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Gerry in the House: National's tax plan

Gerry in the House

22 August 2005

National's tax plan

National plans to significantly overhaul New Zealand's tax system by reducing the tax rate faced by ordinary New Zealanders who work a little harder, or do some extra overtime. The package announced today is designed to allow people to get ahead from their own efforts. We will provide fair tax relief and targeted family assistance worth about $3.9 billion by 2007.

Under Labour, there will be no significant reduction in personal taxation; what Labour has grudgingly offered in their last Budget is a derisory inflation adjustment of tax brackets in 2008 - a cruel joke on working people.

The massive extension of income support to families announced last week is an insult to all working people without dependent children. What about young people trying to save to establish themselves financially before establishing a family? What about single people without children? What about those whose children have grown up? What about those who are now saving for retirement? National will replace Working for Families with a family tax package, but no one will be worse off.

Labour's package of targeted assistance to families will mean that only 11% of the population will benefit from our growing economy. The combination of National's already announced childcare rebates, student loan policy, and today's tax cuts will mean that all New Zealanders will benefit.

All New Zealanders deserve tax relief after six years of Labour taking most of the benefits of a stronger economy. Under National they will get that.

The features of National's fair tax plan include:

* The 15% tax rate, which now applies to income below $9,500 will extend to $12,500.

* For income between $12,500 and $50,000, the tax rate will be 19%.

* The withholding tax rate for secondary employment will be 19%.

* Income between $50,000 and $100,000 will be taxed at 33%.

* Income above $100,000 will continue to be taxed at 39%.

* The lower statutory rate of withholding tax applied to interest and other investment income will be reduced from 19.5% to 18%.

* The threshold for abatement of Working for Families payments will be $30,000 from April 2006, and to keep the effective tax rate on extra income low, the abatement rate will be 20%.

* The company tax rate will be reduced to 30% in April 2008.

* The personal tax reductions will be implemented in two stages in April 2006 and April 2007.

Under this tax structure, a person on the average wage can work harder, do some overtime, or take secondary employment, and they will, from next year, keep more than $4 in every $5 they earn.

The tax rate on extra work at the average wage will drop substantially - from 33% to 19%.

To pay for this policy we will cut wasteful bureaucracy. The only public servants who should be concerned about their jobs are those who are not doing anything productive. We will make savings from Labour's waste and low quality spending, and we expect to save an average of $400 million a year by cutting public expenditure by 2%.

In addition, National will not introduce Labour's planned carbon tax, which will save the average household at least $200 per year from 2007.

Labour has been running scared from this policy for months. We will NOT lose one teacher, one nurse, or one doctor to pay for this package. We have ring fenced education, health and superannuation costs - there will be NO cuts to these core services.

We will NOT be paying for these tax cuts by borrowing - this is another Labour scare tactic.

But the biggest scare tactic of all is Labour's claim that tax cuts will increase interest rates. This will not happen under our tax cuts - and this has been confirmed by three leading independent bank economists.

National's fair tax and families package provides a lower tax burden and restores the incentive for hard-working New Zealanders to get ahead from their own efforts. It signals to hard-working New Zealanders that everyone can share in the benefits of a growing economy.

Labour can run scared all they like - you can't hide the facts. The numbers speak for themselves - check out and see what this policy will mean for you in dollar terms. Also, see more about the policy at

Gerry Brownlee

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