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robson-on-politics Tues 28 June 2005

robson-on-politics Tues 28 June 2005

robson-on-politics, a newsletter from Matt Robson MP
Deputy Leader of the Progressive Party

Tues 28 June

Costs and benefits of Nat's borrow and spend plan

People ask me what National's tax cuts would mean for the average worker's weekly in-the-hand income.

It is a perfectly reasonable question and a disgrace that National won't tell us the answer when they must know what it is.

What we know is that, now, the average full-time worker earns $42,920 a year, pays 19.5 cents tax on every dollar earned up to $38,000 and 33 cents in the dollar over that for a tax bill of $174 a week. We also know what this government is delivering to families in the area of tax relief.

For a family with two or three children, including pre-secondary school kids where one parent is the carer while the income earner gets around the average wage, the tax relief this coalition is proposing can be a very significant weekly boost.

Check the numbers at:

Alternative Budget would be a courtesy

National has finalized its Manifesto but hasn't got the courtesy of sharing it with the voting public by publishing an Alternative Budget.

If they were proud of their programme, then they would have used the opportunity of their conference in the weekend to release it with sirens blazing and neon lights shinning, but they aren't proud of it.
In the absence of an Alternative Budget, I'll have to take John Key's word and stick to what he told me by email last year which is that National's tax cuts will cost $1 billion a year, maximum.

Company tax cut initially half a billion

Progressive agrees with National that it makes sense at this time in the economic cycle to cut the company tax rate to match Australia's to further propel job-creating companies' investment in R&D and more jobs as social democratic Sweden has shown.

Job-creation is the best remedy to poverty and this government has overseen the strongest boost in employment within a six-year period of any six-year period in our nation's history.

A three cent company tax cut would involve an initial loss to government revenue of $525 million in the first year, although the annual revenue loss would ease over time.

That leaves $645 million for income tax cuts

So, if John Key's word is worth anything, that means National is proposing income tax cuts valued at between $645 million and $715 million a year. Don Brash says he is prudent, so let's say his policy involves lost tax revenue of $645 million a year.

The answer is $9 a week

What would a $645 million a year tax cut mean for the average full-time worker? If National makes the worker pay 18.5 cents on every dollar earned up to $38,000 and 32 cents on each dollar earned above that, then the worker's weekly tax bill would be $165 a week, a nine dollar a week tax cut. Check out the numbers at the well-named website:

Who would like to wager that National is planning savage cuts to health and education spending?

Borrow $1.9 billion for $9 return

Treasury forecasts that central government is on track to run cash deficits of around $2 billion a year for the three years starting July 1, 2006 and National would need to borrow an additional $1.9 billion of borrowing in its first term to deliver that $9 a week tax cut.

National's Credit Card tax cuts will ultimately have to be paid for by future generations, but in the meantime will deliver all of us higher mortgage rates as the cost of borrowing to everyone rises together with the rise in government net borrowings. Just a fractional increase in wholesale interest rates would add well over $9 a week to the average mortgage holder's outlays and it isn't clear if National would keep all, some or none of our Working for Families tax relief targeted at families that most need a hand-up.

National should deliver an Alternative Budget now so voters have time to judge how its tax, borrow and spend policies will affect us and our children.


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