Duncan Garner on John Key’s ‘soak the poor’ GST hike:
It’s not like Key runs a smooth Government. He is loose. He is casual in his approach probably too casual. It’s likely to trip him up one day…Even by his own admission he was ‘sloppy’ over his management of his shareholding in a mining company. But more fundamentally and more importantly, he has proposed a new tax he said he wouldn’t introduce during the election campaign.
I’m glad to see Garner acknowledge what is important here. Key’s lazy, sloppy style of doing nothing for ordinary people while National’s mates are paid off might be endearing to some but they’re a stab in the back for the 276,000 jobless Kiwis who look to the government in their hour of need.
The increase in GST would, under normal circumstances, be complete madness and a one-way ticket to political oblivion for many political leaders. But Key is holding out the hand of compensation. It’s a strange political strategy. Despite three in four voters saying they don’t want GST to go up, 54 percent say if it comes with compensation and tax cuts, then that’s ok. So, Key must get the compensation right or there will be a backlash from voters. He must make sure people don’t feel out of pocket.
The money simply doesn’t exist. You can’t get everyone to put some money in a bucket, give a large chunk of it to a couple of people and then compensate everyone else for what they put in with what is left. Keith Ng calculated that compensating the bottom 50% of taxpayers for the GST hike would necessiate a $6,000 0% bracket or cutting the 12.5% bracket to 6.7% at a cost of a billion dollars. Personally, I think the best way would be to cut both the 12.5% and 21% rates by 2 or 2.5%.
Either way, there’s no money left in the till for tax cuts for the rich if Key does that. Which is why Key dismissed Ng’s suggestions out of hand at the press conference yesterday and why he has repeatedly indicated there will be no reduction in the bottom tax bracket. No wonder 69% of people oppose a GST hike and 63% believe they won’t be fully compensated.
After the Budget, quarter of a million or so jobless Kiwis and hundreds of thousands more of the working poor are going to feel their wallets a little lighter, watch their social wage diminished by public serivce cuts, and still see no jobs on the horizon, while a few rich people make off with hundreds of dollars a week in tax cuts. And they’ll ask ‘what has John Key done to offer me a brighter future?’ and the answer will be ‘nothing’.