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Cullen Tax Figures Challenged

Gordon Copeland

Wednesday 28 May 2008

Cullen Tax Figures Challenged

Independent MP Gordon Copeland yesterday questioned Finance Minister Michael Cullen in Parliament about whether or not his 1 October tax cuts fully compensate tax payers earning over $45,000, for the movement in the CPI index since 1 April 2000.

Mr Copeland stated that the cumulative movement in the CPI between 1 April 2000 and 1 April 2008 is 23.8% so that the tax thresholds would need to move up to $47,000 for 33 cents and to $74,000 for 39 cents just to stay, in real terms, where they were in 2000. However the threshold movements outlined by Michael Cullen in Budget 2008 move those brackets to just $40,000 and $70,000 respectively.

"Having outlined those figures I put it to the Minister that his budget announcement still leaves about 1 million tax payers paying more tax, in real terms, than they did in 2000, " said Mr Copeland.

"The Minister's answer was a flat 'no' and he went on to claim that his 1 October tax adjustment would well and truly exceed inflation indexation to the tune of $10 a week at around $50,000 a year.

"However one of us is wrong. If the current 33 cent threshold was to be moved for inflation from $38,000 to $47,000 (with the 15% low income rate moved to $11,750) then a person earning $45,000 would pay tax of $8,745 which is less than the $8,860 which will apply from 1 October.

"At the average income for a full time earner of $47,637 tax would have been $9,375 compared to Michaels Cullen's $9,730. At $74,000 tax would have been $18, 075 compared to Michael Cullen's $18, 670.

"Accordingly my claim that many tax payers will still be paying more tax, in real terms, than they did in 2000 is confirmed for tax payers earning $45, 000 or more per annum. According to the 'key facts' issued by the Minister that is about 900,000 tax payers.

"Either I'm missing something or the figures quoted by Dr Cullen in Parliament are based on a different inflation assumption."


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