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Taxation - Fairness and Social Spending


Policy 2002

Taxation - Fairness and Social Spending

The Alliance Tax Policy would raise the money needed to cure the worst ills of New Zealand society, and put money back into the pockets of low and middle income earners.

The combination of income tax cuts on low incomes and the abolition of GST on food, as well as the introduction of a universal child benefit and free health care is particularly good news for low income families.

Under the Alliance, those earning under $40,000 - or 74% of taxpayers -- would pay less income tax. The reductions are modest but will be welcome for those on the lowest incomes. Someone earning $10,000 a year would have an extra $280 per year in their pocket.

The Alliance commitment to abolishing GST on food means that the average family would also save $15 per week on food.

This is a very fair tax policy. It puts money back into the pockets of the lowest income earners and it asks for a bit more only from those who can afford it.

Those earning between $40,000 and $50,000 (12% of earners) would pay exactly the same as they do now. This refers to individual incomes. A family of two earners each on $50,000 would pay no more tax.

Only the top 14% who earn over $50,000 a year would pay higher taxes. Someone earning $100,000 per year would pay $3,100 more.

The $840 million raised from the Alliance income tax structure equates to a 1% increase in taxation and is the revenue required to implement the Alliance’s free health policy announced earlier this week.

While we are asking those on higher incomes to contribute more, they will also benefit from being able to go to the doctor for free, from reduced waiting lists, an improved mental health system and from a more stable health sector overall.

The Alliance would also raise an extra $1.03 billion over and above the extra 1% for health through a variety of other taxes, the bulk of which ($500 million) would go towards a universal child benefit.

There continues to be growing inequality in New Zealand which is both socially and economically unsustainable.

The people who are being hit the hardest are our children, a third of whom are living below the poverty line. The Alliance would commit $500 million of this new revenue to improving the health and well-being of all children though a universal $15 per week child benefit for all children.”

The money for the child benefit and additional money for state housing, job creation and funding for primary and secondary education would be raised through:

- Increasing taxes on casinos to the levels found in Australia.
- A carbon tax which would encourage reliance on renewable sources of energy.
- Restoring the land tax abolished in 1992. This would also encourage the development of commercial property. Exemptions would be made for residential land (private homes), farmland, Crown's Conservation estate, and Maori Customary land. Small business would fall below the threshold.
- Death duties on inheritances over $500 000 at 20 cents per dollar.


The Alliance policy to abolish GST on food will be fiscally neutral, as it would be replaced by a Financial Transactions Tax (FTT) at the low rate of 2 cents per $100. The FTT would be charged on withdrawals only, not deposits.

For those who just use a bank to bank to deposit and withdraw their pay check each week, the FTT would be negligible. If you spent $26,000 per year and withdrew a weekly total of $500. FTT would be 10 cents. Compare that to GST on a family's weekly food bill - 12.5% of $160 or $20 a week. Once inflation is taken into account, the saving would be closer to $15 a week.

The Alliance has already announced its free tertiary education policy, to be paid for out of the $1.2 billion of forecast government surplus.


INCOME TAX
Alliance tax compared to current tax. Incomes refer to individuals, that is, a family with two earners each making $50,000 per year would pay no extra tax.

All additional income tax raised would be spent on health.


INCOME ALLIANCE TAX CURRENT TAX DIFFERENCE
$10,000 1250 1530 (-) 280
$15,000 2350 2580 (-) 230
$20,000 3450 3630 (-) 180
$30,000 5650 5730 (-) 80
$40,000 8070 8070 NIL
$50,000 11,370 11,370 NIL
$60,000 15,370 14,670 (+) 700
$80,000 24,370 22,470 (+) 1900
$100,000 33,370 30,270 (+) 3100
$150,000 58,370 49,770 (+) 8600


REVENUE ALL SOURCES
Alliance revenue compared to current revenue. All sums in millions of $

ALLIANCE CURRENT EXTRA
Income tax individuals 19,888 19,048 840
Other income tax 1,077 1,077 NIL
Death duties 300 NIL 300
Land tax 400 NIL 400
Company tax 5,572 5,572 NIL
Indirect taxes 4,090 4,090 NIL
GST 8,854 10,354 [-1,500]
FTT 1,500 NIL [+1,500]
Carbon tax 200 NIL 200
Gaming duty 150 NIL 150
Fees etc 472 472 NIL
Investment income 1,316 1,337 [-21]*
Sales goods/services 705 705 NIL
Other operating income 297 297 NIL

TOTAL 44,821 42,952 1,869

*Loss of interest because of less capital in Superfund.

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