Yesterday, the government released the Tax Working Group’s interim report. As foreshadowed, the Group was coy about what it will recommend in December.

The government on the other hand is clearly eager to see the Group make the case for new taxes. Almost as a matter of regret the background material mentioned the past removal of sales tax, excess retention tax, land tax, estate duty, stamp duty, gift duty, and cheque duty.

Next, it almost wistfully observed that New Zealand does not have financial transaction taxes, wealth taxes, or a general capital gains tax.

Pointedly, the government directed the Group to look at four “specific challenges”. First was a capital gains tax or a land tax (with exemptions for the family home). Next was a progressive company tax, greater recourse to environmental taxation, and exemptions from GST for low income people.

So why is the government keen to consider these options? Doing so increases policy risks for investors. The sole justification for general taxation is to fund necessary spending.

Ineffectual spending is not necessary. Compelling evidence of ineffectual spending on a grand scale was provided in a report The New Zealand Initiative published this week, Fit for Purpose? Are Kiwis getting the government they pay for?

It exists because government agencies are not focused on outcomes in relation to spending that is value for money or productivity. Successive Productivity Commission reports have documented this deficiency. Any new tax revenue could well be spent ineffectually, if not appallingly.

The Initiative’s report also cites international comparisons of government spending efficiency. A 2013 Fraser Institute study indicated that perhaps one dollar in three of general government spending in New Zealand could be saved for much the same wellbeing outcomes if the money could be spent as effectively as in South Korea.

That would be of the order of 13% of GDP, or $20,000 per household, annually. That is twice what the average household spends each year on food.

Spending money ineffectually means a lost opportunity to do more about real problems like child neglect and abuse, mental illness, hardship, inadequate education, and much else.

Governments undermine social cohesiveness if they fail to demonstrate to taxpayers that the money will be well spent. Social cohesiveness is one aspect of wellbeing. Why undermine it?