Friday, February 12, 2010

The PM and GST

post has been updated

Radio NZ reports that Prime Min­is­ter John Key says he will can­cel plans to raise GST if evi­dence shows peo­ple will be worse off.He says that should reas­sure the Maori Party, who oppose an increase in GST.

Isn't that a bit like saying that he will overturn the smacking legislation if someone gets prosecuted, which will reassure parents that they will not be prosecuted for breaking the law?

Answer: a little bit, but its going to be very difficult to provide evidence that people will be worse off when GST is raised before GST is actually raised, isn't it?

This, particularly for those on low incomes families, as Key has not declared how much (or even if) Working for Families will rise to compensate for the rise in GST, or how he will compensate low income earners who are not eligible for WFF. [update: he has sort of]. For beneficiaries to be no worse off after a GST increase, benefits will have to go up at least 5 percent, with an increase in WFF on top of that.

Personally, I think some people will be worse off as a direct result of an increase in GST, but because they won't be able to directly attribute that to a GST increase, John Key will stick to his line.

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