Tax. Tax. More tax.
When the cost of government comes up, the answers tend to arrive before the question has been properly asked. Raise a rate. Tax something new. Leave income-tax thresholds where they are. Raise the age for New Zealand Superannuation. Borrow now and deal with it later.
These are not the same choice.
Some raise cash now. Some reduce spending later. Some move the cost from one group to another. Some leave the bill for people who have not yet had a say. Yet they are too often discussed as though each proves the same thing: that New Zealand can comfortably provide the public services it expects.
It may not.
I am not arguing against taxation. Taxes properly due should be paid. I have spent too much of my working life seeing the damage caused when they are not—late payment, compounding interest, enforcement, and businesses trying to pay yesterday’s tax from tomorrow’s sales.
But government must also account for what it collects. Hospitals, schools, courts, infrastructure and care for older people are not optional in the real world. The question is not whether they should be funded. The question is where the money will come from, who will ultimately bear the cost, and whether we are increasing the country’s genuine capacity to pay.
That last point matters.
There is a difference between collecting more tax and creating more income, profitable businesses and productive work from which tax can sensibly be paid. A country can increase its tax take without becoming materially stronger. It can raise rates, allow inflation to push wages into higher brackets, impose a new charge, or collect debts already owed.
Some of those measures may be justified. But none should be dressed up as economic growth.
Revenue is not capacity
A business owner understands the distinction immediately.
A business can be busy. It can issue invoices, collect GST, employ people and look successful from the street. It can also be short of cash, carry debt and make too little margin on every sale. More turnover does not automatically mean a stronger business. It may simply mean more work for less reward.
A payment arrangement with Inland Revenue can buy that business time. It cannot make an unprofitable business profitable. Nor can it fix a pricing model that was wrong before the first invoice went out.
The same caution applies nationally.
More tax revenue may be needed. It may be fair. It may be the only responsible short-term answer. But the revenue figure alone does not tell us whether New Zealand has become better able to fund its obligations next year, or whether government has simply found a different way to send the bill back to the same people.
That is not a semantic point about the “tax base”. Tax policy specialists can properly use that term to mean the income, transactions or assets covered by a tax. My concern is more practical: are we growing the real economy from which tax is paid?
Are more businesses making sustainable profits? Are workers becoming more productive and better paid in real terms? Are people able to take jobs where the work exists? Are firms investing, exporting and building things that can survive beyond the next quarterly result?
If the answer is no, a larger tax take may be necessary—but it is not a substitute for an answer.
Who earns the next dollar?
New Zealand has a relatively small population. It cannot assume there will always be another large group of high earners, successful companies or property transactions available to fund the next spending commitment.
The answer may be better-paid work for people already here. It may be higher productivity. It may be people returning to the workforce, new firms growing, existing firms investing, or skilled people choosing to build a life here. It may be businesses selling more valuable goods and services to the world rather than simply circulating money between ourselves.
All of that is harder than changing a tax rate.
An employer has to have a job worth offering. A worker has to be able to live within reach of it. A business has to sell something at a price that covers wages, rent, finance and its other costs. An export headline is welcome; a business that can make a durable profit from exporting is more valuable.
These things do not happen because a Budget assumes they will.
That does not mean government should sit on its hands while waiting for growth to appear. It means the fiscal debate must be honest about what each measure actually does.
A tax rise may fund a service. It does not, by itself, create the people needed to provide it.
The nurse is needed now
This is where the easy slogans collapse.
It is all very well to say that New Zealand must invest, train people, open markets and build stronger businesses. It should. But if a hospital needs nurses this year, or an older person needs care this week, telling them that productivity may improve in three years is not an answer.
There is an immediate decision as well as a longer-term one.
Government can shift money from elsewhere. It can borrow. It can raise revenue. It can change how an existing service is delivered. It can make it easier to retain trained people and bring others into work. Each has a cost. None guarantees another qualified person at a bedside tomorrow morning.
If money is missing, government should say how much is needed and where it will come from. If trained people are missing, another budget line will not solve that shortage. If both are missing, the public deserves to be told that too.
The temptation is to pick one slogan and stop thinking.
“Just tax more” deals with today’s bill but may say nothing about tomorrow’s capacity to pay it.
“Just grow the economy” may be right in the long run but does not answer what happens to the patient waiting now.
The serious task is to do both: make hard choices about the present while building a country that can carry more of its obligations without exhausting the same group of taxpayers and businesses.
The person named on the return is not always the payer
There is another problem with loose tax debate. The person or company named on the tax return is not always the person who finally bears the cost.
A company tax increase may reduce profits. It may also affect investment, prices, wages or the decision to employ another person. A tax on a transaction may be absorbed by the seller, passed to the buyer, or shared between them. The result depends on the market, the alternatives available and who has bargaining power.
That does not make tax increases impossible. It does mean they should be explained properly.
“Tax business” is not an analysis. Businesses are not a separate species of taxpayer. They are owners, workers, customers, suppliers, lenders and communities. Some businesses have room to absorb extra cost. Others do not. A family restaurant already working six days a week is not a multinational with a department devoted to tax planning.
We should be able to distinguish between a proposal intended to raise money quickly and one intended to make the system fairer. Sometimes a measure may do both. Sometimes it will do neither.
The public deserves more than a slogan and a revenue estimate.
Student loans are not a spare revenue tap
The same applies to student loans.
A proposal to impose or increase interest on borrowers is not the same as growing the country’s ability to pay for public services. It changes what borrowers owe. It may increase the balance recorded against an account. Whether it produces real cash, at the time it is needed, is a separate question.
That is particularly important for overseas-based borrowers, where the legal debt, the practical ability to pay, enforcement, and the willingness to re-engage with Inland Revenue do not always move together.
An extra figure on a statement is not money in the Crown’s bank account.
Any proposal in this area should answer basic questions. How much cash will actually be recovered? Over what period? From whom? What will collection cost? And what happens where the new liability makes repayment less likely, rather than more likely?
Those are not sentimental objections. They are questions of administration, behaviour and fiscal reality.
Say what the choice is
There may be no painless answer to New Zealand’s fiscal pressures.
A specific tax increase may be defensible. Borrowing may be necessary. Spending may have to be reduced or shifted. Some services may need to be delivered differently. But each choice should be described for what it is.
If the proposal is a new tax, tell us what it will raise, who is likely to bear the cost, and what it will fund.
If the proposal is borrowing, tell us when it will be repaid and what assumptions make that credible.
If money is to be moved from elsewhere, identify what loses funding.
If the answer is economic growth, identify the work, investment and businesses expected to produce it—and say what happens while the country waits.
The right question is not whether tax is good or bad. It is whether we are building the productive capacity to support the public services we expect, or merely becoming more inventive in sending the same bill to the same people.
A hospital needs staff now. A durable economy takes longer to build.
A serious government must deal with both.