Who said a tax-free threshold on income “. . . would have only a minimal benefit for a very small number of low income earners.”?
None other than then-Finance Minister Michael Cullen before delivering his 2008 Budget:
His initial preference had been for a tax-free income threshold.
“This would have seen, for example, the first $9500 of income not attract income tax,” Dr Cullen said.
On the surface this had appeared to be an appealing idea.
“However, it became clear that it would have only a minimal benefit for a very small number of low income earners.”
Up to 90 per cent of those earning below $18,000 were on temporary low income – students and youths – or supported by benefits or superannuation.
Dr Cullen said it would deliver less assistance to low income workers than the $3.7 billion cost in the third year warranted, and he “would be unable to provide meaningful relief for those further up the income scale”.
If the costs outweighed the benefits of a tax-free threshold of $9,500 in 2008 how can the benefits of the lower threshold proposed by Labour leader Phil Goff justify the costs now?
Dr Cullen also rejected calls for removing GST on food and petrol saying it would make the tax system inefficient and any gains would be quickly wiped out.
Goff was a senior member of the same Cabinet in which Cullen served.
Even if his duties as Trade Minister took him overseas when Budgets were being set, Goff must have known about options and justifications for choices.
If removing GST on all food and petrol wasn’t a good idea in the last Labour government, tinkering at the edges of that policy by taking GST off fresh fruit and vegetables wouldn’t achieve enough to jsutify the costs in the next one.