National leader John Key expressed concerns about migration outflows, linking Kiwi flight with the IRD bite, when launching his party’s first election campaign billboard (”wave goodbye to higher taxes not your loved ones”). He contends over-taxation has had a huge influence in driving Kiwis abroad. Actually, it’s somewhat more complicated: outflow data show a fairly consistent trend upwards over a long period while inflows swing according to economic conditions. Within those trends there’s a story about where people come from and go to. Yes, there is a growing exodus from NZ to Aust, doubtless related to take-home pay if not to taxes. But inflows from other parts of the world are reasonably strong because NZ offers good employment prospects, and despite how miserable we might feel, there are many worse off than us.

Is Tax The Issue? On tax policy, Key said National will build on Labour’s planned October tax cuts, treating them as the first tranche in its tax-cut programme. There will be further tax reductions on 1 April 2009, and again on 1 April 2010. Finance Minister Michael Cullen seized on this to claim Key was saying National would not deliver more rounds of tax cuts than Labour; he would just change the ordering of the Govt’s three-staged $10.6bn tax cut programme (planned for 1 October this year, with further cuts in 2010 and 2011). A richer vein for politicking was Key’s response when asked by London’s Financial Times about himself, his political directions and his background: “I’m a bit like [Barack] Obama. I am not institutionalised in Wellington…I had 18 years in the commercial world and I will be quite pragmatic.”

Do It The US Way? Democrat Obama and John McCain, his Republican opponent in the US presidential race, have starkly different positions on tax policy. Under McCain, taxes will be trimmed for the average taxpayer in every income group but high-income taxpayers would benefit more than others. Under Obama, high-income taxpayers will pay more in taxes, but everyone else’s tax bill will be reduced. Those who will benefit most from Obama (in terms of reducing their taxes as a portion of after-tax incomes) are in the lowest income groups. This is an unlikely Nat intention. Either way, bigger budget deficits are in the offing. The US Tax Policy Center estimates McCain’s tax proposals could boost the national debt by up to $US4.5trn with interest; Obama’s could add up to $US3.3trn.

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