The visible hand in economics

Taxes are self-funding?

Posted on: October 8, 2008

I just read this over at the Hive:

“New operating allowances will be the same for National over the next three years as they would be under Labour. National’s rebalancing of the tax system is self-funding and requires no cuts to public services or additional borrowing.”

What the hell? Self-funding? We aren’t on that side of the Laffer curve. But then we hear that:

Mr English says over the next term of government the total cost of National’s personal tax cuts is balanced by the revenue savings from:
Changes to KiwiSaver.
Discontinuing the R&D tax credit.
Replacing Labour’s proposed tax cuts.

Ahhhh. Ok, so by tax system they are talking about other areas (like Kiwisaver) where they are cutting spending.

So just to be clear, it isn’t that the tax cuts that are self financing – the set of changes to tax and spending packages are expected to be neutral, whew!

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