Tax cuts come into effect but will they provide cost-of-living relief? – The Front Page

Prime Minister Christopher Luxon (left) and Finance Minister Nicola Willis. Photo / Mark Mitchell

The Government’s long-awaited tax cuts are finally coming into effect from tomorrow, but one budgeting adviser doesn’t expect them to have much of an impact on people’s day-to-day lives.

The coalition Government, announced as part of Budget 2024, a $14 billion tax package for the next four years, providing relief to everyone earning over $14,000 a year.

The cuts would provide savings of up to $40 a fortnight for many workers, although the lowest income earners and superannuitants would only benefit by $9.

NZ Herald deputy political editor Thomas Coughlan told The Front Page that the tax changes come in two parts. One of them is that all the tax brackets except the top part have been adjusted upwards by around 11.5%.

He said that those changes have not happened for 14 years, and were needed to prevent marginal tax rate creep.

“That would have meant that this year, for the first time, someone earning the fulltime minimum wage would have had part of their income taxed at 30%. Not much, it would have only been a few hundred dollars taxed at 30%, but it would be quite a historic event to see someone on the minimum wage working fulltime being taxed at such a high, high rate.”

The second part of the tax changes is an adjustment to various schemes the Government has, such as the Family Boost Tax Credit – parents can now get $75 a week back if their children are in early childhood care – and the Independent Earner Tax Credit – which is $10 a week for people who don’t have children and aren’t on the benefit but are still struggling.

At a press conference touting the tax cuts this week, Prime Minister Christopher Luxon said 94% of households would be “better off”, while Finance Minister Nicola Willis said: “Cost-of-living relief is on its way.”

Speaking to The Front Page, Auckland Central Budgeting’s general manager Teresa White said she doesn’t expect the money will go far for many people.

“My expectation is that most people’s tax cuts will likely be swallowed by household bills. If you kind of do a bit of the math – I just did a quick calculation, and for me, I’m set to get maybe $15 a week, but my rates are going up and my insurance has gone up, and I have to pay full price for my daughter’s school bus fares, and the doctors have gone up.

“So I think it will help pay for those things that are already risen or already gone, and kind of bring us back to where we were maybe six months ago.”

If people are able to benefit from the cut, White said that they should use it to save and build up a buffer.

“That’s my biggest learning from where I work is that people don’t have money put aside very much, and when times are tough, they’ve got nothing to dip into. So I would really encourage people to do that. And pay down debt, get rid of it while you can. It’s just that the interest on debt is an absolute killer.”

Listen to the full episode to hear more details about how the tax cuts work, and the ongoing struggles with the cost of living.

The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5am. The episode is presented by Georgina Campbell, a Wellington-based reporter who has a particular interest in local government, transport, and seismic issues. She joined the Herald in 2019 after working as a broadcast journalist.

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