incompetent ethnic organisations has not worked before – it will not work tomorrow either.

The second great stumble would be a rise in GST. Most especially if the aim is to compensate all those who would be affected. Because at that point there would be no tax reform. Just a straight swap between personal tax and indirect. Which would be no reform at all.

By its very nature, taxation reform creates winners and losers. New Zealanders still have the antiquated view that all upper income earners are rich. And that the rich are bastards. So best to punish them through the taxation system.

Former finance minister Michael Cullen certainly harboured this perception. Hence his introduction of the 39 cent PAYE step for persons earning over $80,000 a year. It made no sense in terms of the revenue gained and forced almost all who encountered it to consult an accountant. Family trusts and single person companies abounded. Because their tax rate is 33 cents.

And the upper income brackets pay more tax anyway. Even at a top rate of 33 cents they would be contributing more to the government coffers than other earners.

This government appreciates that. As did the Tax Working Group. So it wants to drop the rate and also offer middle income earners an incentive. The only way that can happen, suggested Prime Minister John Key last week, is if lower income earners pay a little more. Through GST.

Although there was a corollary. And property investors and speculators have their tax loopholes closed.

Both suggestions are inelegant. The best way to make more money available for personal tax relief is to cut government spending. To reduce the insatiable appetite of bureaucracy for your and my monies.

This is not an easy fix. Every sector of government – education, health, police, Corrections – can marshal a case for more not less taxation revenue. And cost-cutting thus far has been stupid. It has been applied as a broad brush across all departments.

Which is the next great reform that National must apply before it starts tinkering with tax. The filleting of our state sector, the downsizing of the public bureaucracy. It remains a wasteful scandal and most especially the duplication of jobs and roles.

As there is no need for 21 health boards and 80-odd local government organisations, so there is no need for the proliferation of departments at government levels. There should be no more than three or four – grouped according to general purpose.

No reason exists for ethnic, gender or age ministries. Similarly, no good comes from creating policy or middle management roles for the whim of the moment. Health is a shocker, education little better.

Instead, National has stumbled into voiding pre-election promises for little or no discernible gain. Between the twin perils of racial preference and taxation irritation, Key must tiller his administration. Both have the capacity to gobble his progress and his popularity.

mlaws@radiolive.co.nz

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