Tomorrow afternoon, the Minister of Finance, Bill English, will read the Budget in Parliament. The Budget tells us how much money the government expects to have next year and how the government plans to spend it.
The Prime Minister has already talked about some of these things so don’t expect big surprises. We know that GST will probably be increased to 15%. We know there will be income tax cuts but rich people will get a bigger tax cut than poor people. The Prime Minister said this is because the rich people are the ones who will help our economy. On the other hand, rich people know some clever, legal ways to avoid tax like putting their income into a Trust or investing in property. The government said it will close these loopholes in the laws so these people will have to pay more tax. Of course if landlords have to pay more tax, they could increase the rent.
There will be $750m for Kiwi Rail so that it can carry more freight, especially from Auckland to Christchurch. At the moment, a lot of freight is carried by trucks. New passenger trains are needed in Auckland and Wellington also.
There will be some more money for health and education but not enough to please everybody.
The Prime Minister suggested that pre-school education is costing too much so there may be some changes to the 20 hours free education for children aged 3 to 5. However, if parents have to pay, this would be very unpopular.
We need to wait until tomorrow for the details.
Questions to think about
1. Is GST a fair way to make sure everyone pays tax?
2. Do you think pre-school education should be free for 3-year olds?
3. Why does health spending keep increasing?
GST stands for good and service tax. This means if any one, no matter he/she is rich or poor, has to pay the same amount of tax for the same products or services when purchasing them. Therefore, in theory, GST is an effective way to get tax from the government and it is fair to everybody. However, traders and merchants always try to avoid tax or put the burden the buyers. That is the reason why the gap between rich and poor has still increased excepting the effectiveness of GST.