Less tax = more pension

One of the criticisms about suggestions of reducing income tax and increasing GST has been the impact on people on low, fixed incomes such as pensioners.

The government has been quite clear that if GST increases pensions and other benefits will increase to compensate.

But a response by National’s Dunedin list MP Michael Woodhouse to a letter to the editor of the ODT (not online) points out that pensioners get more when income tax goes down anyway.

Pensions are based on 66% of the average after-tax income. If income taxes come down, the average after-tax income rises and so do pensions.