By Patrick Gower
This is the hip-pocket budget. Because it will hit you in the wallet – most likely by putting a bit of extra dosh in there if you’re working and taking a few more of those pingers out when you’re shopping.
That’s because its tax cuts for every worker and it’s a tax rise for everyone – GST goes to 15 percent.
We now know how it’s going to break down; there’s been a lot of talk about the GST rise cancelling out the tax cuts. Well, workers will be pretty happy by what they see from today’s budget. There’ll be more dosh going into the wallet than there is pingers coming out.
Calculate how much the GST increase will cost you here
In fact, if you’re on the top rate, you’ll be stoked. The well-signalled cut for those earning over $70,000 goes from 38c in the dollar to 33c.
That means Finance Minister Bill English gets something like an extra $220 odd a week – or $111 once the extra GST is taken in. That’ll buy him a block of cheese or two. Someone on $100,000 will get an extra $41.66 a week – that’s after the extra they’ll be paying in GST is factored in. That’s a block of cheese or two as well.
Middle income earners thought they were going to be left out in the cold, but those on $48,000-$70,000 will see their tax cut from 33c to 30c. So, if you’re on $50,000 you’ll be getting an extra $13.71 a week even when GST is factored in. This is a good whack and will get this middle band of about 500,000 voters from getting too jealous. The next two lower bands of tax also get cuts too.
But don’t get too excited - there are a few changes here and there that could end up costing you. If you’re a parent, the early childhood education will go up in many cases. That could suck up a lot of your tax cut.
But fixed income earners – like your granny – are getting pretty parsimonious compensation for the GST hike. They get a 2.1 percent increase. What the? Isn’t GST going up by 2.5 percent? That’s right. Its 2.1 percent because that’s a “technical calculation” of how prices will go up. Its a “bare minimum” figure.
Stuff like rent is exempt from GST you see; but something tells me it won’t feel like that at the end of the week for granny. That compo rate will be adjusted to prices again in six months – English says they “can’t lose”. But that means they aren’t winning; I’m sure they’ll be suspicious. Can someone hear Winston?
The big surprise is the cut to the company tax rate. That goes to 28 percent, gazumping Australia’s coming cut.
So the GST is covering the tax cuts - that’d be neutral. Where does the extra cash come from? The Government has come good on cracking down on tax evaders. A back of the envelope calculation by yours truly shows they’ll be hauling in a billion dollars a law by changes to the property laws, like depreciation write-offs and loss attributing companies.
There’s more cash for the taxman to go after dodgers too; and have you ever heard of the “thin capitalisation rules”? Me neither. It is a way where foreign companies get tax deductions. That loophole’s closing. There’ll be a big haul out of that - $200 million.
And for Labour? I think this a nightmare. Middle New Zealand is going to be nowhere near as angry as they would have hoped. Phil Goff says he’ll be using his tax cut to pay off his mortgage and help his kids out – so will lots of other New Zealanders.
English is saying that this job is about making the economy aspirational. Its a true-blue National budget – its for workers, not for beneficiaries - and that’s where the votes are.
How will people judge it? That’s simple - by their hip pocket.
3 News