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Free Press: Tax Cuts

Free Press

ACT’s regular bulletin

Tax Cuts

David Seymour appeared on The Nation this weekend debating the Peter Dunne, the Greens, and the Maori Party. You can watch the full debate or read the transcript here. Supporters and opponents agree Seymour dominated the debate.

Where was Wally?
Winston Peters was invited but refused to appear. He will no doubt say it was beneath him, but we think Peters’ usual bluff and bluster would have looked silly surrounded by younger and sharper politicians in a policy-orientated debate. There will be more debates, he can run but he can’t hide.

And the Others?
Peters has eleven colleagues in Parliament. Aside from Ron Mark’s various outbursts (swearing and pulling the fingers in Parliament) none of them have ever been on TV. None were allowed to represent New Zealand First in the debate. A vote for NZ First is a vote for more ‘filler’ candidates.

ACT’s Alternative Budget
ACT would deliver tax relief for middle earners. We’d cut the 30 per cent tax rate to 25, and defer the top tax rate until you’re earning over $100,000.

Income Bracket Current Proposed
$0 to $14,000 10.5% 10.5%
$14,001 to $48,000 17.5% 17.5%
$48,001 to $70,000 30% 25%
$70,001 to $100,000 33% 25%
Over $100,000 33% 33%

Here is how much income tax you’d pay:

Income Tax Paid Now Tax Paid Under ACT Annual Tax Relief
$60,000 $11,020 $10,420 $600
$80,000 $17,320 $15,420 $1900
$100,000 $23,920 $20,420 $3500
$150,000 $40,420 $37,920 $3500

It’s a modest tax cut, leaving room for more substantial tax reform in 2017 and beyond.

What Would we Give Up?
ACT’s tax cuts do not require any reduction in spending on healthcare, welfare, or education. They would not require cuts to police, the army, roads, or civil defence. In fact, all those could receive their standard Budget increase.

So What Would ACT Give Up?
ACT has always been opposed to governments giving money to business. The Taxpayers Union has identified $1.3 billion of this spending that we call ‘corporate welfare.’ Bill English has set aside $1 billion for ‘new’ spending initiatives. ACT’s modest tax cuts could be paid for by eliminating corporate welfare and using a small portion of new spending.

That’s Right Folks
ACT’s proposals are modest but not modest enough for a National-led Government. There would still be $800 million in ‘new’ spending, but this is going too far for a National-led Government.

“Tax Relief for the Rich?”
Free Press can hear the refrain as we type, but it’s difficult to give tax cuts to people who don’t pay much tax. If tax relief accrues to higher income earners, it is because they pay disproportionately more tax.

How Much More?
Even under ACT’s tax cuts, someone earning $150,000 pays nearly nine times more tax than someone earning $30,000.

Don’t Forget Bracket Creep / Fiscal Drag
When Michael Cullen introduced the 39 per cent envy tax he promised only five per cent of people would pay it. By the time he was voted out 14 per cent were paying it. John Key has admitted that by next year, 48 per cent of taxpayers will pay the top rate.

Creeping On
It’s true that the top rate is now lower at 33 per cent, but in 2014 only 13 percent of tax payers were paying the top rate. Between National’s 2011 tax cuts and next election, the average household will have paid $2500 extra thanks to inflation pushing them into higher tax brackets. ACT’s policy is to index tax brackets to inflation because if the Government wants to increase your tax rate, it should have to ask first.


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