Tbf, I blame economists – they are the ones that are supposed to sell this stuff to the public.

As an economist, I feel comfortable blaming my clan 😉

“The original problem with a GST hike wasn’t the total tax increase, but in its equity impacts”

Ahh did not realise that. Still, if his knowledge of the equity impact is changed then the policy change still seems fair – GST isn’t actually regressive after all.

“Not that we know what the compensation package is, but if the summed package is regressive, then the point still stands”

The package sounds like it will be an increase in GST combined with a change to everything else to compensate. So the thresholds increase in a way that treats the GST lift like inflation, and the tax rate changes to leave the EMTR’s unchanged. In this case we have the same tax package as before – except that:

1) The tax on interest is reduced,
2) The GST component is “expected” to be easier to enforce, reducing costs and reducing tax avoidance.

I would also note that, if we believe the poor have borrowed more coming into this change – then they are the winners from this:

http://www.tvhe.co.nz/2010/02/11/more-winners-and-losers-from-gst/

It is actually the older generation, rich with housing assets, that get pinged.

The original problem with a GST hike wasn’t the total tax increase, but in its equity impacts. Not that we know what the compensation package is, but if the summed package is regressive, then the point still stands.

Tbf, I’m not really sure he’s broken any promise here, I would say:

“Although he was saying “I won’t increase GST to lift taxes”. Now he is saying “I will increase GST to change the tax mix, but the total tax on households will be unchanged”. I don’t feel like this is a violation of an election promise.”

“The middle NZ’ ers get less when GST goes up. And the middle NZ’ers with modest rental properties? Well, they get stuck twice. Hard luck, guys.”

Except for the doubling in house prices …

It is fully compensated, so any change in GST will be meet by an equal change in income tax.

However, if you have a net positive asset position you will lose out – but this is just telling us that the tax change is likely to impact more on older New Zealander’s then younger New Zealander’s.

http://www.tvhe.co.nz/2010/02/11/more-winners-and-losers-from-gst/

Although he was saying “I won’t increase GST to lift taxes”. Now he is saying “I will increase GST to change the tax mix, but the total tax on households will be unchanged”. I don’t feel like this is a violation of an election promise.

@Keith Ng

In the long-term, if the tax does nothing about efficiency and is perfectly compensated then … nothing will happen.

If GST rose and nothing else happened, it would reduce real purchasing power in the long term.

GST is just like a flat income tax on non-interest income.

http://www.nzherald.co.nz/taxation/news/article.cfm?c_id=335&objectid=10625344

What impact will a GST increase have on income? Will it reduce real purchasing power in the long-term?

And for all the wonky benefits of GST, isn’t horizontal equity re:property quite a lot more urgent than the efficiency gains of GST? How much impact is it expected to have on savings, anyway?

Never mind, kiddies, it’s simple enough. The PM and his Cabinet mates get more cash in hand.

The middle NZ’ ers get less when GST goes up. And the middle NZ’ers with modest rental properties? Well, they get stuck twice. Hard luck, guys.

Otherwise, how can he pay for the tax cuts?