Last week, I looked at Key’s tax reform promises and concluded he was promising over $5.3 billion of income and corporate tax rate cuts paid for with, at best, $3.6 billion of extra revenue from GST and housing investment. Key has explicitly promised that no-one will be left worse off by these changes but he doesn’t have the money, can’t have to money, to do that if he persists in handing over buckets of money to the rich.
I said at the time: “So which tax cuts won’t happen to bridge the gap? Not too hard to guess, eh? While Key pockets $500 a week, Kiwis on low incomes will get nothing, and have to pay higher GST and higher rents.” God, I hate being right sometimes. Here’s Key on Q+A yesterday making it clear there will be no cut to the $0-$14,000 12.5% tax rate:
“it’s the mid rate and the top rate where we want to make people better off, but it’s very difficult at that lower end to make them a lot better off.”
Got that? No cut at the bottom rate. Key says it doesn’t matter because people on low incomes don’t really count:
“about three million taxpayers in New Zealand, about a million of them earn between $0 to $14,000 so you could say well they’re very low income earning New Zealanders, that’s not necessarily correct, they’ll be dominated by children’s accounts, people who have got a small amount in the bank, children for instance, they’ll be dominated by maybe a partner that earns a small amount relative to the overall household might earn quite a lot, and they’ll be students, of which we have thousands and thousands, who do a part time job, they’re not necessarily low income New Zealanders”
I’m sorry? People with low incomes are just kids and stay at home wives, so they don’t count? Firstly, that’s just wrong – there are 3.4 million taxpayers and 3.1 million working age New Zealanders (that includes retired people), so only 300,000 taxpayers can be kids and I highly doubt there are 700,000 housewives out there. In fact, when you look just at income from wages and salaries, there are 745,000 people working for less than $14,000. Secondly, they still have to pay GST on their spending don’t they? I don’t care if they are kids or housewives or students or people ineligible for benefits getting by on a few hours work a week, if their GST goes up they need compensation, like Key promised.
“in fact most beneficiaries, super annuitants and those that work the minimum wage, they earn considerably more than [$14,000]”
Um. No, see the big spike at $13,000-$14,000 on the income distribution graph? That’s your sickness, invalids, and DPB beneficiaires. And remember too, that even if you’re on a full-time minimum wage and bringing in $25,000 a year that most of the tax you pay is in the $0-$14,000 bracket. In fact, 1.9 million Kiwi taxpayers pay more than half of their income in that bottom rate (ie 56% of taxpayers have incomes under $28,000). It looks like Key is going to give these Kiwis on typical incomes a cent or two off the 21% rate but most of their income will still be taxed at the same rate, which means no compensation for GST, despite what Key promised.
It is clear now that Key intends to leave the 1 million taxpayers with incomes below $14,000 completely shafted. They’ll be paying more GST but get no income tax cut. The next million will get get half-pie compensation – a cut in tax on half their income, but they’ll be pay more than that in added GST.
Key has to do that for a very simple reason: he can’t magic more money out of thin air, yet he is determined to give tax cuts of hundreds of dollars a week to his wealthy mates.