Tax cuts are on the table…especially for people with families.
The Prime Minister has indicated any tax cuts offered next year are likely to be delivered with a scalpel, rather than a hammer.
The 2017 Budget will be delivered in May as usual, about six months ahead of the general election, where John Key is expected to seek a fourth term.
Speaking on The Nation on Saturday, Mr Key said there is a “range of options”, but hinted that he’s leaning towards tweaks to Working for Families and the accommodation supplement.
Simply cutting tax rates or lifting the thresholds at which higher rates kick in wouldn’t be “fair to everybody”.
“If you lower the bottom rate, you give it to everybody at the top and it costs a fortune,” he explained.
“Whereas you might be able to do some integrated family package… which delivers fairness to everybody but a bit more meaningful at the lower-income end.”
As usual, the bludgers want tax relief for beneficiaries…who don’t pay tax anyway. The lower end don’t actually pay any tax after working for families. The tax burden is still lumbered by those on the top tax bracket.
But changes to income tax brackets haven’t been ruled out. Presently, the top rate of 33 cents in the dollar kicks in at $70,000. As incomes rise, more people find themselves earning enough to start paying the top tax rate.
“People are getting bumped into the top personal rate without doing too much,” says Mr Key.
Asked if beefing up the accommodation supplement was on the cards, particularly in areas where rents have risen sharply, Mr Key said: “That may well be right.”
He hasn’t yet decided whether any changes would come in Budget 2017 or used to woo voters in next year’s election campaign.
They would also play second-fiddle to the Government’s main priorities.
“The Government’s objectives are… One, grow surpluses. Two, repay debt. Thirdly, get debt to 20 percent of GDP – probably not much below that – by 2020,” said Mr Key.
“We’re on track to do all those things. Surpluses are rising, we think we’ll be under 20 percent of GDP. That’s the advice we get from Treasury.”
The recent earthquakes he says won’t put an end to those hopes.
“Christchurch was a $45 billion cost to the economy overall, about $17, $18 billion from the Government. I don’t think anyone’s suggesting at this point Kaikoura and the general costs of the infrastructure are at that level.”
The bill for the latest earthquake isn’t yet known, and I suspect the damage in Wellington is worse than people are letting on.