If your annual income is over $14,000, your tax will decrease by $12 to $28 a week from Wednesday. That’s a reduction of up to 26% on the income tax you pay. By 2011, people will be paying up to 31% less income tax (graphs here). With boosts to Working for Families, many people with children will be paying no net tax (already the average tax paid by a single earner family with two kids is only 2%).
Funny, then that the actual amount of cash seems a little underwhelming to those on comfortable middle-class incomes. Funny because we’ve had nearly a decade of National basing its entire political argument around the need for tax cuts. Yet, now we have tax cuts, no-one seriously thinks they will be the panacea that National has made them out to be. National’s argument, of course, is that we just need to cut more, specifically for the wealthy (they have ruled out cutting the bottom rate any further). But if $1.7 billion worth of tax cuts this year, rising to over $3 billion a year by 2011, isn’t the cure to all our woes why would more make all the difference? It wouldn’t, of course. Tax cuts are not a solution to low wages, they are not the difference between people leaving NZ and staying, they are not compensation for inflation, and they never can be. And every dollar spent on tax cuts is a dollar that can’t go on health or education or, in the case of National’s cuts, a dollar that has to be borrowed on the turbulent international credit market.
So, what will you do with your tax cut? I expect all our friends on the Right who claim we don’t need a public welfare system because that’s the role of private charity will be keen to donate to a worthy cause. The Anglican Church’s quirky ‘give it up’ site has a number of good ideas for organisations you can give your tax cut to. For something less Christian-based, how about an environmental group like Forest and Bird, or a local community organisation, or even a political party, so they don’t have to turn to secretive wealthy donors?