A $350 million tax cut for supermarkets

Bryce Edwards writes:

Labour is budgeting $500 million per year on this tax cut. But how much of that will end up in consumers’ pockets? And how much will end up with poorer citizens?

The consensus among economists seems to be that when such tax exemptions are introduced, companies avoid passing the bulk of the savings on to consumers. Labour’s own 2018 Tax Working Group concluded that only about 30 per cent of a tax cut normally gets passed on. The rest goes into increased profits.

That TWG was chaired by Michael Cullen. So Chris Hipkins is going to give $350 million to the supermarkets as a tax cut and $150 million will flow through to consumers.

So Labour are saying this policy will save $5 a week for the average family. Well if Dr Cullen is right, it will in fact only say $1.50 a week.