Slothsayer

The impact of exempting food from GST on health and wellbeing is considerably less than may first be thought. GST is much less regressive than commonly imagined so cuts to GST are at best very mildly progressive. The bulk of the benefit would go to those on middle to high incomes, who pay the bulk of GST. The reason for this is that low income households spend a large part of their income on rent, which is not subject to GST. In contrast, food tends to be a relatively constant share of income across deciles as rich people tend to eat out more.

If the argument is around income redistribution – Working for Families is much more effective at that. You would target tax cuts much more effectively for the same revenue by introducing a tax-free threshold at the bottom of the income tax scale. This would also benefit everyone but would be proportionately more targetted.

If the argument is around healthy food, then cutting GST on food will have little effect as it doesn’t change the relative price of junk food and healthy food. Better to look at a fat tax, coupled with measures such as fruit in schools etc (see below).

If we want to reform taxation on food to ensure a basic healthy diet is more affordable then lets look at the actual causes of poor diet, which are far more complex than GST on food. Possible remedial actions could include subsidising fruit shops in low income areas, tax fat and sugar in food, ensure people have an adequate income and possibly reintroduce meals in schools.

Comments above have already noted that removing GST on a class of food is not the same as ensuring that all food falls by 12.5% in price. Boundary issues abound and Australian supermarkets tend to average prices. The administrative burden is much higher on small community businesses (eg the corner dairy) than it is on large chains.

So while removing GST on food seems like a simple slogan, in my view it would do much less than its proponents imagine to address either equity or wellbeing.

The reason is a misunderstanding of their own identity of the so called middle class. We seem to think that being middle class means that we belong to a camp whose interest are better served by policies that benefit the rich.

But the middle class is not rich. And the word middle class is confusing because it can only exist in a system where there are only three classes. The rich are not in the middle class. They are way above, class number seven or so.

When we “must, must, must lower our corporate tax rate to match the corporate tax rate that prevails in Australia” then what this means is that we must adjust our policies so that the interests of the rich and super rich are better served. Nothing else. And the middle class says amen because they are not poor, are they? On this path the middle class as we know it will gradually disappear and as a result of it there will only be super rich, and poor people.

An then we can proudly say: We did it!

Gone from the above discussion was any mention of alternatives – such as a universal tax credit to offset the approximate GST portion of a normal household’s food bill. Or a tax free threshold to negate not just the GST rise, but GST on food. Those things would have less administrative compliance costs for businesses.

National would be hard pushed to enact any policy more beneficial to business than the above-cited Labour legislation, so their only option is to start making noises that position them slightly to the right of Gengis Khan.
Expect a Welfare policy that begins with “first sort out who’s work-ready and who isn’t”, and ends with “well, just let the buggers starve if there isn’t enough work to take up”.

Then they can officially be recognised as the re-incarnation of the Liberal Government that mismanaged the early years of the Depression so badly as to create conditions for a landslide win by the nascent Labour Party.

Who replaces the centre-right?
Watch out for the Worker’s Party/Unite union collaboration. There’s a lot of underpaid, hungry young people on the minimum wage out there….

Mottos along the lines of ‘you’ll get blood from a stone before you take the bread out of our children’s mouths’, and soaking welfare miser Bennett in blood, will assure this government of its proper place in history – right next to practically every damned fool we’ve produced in the last thirty years.

It’s because there is no objective people-oriented newspaper that you can hold in your hands on the bus, the train, the plane. It will be some years before the older voter is holding an e-paper.

By the time the foreign owned manipulative newspapers and the rightwing radio talk backs (except for the only objective radio station Radio NZ which this government is trying to destroy) have finished with New Zealanders they’ve been brainwashed. You also have to remember that Labour didn’t change GST because they were helping people financially in other areas. I personally would have exempted food back then. It is always better to have things cemented into place well before the tax cut kids come back in and the knives come out on the social good funding.

Increasing taxes on alcohol would have been a better choice. Alcohol consumption is a huge burden on our public health system, ACC and a cause of social problems such as child abuse.

And Duncan, don’t think that the vast NZ middle class doesn’t know that its tax cuts (then and now) depend on the efficacy of GST in filling the coffers. In other words, I think the problem in this instance is not apathy but rather conscious self-aggrandisement by the middle class at the expense of the poor (who don’t benefit much, if at all, from tax cuts).

But congrats to Gordon for helping expose the issue, anyway!