In what it seems to think is an act of benevolence and economic genius, National has decided to borrow a pile of money, cut key public services, put up GST, and give me an extra $1000 a year.
I’d rather the money was going to the education and health of the members of my community. What’s good for others is good for me.
Will it make me work harder?
Hell no. My partner and I are already paid plenty. If anything it will make us look at ways to reduce the amount we work. A week each of unpaid leave a year and we’re still as well off as before. I suggest the government look up a little thing called the backward-bending labour supply curve. Once you’re earning above a certain amount getting more per hour doesn’t make you want to work more; it makes it more worthwhile to work less, get the same money and have more time to yourself.
But I would feel kind of sh*t taking a week off on money that comes out of other people’s pockets, borrowing, and spending cuts. Since health and education are being cut by a National government, it seems fitting to give the money to some charities, the Greens, and Labour.
Either way, the one thing it certainly won’t do is boost my economic output or even my consumption.
Did it close the loopholes?
The funny thing is that National has actually made rorting the system more tempting. Before, you could get 5% off your tax on your income over $70,000 by using a trust at 33%, rather than paying 38% on the top rate. Now, you can set yourself up as a contractor (obviously this is a game for well-off) and, rather than pay 33% on your income over $48,000 you pay 28%. Stupid.
Of course, it’s not really stupid. They know they’re leaving a loophole open for their mates. And the long game is that in three years’ time we’ll be hearing how the top income rates have to be dropped to 28% to align the rates.
Is it fair?
The ultimate in fair is the same for everyone. The government could have introduced a $25 a week tax credit for every taxpayer. That would have been more than 2.3 million taxpayers are getting from National.
How about slightly less fair, the same percentage for everyone? No, they didn’t deliver that either. A part-time worker on $14,000 got a 2% cut. A CEO got nearly 5%. Actually, that’s the reduction in the tax rates. Look at the increase in net income. On $14,000 it’s a 2.2% increase in your net income. For Paul Reynolds it’s 8%.
Will it boost growth?
Ha! By 0.1% a year if you believe the Treasury’s optimistic assumptions (they assume I’m going to spend my tax cut, for example). 0.1% is margin of error stuff. This is National’s economic plan: 0.1%. It’s not even trickle down because it’s about the same as the top 10%’s increased share of the national income. Personally, I don’t accept the theory behind Treasury’s forecasting here. But we’ll never know either way they’re calling such a small impact we’ll never know if we saw it or not.
But, let’s face it. This tax bait and switch was never about any of those things. It was a wealth grab. And in that, at least, it has succeeded.
I hope the Nats enjoy their $340,000 of tax cuts.