Good news and bad [updated]

Updated (below)

Well, the good news from Key's speech is that we're not going to get a land tax.

The bad news, surprisingly, also is that we're not going to get a land tax. Or, rather, Key has given himself no room to make the tax system more efficient. I was hoping for a bigger GST hike to pay for some bigger cuts to marginal income tax rates [hopes for spending cuts are a hope too far]. Instead, we're getting a relatively small GST increase (2.5 percentage points) that will be coupled with increases to low income benefits to offset any (dubiously proven) harms to poor people - in other words, not enough to be able to do anything on marginal tax rates. I'd be surprised if whatever moves they make on tightening up rules around tax treatment of investment properties give them space to do much on marginal income tax rates either.

So, we've mostly ruled out anything interesting on the tax front. But we may yet see interesting moves in social policy. Key's hinted at work requirements for the Domestic Purposes Benefit, tightening up the sickness benefit, and knocking out some tertiary education rorts in non-degree programs (rather interested to see specifics!). I like this one:

Accordingly, this year the Government will appoint a working group of experts to recommend ways in which we can reduce long-term welfare dependency and thereby reduce the welfare bill future generations will face.

I wonder if he'll pay it any more attention than he's paid to either of the previously commissioned expert working groups on productivity and taxes, both of which seem consigned to the shredder. It would be foolhardy to expect any of this to amount to much given the track record. This time, I'm going to revise my expectations sufficiently downwards that I won't be disappointed again.

Oh, and there's also this:

Part of our ongoing work to address the drivers of crime will be the introduction of legislation to reform liquor licensing laws. The purpose of this legislation will be to reduce the crime and harm caused by binge drinking, by stopping the excessive proliferation of liquor outlets in many of our communities.

That seems to preempt Palmer's report. Again, I'll need to see details. If it's just not allowing new liquor outlets opening in low decile areas (because poor people apparently can't be trusted to have too much liquor available for purchase within easy walking distance), it's perhaps one of the less bad anti-alcohol initiatives. Confers rents on existing owners, imposes losses on folks who need to travel farther, but otherwise not awful. If it means that folks in those areas will have their licences cancelled - that's a rather nasty stunt to pull on legitimate businesses who'd see almost complete regulatory expropriation of their investments. We'll see.

TVHE and Bernard Hickey also aren't terribly impressed. Farrar gives Key a B, but he's an easy grader (nice to see his blog post quoted by the Opposition Leader 20 minutes later in the House though!). I'd treat it as a first draft and give the student, who you know is capable of better work, the necessary kick in the pants to make sure the final draft is up to scratch: C- (with provision for upwards revision by higher weighting on the final draft).

Update: I'm giving a rare upwards grade revision. C+/B-, with a big downwards revision on the weight put on the statement and a big upwards revision on what comes out of the budget. If he's serious on welfare reform, that could easily move up into the A ranges.

Update 2: I'm somewhat skeptical, but I'm absolutely not an accounting guy or a NZ tax expert. If this is right, then the minor changes in property tax administration could bring in sufficient funds for substantial changes to the income tax structure. In that case, the grade is further revised upwards.