$12 a week better off with tax changes

Most households will be left slightly better off by likely tax changes in the Budget, new research suggests.

The New Zealand Institute of Economic Research estimates that households with a median income of $65,000 a year will have around $12 a week more to spend after personal tax cuts and GST increases.

However, the benefits of the tax package may be offset for a while by other potential costs such as tax changes for rental property and tighter criteria for Working for Families benefits.

Earlier this week, a Westpac McDermott Miller consumer confidence survey found that a third of people thought the Budget would be good for them financially, and 34 per cent expected to be worse off.

However, the poor and the elderly were particularly pessimistic about a possible rise in GST to 15 per cent, even though the Government has talked about raising superannuation by 2 per cent and adjusting benefits.

The NZIER said high-income earners would benefit the most from the changes because they earned more, spent more and paid more tax.

The highest-paid households would benefit the most, with those earning $146,000 getting $90 a week in the hand after GST rises and tax cuts were factored in.

Those between $75,600 and $89,999 would get $24, dropping away to just $2 for those earning between $28,700 and $37,099.

Superannuitants would be an estimated $7 better off after a tax cut of $15 and a $7 GST adjustment.

The NZIER said the rich would continue to pay the most tax. Households with the top 20 per cent of income would continue to pay about 46 per cent of all income tax and GST.

The bottom 30 per cent of households, in terms of income, would pay around 8 per cent of all tax.

But other potential changes might further alter the tax burden of the rich, the NZIER said. Change to property investment tax was one such possibility and it might also affect low-income earners if landlords put up their rents as a result.

"We anticipate that there will be other tax changes, to ensure the whole tax package is fiscally neutral. These other changes are more likely to impact on high-income earners rather than low income earners, although we cannot estimate their specific costs without further details."

- © Fairfax NZ News