There probably isn’t anyone in Palmerston North who hasn’t noticed the cost of living is on the way up. Every time we go to the supermarket, every time we open a power bill, every time we get new clothes for the kids, the pressure of increased prices makes us stretch every last dollar as far as it will go.

As prices are going up, average incomes in New Zealand remain the same, meaning every payday we need to make our money go further.

So why on earth is the Government set on increasing GST when times are so hard?

By increasing GST to 15%, the Government will place even more pressure on people with fixed incomes, especially super annuitants, people on low incomes and working families across New Zealand. That is because GST has the greatest effect on those who have to spend everything that they earn, while those with enough disposable income to save a portion of their money are taxed on less of their income.

The odd thing is, no one actually voted for an increase to GST. John Key actually explicitly ruled out increasing GST before the election. In fact it is fair to say that the National-led Government was elected with a mandate to cut taxes and put more money into working kiwis’ pockets.

But the Government is not planning to cut taxes at all. What increasing GST represents is a re-arrangement of the way tax is collected, not a reduction in the overall tax take.

There is no doubt the Government will cut some personal income tax rates. But who will benefit the most from that? All the Government has talked about so far is a significant cut to the top personal tax rate. That means a tax cut for those earning over $70,000 while everyone else pays more tax through increased GST.

The Government’s tax proposals represent a shift in the tax burden away from those who can most afford it on to those who can afford it the least. That is unfair.

Labour MPs have travelled the country recently, listening to what kiwis have to say about GST. The message has been clear: ‘Do not raise GST.’ We have listened and are working hard to convince the Government it needs to think again.

We need a fair tax system in New Zealand. What the Government proposes is anything but fair. It’s time a better plan.

First published in the Tribune March 2010