The chatter around tax cuts yesterday gave a clearer idea of the direction the Government is heading with its plans before the election, including that simple tax cuts likely to deliver most of the benefits to the better off seem unlikely.
The Government may yet surprise with another benefit-hike or free doctors' visits style tack into centre-left territory that focuses on low to middle income earners, rather than simply delivering big tax cuts for the wealthiest.
The Government made a point with its October 1, 2010 tax cut and GST hike package to make it distributionally neutral in proportion to income. John Key and Bill English indicated yesterday they would focus in the package on boosting disposable incomes for low to middle income families, which means simple tax rate reductions or threshold increases will not do the job. Changes to Working For Families tax rebates and Accommodation Supplements seem more in focus than simple threshold and tax rate changes.
Key said the Government could lift incomes in a way outside of the usual wage growth.
"Tax is one vehicle for doing that. It's not always the most effective vehicle for doing that for particularly low income families," he told reporters in Lima.
He added that tax cuts would be effective for those on higher incomes, but were not as effective for those on lower incomes, and tax cuts that reached those on lower incomes were also more expensive.
"Over the fullness of time we'll have to see whether we've got much capacity to move," he said.
"Making sure they can keep a little more of what they earn or get a little bit more back through a variety of mechanisms is always something we can consider. It could be a mix, yes."
Key pointed to the Government's 2010 "tax switch" that included changes to Working for Families and a low income tax rebate.
"In the end it's about equity for New Zealanders and about having a rise in their standard of living, and there's a number of ways you could deliver that."
Asked specifically about whether that meant changes to Working For Families, he said: "There's always options available and you can always be creative."
English also talked about how the Government was looking at ways to deliver help to lower to middle income families, which suggests the Government may be looking at ways other than tax cuts to deliver higher incomes, given simple tax cuts deliver the most to those on the highest incomes.
"The pressures on low and middle income income households - the rise of housing costs because of the cost of housing, and also the rise in rents - has put a bit of a squeeze on those households," English said when asked why the Government was considering tax cuts.
"They would prefer relief if that's possible. We've yet to see whether that's possible," he said.
There have been calls for increases in Accommodation Supplements in recent months, given they have not been adjusted in over a decade. Social Housing Minister Paula Bennett and Key said in early October they were open to reconsidering the Supplements levels.
Andrew Little and James Shaw attacked the suggestions of tax cuts describing them as "just plain crazy" and a "tax-tease" respectively.
“Kaikoura’s rebuild alone will cost billions and put pressure on the Government’s books so for Key to now say there’s still room for tax cuts just shows just how out of touch he is," Little said.
“New Zealand weathered the GFC and Canterbury earthquakes because the previous Labour-led Government resisted National’s calls for tax cuts, paid off debt and put the Government’s finances on a sound footing so it could withstand shocks," he said.
In other economic news...
Statistics New Zealand issued its first statistics package since the earthquakes, publishing via a back page of its website the Retail Trade Survey for the September quarter. Retail sales volumes grew 0.9% in the September quarter from the June quarter, which was slower than the 2.2% growth seen in the previous quarter, but was in line with market expectations. Growth in core retail sales, which excludes fuel and car sales, fell sharply to 0.3% in the September quarter from 2.5% the previous quarter.
Treasury will publish its latest Long Term Fiscal Position report, which must be produced at least once every four years, at 2 pm today.
Statistics NZ is scheduled to release the latest migration and travel figures for October at 10.45 am today.
Quote of the day:
Spark CEO Simon Moutter congratulating John Key on challenging Mark Zuckerberg over Facebook's tax affairs in this Spinoff Op-Ed.
"Multinational companies already have the opportunity today to pay their fair share of tax in New Zealand. There is no law that compels them to operate with thinly-capitalised local companies, to route revenue through offshore entities, or to have massive levels of intercompany expenses to reduce their taxable profits in New Zealand. Businesses have choices. They make a considered choice when they use such tactics to avoid paying tax here."
Tweets of the day:
The cast of Hamilton the musical SHOULD apologize to VP Pence. The cost of General Admission seats is OUTRAGEOUS!
Everyone is talking about fake news, but the one news item we wish was fake is real.
Have a great day.