On Realism, Empiricism, and Deficit Reduction

by Andrew Stuttaford

John, you are quite right to cite New Zealand in the 1980s as an example of how things can be turned round if the political will is there, and you are quite right to note that “tax reform” played a part in that process. It’s perhaps worth adding that an important component of that reform was the introduction of a Goods and Services Tax, a tax very akin to a VAT, accompanied by a dramatic reduction in marginal income tax rates. And yes, it worked.