OK, I don’t get it, I really don’t. Can someone please explain. For a long time now Marty G and others here have been pointing out that National’s claims on tax cuts and GST increases don’t add up. They are promising (1) that the “vast bulk of New Zealanders will be better off”, and (2) that the combined changes will be “fiscally neutral”. In other words either they have a way of creating money out of nothing, or they’re lying through their teeth. I pick the latter.
But they keep getting away with these incompatible claims. Now we’re starting to get some actual figures:
Tax cuts – what you’ll get
The Government is putting the finishing touches to its package of tax cuts and is now confident that low and middle income earners will have more money in their pockets even after paying a higher GST. …
If the changes are implemented, someone on the average wage of about $48,000 will be about $5-$10 a week better off, according to New Zealand Institute of Economic Research figures to be published this week. Those earning more than $70,000 would be about $20 a week better off (see table).
The government has signalled that GST will rise from 12.5% to 15%, raising an estimated $2 billion in revenue that would be used to pay for the tax cuts. Lifting the tax to 15% will add $21.25 to the average weekly household bill.
“… we are not only looking at possible reductions in the top personal tax rate, but at the whole personal tax structure across the board. Therefore the vast bulk of New Zealanders will be better off.”
Although it isn’t clear from the online article, the $5 – $10 for the average wage is the claimed net increase after GST costs are taken in to account. Apart from the question of whether $5 per week is “better off” in any meaningful sense, the problem for the claim that “the vast bulk of New Zealanders will be better off” is that 70% of Kiwis have incomes under $40,000. Their tax cuts will barely compensate them for the GST increases, and many (including those on fixed incomes and student loans) will be worse off.
So how does National get away with it? How can they claim that the “vast majority” will be better off when the tax cuts are only going to benefit the few on higher incomes? How is it even logically possible for the vast majority to be better off (unless some tiny minority is going to front up with the cash) from fiscally neutral changes? Can anyone please explain?
[Update: Post updated after helpful comments re information not included in the online version of this article]