Discussion on tomorrow’s tax cuts have focussed on who gets what. Although, as Macdoctor points out, who keeps how much of what they earn, would be more accurate.
Setting that aside, while the immediate impact on individuals is important, the long term gain for the economy is more significant:
The Government’s tax changes tomorrow will strengthen economic growth and help New Zealand families get ahead, Finance Minister Bill English says.
“New Zealanders will benefit immediately from tax cuts and they will benefit more over time from the lift in growth and jobs this package will create,” Mr English says.
“But we must remember that these changes are being made for important and over riding economic reasons. This has never been a lolly scramble.
“As well as improving the incentives to work, the package tilts the economy towards savings, investment and exports and away from the unsustainable borrowing, consumption and over investment in housing of the past decade.
“Treasury estimates the tax changes will add about 1 per cent to economic growth over the next few years. They are just the next step in the Government’s wider programme to get the economy growing faster.”
National’s policy will allow us to keep more of what we earn and leave us free to choose what we do with it. It will also rebalance the economy away from borrow and spend to sustainable growth and the better paying and more secure jobs which come with that.
Contrast this with Labour’s plan to take GST of fresh fruit and vegetables.
That will complicate the world’s simplest consumption tax and add to compliance costs.
If it had any impact on prices the wealthy would benefit far more than the poor. But there’s unlikely to be any price fall from zero rating GST because prices of fresh produce are influenced by so many other factors and are a very small aprt of most people’s expenditure.
“This is the first part of the most significant tax reform package in New Zealand for nearly 25 years,” Mr English says. “For ordinary New Zealanders it will reward effort, encourage savings and help families to get ahead,” Mr English says.
“At all taxable income levels, the personal tax cuts will more than offset the rise in GST. When other tax base broadening measures such as tighter property investment rules are taken into account, low, middle and high income groups broadly receive about the same proportionate increase in disposable income.
“After the GST-income tax switch, an average income family will be about $25 a week better off, an average wage earner about $15 a week better off and a couple on NZ Super about $11 a week better off. These benefits will actually grow over time as wages increase.
What’s likely to lead to better long term prosperity for us and the country – allowing us to keep more of what we earn or a futile attempt to get us to eat more greens?