Episode Details

How much cash will we get back from tax cuts? 

Nicola Willis will soon make an announcement about their timing and potential value, if they get back to the Treasury benches. 

The good news out of yesterday's PREFU is that the books are out of structural deficit this year. 

That means when the Government borrows new money going forward, it will be for capital spending, not to keep the lights on. 

We've essentially been borrowing money by issuing bonds to pay for day-to-day spending. Fixing potholes with a credit card when the cost of borrowing is heading north is not a particularly smart way to run the books. 

The books are helped by the economy growing. When the economy grows, our wages grow with it. 

Inflation pushes our wages into a higher tax bracket. It's what they call bracket creep. 

You end up paying more tax because the tax brackets don't change, even when our wages do. 

So, the Government's books are improving off the back of Kiwis paying more taxes. 

How much is that worth? 

The PREFU reckons around one third of the extra revenue comes from bracket creep. 

Patrick Smellie at Business Desk estimates $15 billion will be collected over five years. That creates about $3 billion a year in a potential tax cut kitty created by wage inflation. 

So, the question now is when might cuts happen and will Nicola's coalition partners allow them? 

As the old saying goes, to the victor goes the spoils. 

Taxpayers are the real victors here, the real heroes, and more money in the pocket to offset higher prices will surely be a welcome thing. 

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