As is usual, Sir Roger has done what is effectively an alternative budget. Here are some of the details:
- Cutting $3.1 billion of “wasteful” spending
- Increase GST to 15% ($1.9b)
- Reduce depreciation claims ($1.2b)
- Tax cuts of $4.2b
- Deficit reduced by $1.4b
The tax cuts package would be:
- 21% tax rate drops to 18%
- 33% and 38% rate drops to 24%
- Company rate drops to 24%
Now that would lead to investment!!
Sir Roger also proposes replacing WFF with a tax free threshold,which would be $41,600 for one child, $49,400 for two children up to $81,000 for six children. If a parent earn under the threshold they get a tax credit equal to the difference between their old WFF subsidy and this regime.
A key issue is whether there is $3.1 billion of waste to be chopped. Sir Roger has listed around 200 programmes he would chop ranging from the fibre to the home rollout to some of the research and science fund. The major ones are:
- $30m from public broadcasting
- $82m from energy efficiency
- $248m from broadband
- $53m from school staffing
- $100m from social services NGOs
- $330m from abolishing MED
- $470m from the ETS
- $530m from interest free loans
Now the Government got elected on the basis of keeping interest free loans, an ETS and a fibre to the home broadband package. If it abandoned those promises, I suspect Phil Goff would be Prime Minister next year.
However that does not mean the direction Sir Roger pushes is wrong. If we can at least slow the rate of increase in spending (I support Sir Roger’s idea of a capping it on a real per capita basis), then over time we would have the ability to get tax rates down to a level where economic growth will be bullish.