The tax reform proposals put forward by the Government's Tax Working Group will, if adopted, tilt the tax system more in favour of wealthier New Zealanders.

The recommendation to cut the top personal, company and trust tax rates and align them at around 30 percent will provide a windfall for wealthier and upper middle income taxpayers.  This is in line with the New Right economic theorem of 'trickle down' where if higher income earners are rewarded for effort, then that will supposedly flow through to consumer spending which will, in turn, create jobs further down the line. In countries with low flat tax rates, such as Ireland, this has not happened and the poorest workers have remained poor while the richest have become even wealthier. No society, in my view, benefits from high levels of inequality as this is represented in poor health, education, housing and crime statistics. Therefore, any gains are wiped out through the need to spend more on prisons, police, remedial education and unnecessary hospitalisations.

The proposal to widen and broaden the tax base through increasing GST to 15 percent will hit lower income individuals and families hard. Even though John Key has said that beneficiaries and superannuitants will be compensated for any GST rise, any benefit increases may not be enough to cover price rises sufficiently, so real incomes will plunge even further amongst this group. Furthermore, raising GST while cutting personal and company tax rates will generate negative income redistribution from the poorest to the wealthiest and is one more reason as to why there will be no 'trickle down' effect.

However, I am in agreement with the proposal to introduce broad-based property and capital gains taxes. This will put somewhat of a dampener on property speculation and also generate some revenue from wealthier tax payers. It's a shame though that these taxes are being proposed alongside a cut in taxes for the weatlhy and a rise in GST. What I would favour is that these types of taxes be introduced as part of a progressive tax package which raises taxes for the wealthiest and cuts them (in real terms) for the poorest. I would also favour the eventual abolition of GST and its replacement with a Financial Transactions Tax (FTT) levied on all financial transactions.

These policies have been advocated (to varying degrees) by political parties such as the Alliance, Jim Anderton's Progressives, the Greens and trade unions as an alternative to the scorched earth tax policies advocated by the Business Roundtable and other peak capitalist organisations.

After all, these recommendations should come as no surprise as there were many eminent New Righters on the working group. Bob Buckle (chairperson) Rob Cameron, Arthur Grimes, Rob McLeod (former Business Roundtable chairperson), Gareth Morgan, John Prebble and Mark Weldon, were just some of the key neoliberal advocates on it.  Besides there was plenty of input from Treasury and the Reserve Bank. On the other hand, potential critics like Susan St John (Auckland University economist) as well as Bill Rosenberg and Peter Conway (Council of Trade Unions) were only permitted to give minimal input.

It wouldn't surprise me if nearly all of these recommendations ended up forming the centrepiece of this year's Budget. I would have to say that if they did, then they would definitely be popular amongst National and Act's core support base but not amongst swinging middle income voters who are struggling to make ends meet. Working class and poorer voters would definitely not be inclined to support such moves. That's why National might not be onto a winning policy at all with the proposed tax changes if they decide to go with them.

And on them will rest National's hopes of winning the 2011 election.