Thursday, 22 May 2008

Cullen's Budget dubbed "Too Little, Too Late"

New Zealanders will surely be starting to understand that this is an election year, following Michael Cullen's 9th Budget (yep, 9th!) this afternoon.

After months of dampening down expectations of tax cuts for New Zealanders, Cullen's Labour-led government has finally delivered a small package, albeit through tightly gritted teeth.

Michael Cullen & Trevor Mallard search for Tax Cuts

Being election year and well behind in the polls, Dr Cullen has upgraded his previous "chewing gum" tax cuts, to cuts amounting to "a block of cheese" (as the National Party has dubbed them).

The average worker on $45,000 will get to keep around $16/week more of their own earnings, once the first tax reduction and threshold changes come in on October 1st... coincidentally just weeks before the General Election.

Cullen has set a bottom tax rate of 12.5%, which will apply on all earnings up to $14,000. The next bracket of 21% (which is actually an Increase - UP from 19.5%) will apply up on earnings up to $40,000 (previously $38,000).

The 33% (unchanged) rate covers earnings up to $70,000, with Cullen retaining the top rate of 39% (dubbed an "envy tax" by opponents).

Labour is planning further reductions to the tax thresholds will be introduced in 2010/11, if it manages to cling to power after the General Election.

What was most interesting was some of the responses from the other parties in Parliament. Earlier this week, National Party leader John Key said National would offer "meaningful tax cuts north of $50 a week" for the average worker. However, in Parliament this afternoon he did little to spell out National's plans.

Winston Peters (NZ First) and Jeanette Fitzsimons (Green) were disappointed Michael Cullen didn't introduce a tax-free allowance for workers, as is common in many Western countries. United Future's Peter Dunne and ACT's Rodney Hide both admitted the tax cuts and reductions were "a step in the right direction".

It was very interesting to see National's Bill English following the lead of Rodney Hide in proposing to vote for Labour's tax cuts... I'm not sure that would have happened if ACT hadn't made its stand first.

The coalition government's pet "Working for Families" welfare system received a boost, with the first increases brought from from next April to this October.

Fitzsimons welcomed Labour's buy-back of the railways, but pointed out that Dr Cullen's budget was very light on the full cost of this (some estimates suggest up to $1.5 billion).

* Stuff: Budget 2008: Cullen delivers tax cuts

* NZ Herald: 'Two blocks of cheese' budget too little - Key

* NZ Herald: Business reaction to Budget - more needs to be done

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