Book Reviews | Gordon Campbell | News Flashes | Scoop Features | Scoop Video | Strange & Bizarre | Search

 


Tax Cuts: How Much Would It Cost?

The Treasurer, Bill English, has announced that a future National Government would make it a priorirty to lower the business and top personal tax rate to 30 cents, while at the same time matching any cuts with increased social spending - dollar for dollar. The Scoop looks at how much a Government would need to fund such a promise.

Working out bottom line impacts on changes to tax rates is notoriously difficult because of the complex interactions in an economy and the changes themselves cause changes in behaviour, which in turn move the bottom line in unexpected ways.

For example, a decrease in personal income taxes has a direct effect on consumption and
thus on GST collections. These changes would flow on to affect business sales and hence company tax.

However for the sake of argument, Treasury does do stab-in-the-dark predictions on what small changes would have on government revenues

In the 1998/99 year, Treasury predicted a one-percentage-point change in the top individual rate would cost $105 million and a one per cent change to the company rate would cost $120 million

This estimate allows for effect on indirect taxes through changes in consumption and on direct tax through changes to company profits, but does not incorporate possible second round effects on wages and profits. Fiscally neutral changes in tax paid on benefits are excluded and the labour supply response is assumed to be zero in the short term.

Treasury would probably frown, but if we multiply this by three to get the Treasurer's hoped for fall of three per cent in the top rates we get a total of $675 million dollars required, double this to meet the dollar for dollar pledge and you get a total of $1,350 million extra required to fund National's pledge.

To go to the next stage, both the Treasurer and the Prime Minister have said such moves would be funded by economic growth.

The last Budget outlined three scenarios, the most optimistic had four per cent growth in real GDP in 2000 and 2001 and this would deliver a $1.7 billion operating balance surplus in 2000/2001. The central forecast would have a $1.5 billion surplus by 2001/2002. Under the weak recovery forecast the pledge could simply not be met.

Looking at the figures it is clear why both the Prime Minister and Jenny Shipley have added the rider - 'better than expected economic performance is required'.

© Scoop Media

 
 
 
 
 
Top Scoops Headlines

 

Werewolf: Living With Rio’s Olympic Ruins

Mariana Cavalcanti Critics of the Olympic project can point a discernible pattern in the delivery of Olympics-related urban interventions: the belated but rushed inaugurations of faulty and/or unfinished infrastructures... More>>

Live Blog On Now: Open Source//Open Society Conference

The second annual Open Source Open Society Conference is a 2 day event taking place on 22-23 August 2016 at Michael Fowler Centre in Wellington… Scoop is hosting a live blog summarising the key points of this exciting conference. More>>

ALSO:

Buildup:

Gordon Campbell: On The Politicising Of The War On Drugs In Sport

It hasn’t been much fun at all to see how “war on drugs in sport” has become a proxy version of the Cold War, fixated on Russia. This weekend’s banning of the Russian long jumper Darya Klishina took that fixation to fresh extremes. More>>

ALSO:

Binoy Kampmark: Kevin Rudd’s Failed UN Secretary General Bid

Few sights are sadder in international diplomacy than seeing an aging figure desperate for honours. In a desperate effort to net them, he scurries around, cultivating, prodding, wishing to be noted. Finally, such an honour is netted, in all likelihood just to shut that overly keen individual up. More>>

Open Source / Open Society: The Scoop Foundation - An Open Model For NZ Media

Access to accurate, relevant and timely information is a crucial aspect of an open and transparent society. However, in our digital society information is in a state of flux with every aspect of its creation, delivery and consumption undergoing profound redefinition... More>>

Keeping Out The Vote: Gordon Campbell On The US Elections

I’ll focus here on just two ways that dis-enfranchisement is currently occurring in the US: (a) by the rigging of the boundary lines for voter districts and (b) by demanding elaborate photo IDs before people are allowed to cast their vote. More>>

Ramzy Baroud: Being Black Palestinian - Solidarity As A Welcome Pathology

It should come as no surprise that the loudest international solidarity that accompanied the continued spate of the killing of Black Americans comes from Palestine; that books have already been written and published by Palestinians about the plight of their Black brethren. In fact, that solidarity is mutual. More>>

ALSO:


Get More From Scoop

 
 
 
 
 
 
 
Top Scoops
Search Scoop  
 
 
Powered by Vodafone
NZ independent news